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Layoff Violations Under Vietnam’s Updated Criminal Code

By Dezan Shira & Associates
Posted: 7th June 2016 08:28

Recently implemented, an updated version of Vietnamese criminal code raises penalties for illegal termination of employees. Effective from July 01 2016, Code No. 100/2015/QH13 lays out punishments, including serious fines and even jail time, for those found to be terminating or coercing the termination of employees illegally.
In order to reduce exposure to non-compliance, companies should be aware of how updates differ from previous legislation, in what instances non-compliance can be triggered, and the penalties and liability that are established and maintained under updated guidance.

Avoiding Violations

Legal action under Code No. 100/2015/QH13 is triggered under more specific circumstances than the legislation it superseded. Instead of referring to “forcing workers to leave their positions” in an “unlawful” manner, violations under the new code are tied to three specific situations:

  • Forcing workers to quit their jobs through coercion

  • Issuing decisions to terminate workers based on grounds currently prohibited

  • Carrying out the dismissal process in a manner found to be incompliant with current laws

If it is found that violations mentioned above have been carried out against people meeting certain qualifications, or result in the outcome listed below, those carrying out the dismissal will be liable for more severe penalties:

  • Violations related to pregnant employees

  • Violations related to a mother that has given birth in the last 12 months.

  • Violations relating to two of more employees

  • Violations that can be connected to the suicide of the employee in questions

Note: while the previous criminal code eluded to hardship as a means of determining the severity of violations, the use of a two tier system is new to the the updates introduced in 2016.

Understanding Penalties

Under the old criminal code from 1999, dismissal violations often resulted in a warning and had a maximum penalty of one year in jail. In addition to lacking clarity on when certain punishments were to be utilized, fines were also excluded from available recourse.
Under 2016’s update, violators of the labor code that have been mentioned previously will be faced with one of the following punishments:

  • Fines: between VND 10 million (US $500) and VND 100 million (US $5,000)

  • Community service: up to one year

  • Imprisonment: for a duration between three months and one year

For dismissals that have met the criteria for more serious punishment, any of the following punishments may be implemented:

  • Fines: between VND 100 million (US $5,000) and 200 million (US $10,000)

  • Jail time: from one to three years

Note: As part of the punishment for either of the tiers of violation listed above, the person in question may be barred from holding their professional position in Vietnam for a period of up to five years.

Preparing for Liability

As with the previous criminal code, liability is tied to the legal representative of a company. This is the person with the power of attorney to sign contracts and is generally a person of great importance for the company. With jail time and revocation of the ability to represent the company on the line, it is of utmost importance to ensure that operational exposure to HR non-compliance is brought to as close to zero as possible.

Ensuring compliance

Despite the risks, laying off employees is an unfortunate but necessary component of corporate HR strategy. Whether it be to cut costs, close operations, or simply to remove workers unable to fulfill daily tasks, letting employees go can be a powerful tool to ensure the continuity of operations.
Under Vietnamese law, the proper procedures for terminating employees can be clarified by referring to Vietnam’s 2012 labor code and should be reviewed closely in conjunction with newly established penalties set forth within the updated criminal code. Given the personal exposure of the legal representative to criminal liability, it is also of utmost importance that companies clarify any questions concerning the cohesion of their current HR practices with Vietnamese Law.
Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and emerging ASEAN, we are your reliable partner for business expansion in this region and beyond.
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