Question 40: In the process for terminating LCs due to “restructuring”, which procedure is the most difficult, time-consuming and risky one?


Article 44 of the Labor Code and Article 13.3 of Decree 05/2015/NĐ-CP prescribes that if a restructuring affects 2 or more Employees, Employers are obliged to build and implement a new labour use option as prescribed in Article 46 of this Code; if there are new positions, Employers should, as a priority, re-train those Employees to keep using them. If Employers cannot provide new jobs for Employees but have to terminate LCs with them, they must pay severance allowances in accordance with law. The termination of LCs with many Employees due to restructuring reasons can be done after Employers have consulted the labour collective representing organisation and must give a 30-day prior notice to the provincial labour management agency.

Pursuant to Article 44 of the Labor Code and Article 13 of Decree 05/2015/NĐ-CP, building a labour use option is a mandatory procedure if the “restructuring” affects the employment of 2 or more Employees. The labour use option must contain all the items prescribed in Article 46 of the Labor Code.

Thus, building a labour use option is the most difficult and risky procedure because of the following reasons:

  • The labour use option must provide a convincing explanation about why the restructuring leads to the termination of LCs with the concerned Employees. For example: an enterprise or a department of a company employs 300 Employees, why the restructuring leads to the layoff of the mentioned 50 Employees without affecting the remaining others in that department? Such reasons as those 50 Employees have not done their jobs well are not appropriate for the purpose of restructuring;
  • In building the labour use option, it is required to have the participation of the executive board of the grassroots trade union or of the immediate superior trade union if the grassroots trade union has not been established (referred to collectively as the TUEC). Although labour law does not require the labour use option to be approved by the TUEC, unfavourable opinions from the TUEC will create driving forces and premises for Employees’ objections which will lengthen the termination process.