Question: Pursuant to Article 130 of the Labor Code: a. Employees who cause damage to devices, equipment or conduct other acts causing damage to Employer’s properties must pay compensations. If Employees cause slight damage due to their negligence with the value of less than 10 months of the area minimum wage announced by the Government and applicable at the workplace, Employees must compensate to the tune of an amount of 3 months’ salary at a maximum that is monthly deducted from their salary; and b. If Employees lose any tools, equipment, properties or other assets which are handed to them by their Employers, or use supplies more than the norms permitted, they must compensate part or the whole value of such things at the market price; if a liability agreement is available, they must pay compensation as prescribed in this agreement; in case of natural calamities, fires, enemy sabotage, epidemics, disasters, objective occurrences which are unpredictable and irrecoverable despite all measures taken, Employees will not have to pay compensation. What are the “other acts” in this context? Assets here mean tangible assets only or include enterprises’ intangible assets (e.g. trademarks, prestige etc.). For other violations that also cause material damage to Employers but do not fall into circumstances above, how do Employees pay compensations?

1.What are the “other acts” in this context?

The current law does not provide for or explain the “other acts” prescribed in Article 130.1 of the Labor Code.

From the legal perspective, a material responsibility is one that requires Employees to pay compensation for the damage caused by the conducts breaching labour discipline or due to Employees’ lack of responsibility in the performance of their obligations. In practice, “other acts” here are often interpreted as Employees’ acts (either due to negligence or intentionally) in the performance of their obligations which cause damage (broken, decrease in value) to Employers’ assets.

However, since this issue is not provided in detail by law, Employers should expressly include “other acts” in the ILRs (by defining and listing specific acts) to have a solid basis for claiming compensations.

2. Assets here mean tangible assets only or include intangible assets as well

The Labor Code and its guiding documents do not have any regulations to help define the Employer’s assets which are damaged. Therefore, assets here may be interpreted according to the “asset” concept in the source code, i.e. the Civil Code as follows “Asset comprises objects, money, valuable papers and property rights, including real estate and movable assets, existing assets and assets formed in the future“[1]. This means the asset concept is construed as including tangible and intangible assets such as property rights, intellectual property rights, know-how.

In addition, Article 27.4 of Decree 05/2015/NĐ-CP prescribes that ILRs must include the content on the List of assets, documents, technological know-how, business secrets, and intellectual property rights under Employees’ protection and responsibility.As such, it is evident that from the labour law perspective, intangible assets such as technological know-how, business secrets and intellectual property rights are also considered enterprises’ assets.

In practice, competent state authorities often refer to the List of assets, documents, technological know-how, business secrets, and intellectual property rights which must be protected and are under Employees’ responsibility to consider whether the Employees’ conducts have caused damage to the assets that Employers have listed in the ILRs or not. Therefore, Employers should expressly prescribe the List of assets, documents, technological know-how, business secrets, and intellectual property rights which must be protected and are under Employees’ responsibility to have a basis for determining the assets that are under the compensation obligation according to material responsibilities.

3. For other violations that also cause material damage to Employers but do not fall into circumstances above, how do Employees pay compensations?

The regulation on the basis of damage compensation according to material responsibilities between Employees and Employers is only prescribed in Article 130 of the Labor Code and its guiding documents. Therefore, with regard to other violations that also cause material damage to Employers but does not fall into the circumstances mentioned in this regulation, they do not fall into the case of damage compensation according to material responsibilities.

In practice, other than the primary employment relationship between Employers and Employees, there may arise many other legal relationships that must be governed by other laws such as civil or criminal relationships. Therefore, if Employees’ conducts do not fall into the case of compensation according to material responsibilities, Employers may request Employees to pay compensation out of labour contracts and pursuant to the regulations of civil law, or according to the remedies of criminal law if their conducts meet the prescribed conditions.

[1]Article 105 Civil Code