AVAILABLE LABOUR LAW OPTIONS TO DEAL WITH COVID-19 IMPACT

Many companies have to reduce or halt their operation and hence face a need to cut off headcounts or reduce salaries of employees. What options are available under Vietnamese labour law to enable businesses to reduce the labour force or save labour costs amid the Pandemic?

21 Mar 2020

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LEGAL UPDATE

Since our latest update on the impact of the Corona Virus on businesses, the situation has gotten worse all over the world. On 12 March 2020, the World Health Organization (WTO) declared Covid-19 a worldwide pandemic (Pandemic). Many countries have implemented extreme and unprecedented measures such as city lockdown or border closure to contain the spread of Covid-19. As a result of the governments’ restrictions, many companies have to reduce or halt their operation and hence face a need to cut off headcounts or reduce salaries of employees.

In this update we will explore some of the options that are available under Vietnamese labour law to enable businesses to reduce the labour force or save labour costs amid the Pandemic.

1. Temporary Assignment of Duties

Due to the Pandemic, a company may encounter a temporary shortage of labour force when its employees are infected or suspected to be infected with the Coronavirus and therefore cannot perform their job. A company may also encounter a scenario where a part of the whole premises of the company is locked down because of the virus spread. In such events, the 2012 Labour Code allows an employer to temporarily shift an employee to another position to fill in the vacancies, provided that the assignment does not exceed 60 accumulated working days within 1 year, unless otherwise agreed by the employee. The employer needs to give a 3‑working day advance notice to the employee before the actual assignment. If the wage of the new position is less than that of the old position, the employee is entitled to continue receiving the old wage for a period of 30 working days even after he/she has already taken the new position. In any circumstances, the new wage must be not less than 85% of the old wage and not less than the minimum regional wage stipulated by the Government.

2. Suspension of Labour Contracts

If an employer wishes to suspend the labour contract with an employee because of a circumstance out of the employer’s control (e.g. due to the Pandemic and resulting government restrictions), the employer can negotiate a package for work suspension wage with the employee for the remaining validity term of the existing labour contract, provided that such wage is not lower than the regional minimum wage stipulated by the Government.

3. Temporary Suspension of Labour Contracts

An employer can rely on the occurrence of the Pandemic to seek for a mutual agreement with an employee in order to temporarily relieve both parties from performance of the labour contract. This temporary suspension of the labour contract will not give rise to the employer’s obligation of paying work suspension wage. The temporary suspension term is subject to the parties’ agreement. Within 15 days from the expiry of the suspension term, the employer must receive the employee back to work in the same position that the employee held before leaving, unless otherwise agreed by the parties.

It is important to note that the temporary suspension period as discussed here will not be counted as contributing to the validity term of the existing labour contract. In other words, during the temporary suspension period, the labour contract will be put on hold and will be restarted upon the return of the employee.

4. Leave without Pay

At an employee’s own choice, he/she can request the employer to allow him/her to be on leave without pay during the Pandemic period.

5. Amendment of Labour Contracts

If an employer wishes to reduce salary of employees to cut costs for business operation during the Pandemic, the employer can seek for a mutual agreement with the employee. If the employee agrees, both parties can amend the existing labour contract or sign a new labour contract. The revised salary is subject to the parties’ agreement but must not be lower than the regional minimum wage stipulated by the Government. The employer needs to give a 3‑working day advance notice to the employee before signing the amendment contract or the new labour contract.

6. Termination of Labour Contract by Employer

6.1 Layoff Due to a Force Majeure Event

An employer has the right to unilaterally terminate the labour contract with an employee due to the Pandemic or other force majeure events caused by the Government’s change of policy to prevent the spread of Covid-19. To be able to exercise this right, the employer must demonstrate that (i) the employer has taken all necessary measures to mitigate the negative impacts of the Pandemic or other force majeure events to the employer’s business but they did not work, and (ii) layoff or reduction of workforce is the only option for the employer to save the business. The employer also must pay severance allowances to employees having work at least 12 months for the employer. Before the actual termination of the labour contract, the employer must serve the affected employees an advance notice of:

- 45 days in case of an indefinite-term labour contract;

- 30 days in case of a definite-term labour contract;

- 3 working days in case of a labour contract of less than 12 months.

The above entitlement of the employer however cannot be applied to certain kinds of employees such as employees being under medical treatment or employees being on maternity leave.

6.2 Sick Employee

The 2012 Labour Code also allows an employer to unilaterally terminate the labour contract with an employee with a 3‑working day advance notice when the employee is sick for a long time, which means being sick for

- 12 consecutive months in case of an indefinite-term labour contract,

- 6 consecutive months in case of a definite-term labour contract; and

- more than half of the contract term in case of a labour contract of less than 12 months,

and remains unable to work after having received medical treatment.

Accordingly, an employer may apply this provision when an employee is infected with Covid-19 and unable to resume work after a long period of time. Having said that, however, the employer must consider taking the employee back to work after the employee recovers.

7. Termination of Labour Contract by Employee

An employee can unilaterally terminate the labour contract with a 3-working day advance notice if he/she is sick due to being infected with the Covid-19 and remains unable to work after having received treatment for:

- 90 consecutive days in case of a definite-term labour contract, or

- a quarter of the contract term in case of a labour contract of less than 12 months.

If the employee is currently working under an indefinite-term labour contract, the advance notice period is 45 days.

Contact Information

Should you have any questions, please feel free to contact our lawyers at the below email addresses and contact numbers.

Mark Oakley / Managing Partner

mark.oakley@acsvlegal.com

+84 (0) 8 6810 0510

Minh Nguyen / Senior Associate & Head of Dispute Resolution Practice

minh.nguyen@acsvlegal.com

+84 (0) 7 7865 3936

Phuong Huynh / Senior Associate

phuong.huynh@acsvlegal.com

© 2020 ACS Legal Vietnam Company Limited – All rights reserved

This legal update is not an advice and should not be treated as such.

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