Question 141: Can Employers impose disciplinary actions on Employees who have bad working attitudes, performance or effectiveness? Can Employers also unilaterally terminate LCs with Employees for this reason?

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1.Can Employers impose disciplinary actions on Employees who have bad working attitudes, performance or effectiveness?

Pursuant to Article 118 of the Labor Code, labour disciplines are construed as the regulations that require Employees to comply with the working time and technology, the management of business and production as specified in the ILRs. The ILRs, which are established by Employers, therefore play a very important role in forcing Employees to comply with the regulations on time, order and rules at the workplace. The contents relating to the welfare and criteria used to assess the Employee’s working attitudes and performance at work will not be included in these ILRs. Therefore, if only Employees violate the regulations on working time and/or business and production processes which are provided for clearly in the ILRs, Employers can impose disciplinary actions on them by one of the methods prescribed in Article 125 of the Labor Code, including: Reprimand; extension of the salary increase period to no more than 06 months; removal from office; and dismissal.

In which, the method of dismissal prescribed in Article 126 of the Labor Code is only applicable in the following cases:

  • Theft, embezzlement, gambling, deliberately injuring others, using drugs in the workplace, revealing trade secrets, technological secrets, infringing the Employer’s intellectual property rights, causing serious damage or threatening to cause extremely serious damage to the Employer’s properties and interests;
  • Employees under the disciplinary action of a prolonged pay raise term or a position discharge falling into a relapse. Relapse is the case where Employees repeat violations that have been disciplined within 6 months with respect to the extension of the salary increase period and 3 years with respect to the removal from office; or
  • The legitimate reasons prescribed in Article 31.2 of Decree 05/2015/NĐ-CP include:
    • Due to natural calamity or fire;
    • Self, biological parents, foster parents, fathers-in-law, mothers-in-law, spouse, biological children, legally adopted children falling ill, which is certified by a medical establishment incorporated and operating in accordance with law.
    • Other cases specified in the ILRs.

Employees’ bad working attitudes, performance or effectiveness will therefore not be considered as violations of the ILRs to allow the application of the disciplinary actions prescribed in Article 118 of the Labor Code in general, or the removal from office prescribed in Article 126 of the Labor Code in particular. It is because the Employee’s working attitudes, performance or effectiveness do not fall into the governing scope of the ILRs, as analysed above.

In practice, some enterprises include the following contents in the ILRs: “the disciplinary action of a prolonged pay raise term or a position discharge will be applied if Employees are irresponsible or do not finish the assigned tasks, affecting the quality of products or the Company’s performance and benefits”. Based on this term, Employers may apply the disciplinary action of a prolonged pay raise term or a position discharge if Employees do not finish the assigned tasks well. However, according to the law provisions above and the practical application of labour law, this term in the ILRs may be considered off-target or exceeding the scope of ILRs as prescribed in Article 119.2 of the Labor Code. Therefore, Employers cannot impose disciplinary actions on Employees for this reason though there are grounds to determine that their working attitudes and performance are bad. The application of disciplinary actions may cause serious legal risks to Employers. Specifically as follows:

  • If Employers do not comply with the process of applying labour disciplines, they may be subject to an administrative fine of VND10-20 million pursuant to Article 15 of Decree 95/2013/NĐ-CP as amended and supplemented by Decree 88/2015/NĐ-CP. The process of applying labour disciplinary actions will be as follows:
    • Step 1: Giving written notices of the meeting for application of labour disciplinary actions to the grassroots TUEC or of the superior trade union where a grassroots trade union is not yet established and the concerned Employees at least 05 days in advance.
    • Step 2: Conducting the meeting for application of labour disciplinary actions with the presence of the attendants. If Employers have given written notices 3 times and one of the attendants is still absent, they can still conduct the meeting. In addition, that Employers send letters to the Employees’ permanent addresses to request them to return to work will not be considered a notice of the meeting for application of labour disciplinary actions if Employers then apply the disciplinary action of dismissal for the reason that Employees quit jobs on their own will.
    • Step 3: Making the meeting minutes which are confirmed by the attendants. The minutes must be signed by the attendants and the preparer. If one of the attendants does not agree to sign the minutes though they has attended the meeting, the reason for this must be stated;
    • Step 4: Issuing the decisions on imposing disciplinary actions on Employees within the statute of limitations or the extension thereof. The Employer’s legal representative will have the authority to issue the decisions on imposing disciplinary actions. The authorised person to enter into LCs will only have the power to impose the disciplinary action of reprimand; and
    • Step 5: Sending the decisions on imposing disciplinary actions to the meeting participants.
  • Furthermore, if Employees lodge their complaints to a labour dispute settlement agency or initiate lawsuits at a competent court, and the labour dispute settlement agency or the competent court concludes that the Employer’s decisions on imposing disciplinary actions are against the law (groundless and not in accordance with the procedure because there was not the participation of the trade union to protect the Employees’ rights and interests – except that Employers have sent notices 3 times but the trade union did not come), Employers will be forced to cancel the decisions and restore the Employees’ entire rights and interests (if any).

2. Can Employers also terminate LCs with Employees for this reason?

2.1. Case 1: Employers unilaterally terminating LCs

In this case, if Employers wish to terminate LCs with Employees due to their bad performances, Employers may consider terminating LCs unilaterally. Accordingly, Article 38.1(a) of the Labor Code prescribes that Employers may unilaterally terminate valid LCs if Employees have frequently failed to fulfil the jobs agreed in LCs. However, in this case, to unilaterally terminate LCs in accordance with the law, Employers need to fulfil the following conditions:

  • There must be a specific regulation on the criteria to evaluate the degree of task completion, which is issued following the collection of opinions from the labour collective representing organisation (Article 12.1 of Decree 05/2015/NĐ-CP), and Employees actually failed to fulfil the tasks in accordance with the criteria;
  • Notify Employees of the decisions on unilateral termination of LCs at least 45 days in advance for indefinite LCs; and 30 days for definite LCs. The notice of termination of LCs should indicate the reasons, the grounds to conclude that Employees have not fulfilled the tasks in accordance with the criteria in order to avoid future disputes.
  • Fully pay all the amounts that Employees are entitled to, such as salary, insurance, severance allowance etc. within 7 working days from the date of termination of LCs. To avoid Employees’ complaints about these payments, Employers should make a table of payment breakdown and payment schedule enclosed with the notice of termination of LCs to get the Employees’ opinions and confirmation.

However, Employees may make lawsuits against Employers at competent courts or lodge their complaints to the Inspectorate of the DOLISA. Accordingly, if the evidence given by Employers are not convincing, the decisions on termination of LCs may be declared to be unlawful, and Employers must accept Employees back to work and pay them at least 2 months’ contract salary in compensation.

2.2. Case 2: Employers negotiating the termination of LCs with Employees

Due to the legal risks with the application of labour disciplines and the unilateral termination of LCs by Employers, they may consider negotiating the termination of valid LCs with Employees. In this case, Employers may have to pay Employees an additional amount to help them seek new jobs along with other payments that must be made in accordance with labour law.