Question 22: Upon termination of LCs, if the two parties do not sign new LCs or renew LCs, can Employers continue to let Employees work for them during the time they recruit new ones?

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Employers’ responsibilities upon termination of LCs and the legal consequences in the event of violation

  1. Employers’ responsibilities upon termination of LCs

Upon termination of definite-term LCs, Employers are obliged to notify Employees in writing of the termination date of LCs at least 15 days prior to this termination[1].

In addition, within 7 working days from the termination date of LCs, Employers must fully pay all the amounts that Employees are entitled to; in particular cases, this duration may be extended but no more than 30 days. At the same time, Employers must be responsible for completing verification procedures and returning Employees’ social insurance books and other papers they are keeping[2].

  • Legal consequences for Employers in case they violate the regulations on LC termination 

Pursuant to Labor Code, if Employers do not perform the notification obligation and Employees continue working without signing new LCs within 30 days from the LC termination date, the definite-term LCs will become indefinite LCs, and seasonal or specific task LCs of less than 12 months will become definite-term LCs of 24 months[3].

In addition, Employers will be sanctioned for administrative violations if they do not notify Employees in writing at least 15 days prior to the termination of definite-term LCs. In particular, the penalty levels for this violation may be a warning or a fine up to VND2,000,000 for corporate Employers or VND1,000,000 for individual Employers[4].

  • What can Employers do if they do not want to sign new LCs with Employees but wish to let them work until new Employees are recruited?

Upon termination of LCs, if the parties do not sign new LCs, the employment relationship will obviously terminate. Therefore, if Employers do not want to sign new LCs with Employees, they can choose to sign an LC appendix which amends the term of LCs to the time new Employees are recruited. However, Employers should note that the term of LCs can, pursuant to Decree 05/2015/NĐ-CP, only be amended one time by making an LC appendix without changing the type of LCs, except for extending the term of LCs with senior Employees and Employees who are non-dedicated trade union members[5].

[1]Article 47.1 Labor Code

[2]Article 47.2 Labor Code

[3]Article 22.2 Labor Code

[4]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

[5]Article 5 Decree 05/2015/NĐ-CP dated 12/01/2015