Question 16: What are the legal procedures and risks related to the notice of terminating a definite LC upon its expiry?

786

Procedures for notifying the termination of a definite LC upon its expiry.

Except for cases where any Employee as a part-time trade union officer is serving in the office term of the trade union, but his LC term expires, the signed LC will be extended until end of the term[1]. For the remaining cases, Employers may take the following steps to terminate definite LCs upon expiry of their term:

  • Notify Employees in writing of the termination date of their LCs at least 15 days before the expiry date of any definite LC[2];
  • Within 7 working days of the date of terminating LC, the two parties will be responsible for paying all amounts related to the interests of each party. In special cases, it may be extended but shall not exceed 30 days[3]; and
  • “Special cases” may be extended but shall not exceed 30 days, including[4]: (i) Employers are not individuals who terminate their operation; (ii) Employers or Employees encounter natural disasters, fires, enemy sabotage or epidemics; c) Employers change in terms of their structure, technology or economic aspects as provided for in Article 13 of Decree 05/2015/NĐ-CP.
  • Legal risks related to the notice of terminating a definite LC upon its term expiry.

Employers who breach the advance notice period of at least 15 days before the expiry date of the definite LC may be subject to a warning or a fine of VND500,000 to 1,000,000[5];

In addition, if Employees continue to work upon expiry of their definite LC, the two parties must sign a new LC within 30 days of the expiry date of the LC. If no new LC is signed, the already signed contract will become an indefinite LC[6].

Where Employers fail to pay or insufficiently pay Employees severance allowances, retrenchment allowances within the time limit specified in Article 47.2 of the Labor Code; or fail to complete the procedures for confirmation and return Employees other documents held by them after the termination of LCs as provided in Article 47.3 of the Labor Code, they may be fined at one of the following levels[7]:

  • Between VND500,000 and 2,000,000 for violations involving between 1 and 10 Employees;
  • Between VND2,000,000 and 5,000,000 for violations involving between 11 and 50 Employees;
  • Between VND5,000,000 and 10,000,000 for violations involving between 51 and 100 Employees;
  • Between VND10,000,000 and 15,000,000 for violations involving between 101 and 300 Employees;
  • Between VND15,000,000 and 20,000,000 for violations involving 301 Employees or more.

Therefore, in order to avoid the aforesaid legal risks, Employers must regularly monitor the LCs that is going to be expired and inform Employees immediately if they do not want to renew LCs as well as ensure the payment of severance and retrenchment allowances and return of other assets to Employees in accordance with the law upon termination of LC.

[1]Article 192.6 Labor Code

[2]Article 47.1 Labor Code

[3]Article 47.2 Labor Code

[4]Article 14.5 Decree 05/2015/NĐ-CP dated 12/01/2015

[5]Article 7.1 Decree 95/2013/NĐ-CP dated 22/08/2013 as amended and supplemented by Decree 88/2015/NĐ-CP dated 07/10/2015

[6]Article 22.2 Labor Code

[7]Article 8.1 Decree 95/2013/NĐ-CP dated 22/08/2013 as amended and supplemented by Decree 88/2015/NĐ-CP dated 07/10/2015