Question 135: The Labor Code prescribes that Employers may dismiss Employees who cause serious damage or threaten to cause extremely serious damage to the Employer’s properties and interests. How to determine if an Employee causes serious damage or threatens to cause extremely serious damage?

589

1.What are the relevant regulations to be referred to for determination of the serious damage or the threat to cause extremely serious damage?

Currently, the labour law and relevant guiding documents do not provide for any general criteria to determine the serious or extremely serious damage. Therefore, the levels of serious or extremely serious damage must technically be prescribed in the enterprise’s ILRs to provide a legal basis for applying the disciplinary action of dismissal. The levels of damage are self-prescribed by Employers but must be reasonable, appropriate to realities, and are made on the advice of the grassroots TUEC.

Regarding this matter, according to the informal guiding opinions of local competent labour management agencies or the court’s opinions in settling similar cases of labour disputes, it will be referred to Article 130.1 of the Labor Code to determine the level of serious damage, which provides for the case where Employees must compensate for the damage that they cause to the Employer’s tools or equipment. Accordingly, to determine the Employee’s liability of compensation, “the level of non-serious damage” is specified by the Labor Code as not over 10 months of the area minimum salary which is applicable at the Employee’s working location and on the time of the damage. Based on this regulation, it can be inferred that “the level of serious damage” must be at least 10 months of the area minimum salary which is applicable at the Employee’s working location.

2. What area minimum salary is applied to determine the levels of serious or extremely serious damage?

Pursuant to Article 4.1 of Decree 153/2016/NĐ-CP providing for the area minimum salary, “If an enterprise has branches operating in many localities with different area minimum salaries, each of the branches will apply the area minimum salary which is prescribed for the locality where it operates”. Therefore, if an enterprise has Employees working in many localities with different area minimum salaries, Employers will have to specify in the ILRs the levels of serious damage according to the Employee’s working location.

Example 1: If Employees work in Ho Chi Minh City – the enterprise’s head office is the place with the highest area minimum salary (excluding Binh Chanh District) of VND3,980,000/month. Therefore, the level of serious damage for this case is from VND39,800,000 for Employees working in Ho Chi Minh City.

In addition, after registering the ILRs with the competent labour management agency of the place where the enterprise’s head office is located, the Employer must submit one valid ILRs to the state authority on labour management of the province where the enterprise’s branch, business or production unit is located[1].

Example 2: Is it in line with the labour law to prescribe in the ILRs the following regulations for the disciplinary action of dismissal?

–           Deliberately destroy or cause serious damage to the enterprise’s machinery, equipment, tools and properties of VND500,000 and above; and

–           Forge or interfere with the enterprise’s tables, documents, tools, vouchers, receipts or forge the stamps, signatures, which causes damage to the enterprise’s interests with value up to VND500,000 and above.

As mentioned above, Employers must ensure the following when imposing the disciplinary action of dismissal on Employees who cause serious damage or threaten to cause extremely serious damage to the Employer’s properties and interests: (i) Employees commit the acts which cause serious damage or threaten to cause extremely serious damage and which have been prescribed in the ILRs; and (ii) the ILRs expressly prescribes the level of serious damage.

According to the regulations on the acts that may be disciplined in the form of a dismissal, the example above satisfies the requirements in (i) and (ii). In the legal perspective, Employers may impose the disciplinary action of dismissal if they have sufficient evidence proving the Employee’s violations and the corresponding damage. However, in practice, the court and Vietnamese labour management agencies often consider the level of serious damage must be at least 10 months of the area minimum salary which is applicable at the Employee’s working location. As such, the level of serious damage of VND500,000 prescribed by the Employer is not reasonable and not appropriate to realities. Therefore, it is still legally risky for the Employer to impose the disciplinary action based upon the regulations in the ILRs as quoted in this example.

When determining the level of damage to provide the basis for imposing the disciplinary action of dismissal, Employers must refer to the area minimum salary and the regulation about 10 months of the area minimum salary as aforesaid. Specifically, depending on the nature of business operations, Employers will make considerations and, by the advice of the grassroots TUEC, prescribe in the ILRs the levels of serious damage and extremely serious damage which are appropriate to realities.


[1]Article 28.8 Decree 05/2015/NĐ-CP