CAN AN EMPLOYER UNILATERALLY TERMINATE AN EMPLOYMENT CONTRACT BASED ON A RESTRUCTURING REASON WITHOUT AN ADVANCE NOTICE?

The Labour Code 2012 does not expressly require an employer, who intends to terminate an employment contract on the grounds of companies restructuring, change of technology or economic reasons (Company Restructuring), to give advance notice to the relevant employees.

The advance notice requirement is provided in Article 38.2 of the Labour Code 2012. Article 38.2 follows Article 38.1 which only covers termination of an employment contract on other grounds such as poor performance, prolonged illness, or force majuere events. Therefore, one can argue that Article 38.2 only applies to the scenarios contemplated under Article 38.1 of the Labour Code 2012 but not a Company Restructuring.

On the other hand, the above view may be not reasonable since:

• Although in terms of presentation, Article 38.2 follows Article 38.1, the wording of Article 38.2 can cover any termination of an employment contract by the employer including termination on the ground of Company Restructuring.
• An advance notice period may give the terminated employee an opportunity to (1) look for a new job before leaving his/her current job; or (2) make a complaint against the employer’s decision in case of wrongful termination. Therefore, there is no reason why a termination due to Company Restructuring should be treated differently from other cases.
• This interpretation has been adopted by the courts in certain cases.

This post is contributed in parts by Nguyen Hoang Duong, a trainee at Venture North Law Limited.

Processing activities by an foreign invested enterprises (FIE) in Vietnam

It is not clear under Vietnamese law if an FIE needs to obtain a Trading Licence (Giấy phép kinh doanh) to provide commercial processing services (gia công thương mại) to other companies. Under Decree 23/2007 on goods purchase and sale activities and other related activities of FIEs, commercial processing is regarded as an activity relating to sale and purchase of goods. Accordingly, technically, if an FIE wishes to involve in commercial processing, such FIE should obtain a Trading Licence.

On the other hand, after Decree 23/2007, Ministry of Trade issued Circular 4/2007 under which, an FIE can process goods if (i) the processing activity is consistent with the objectives set out in the Investment Certificate of this FIE; (ii) the processed goods are not banned or suspended from import and export or if the processed goods are subject to import and export licence, the FIE can enter into the processing contract only when the import and export licence is obtained; and (iii) FIE has completed its capital construction investment and has commenced production and business activities. It appears that a Trading Licence is not required under Circular 4/2007.

Two regulations regarding processing activities of an FIE may cause certain confusion. Although Decree 23/2007 is a higher legislation, in practice, it appears that Circular 4/2007 still applies and FIEs do not obtain Trading Licence for their processing activities.

This post is contributed by Le Minh Thuy, a trainee lawyer at Venture North Law.