Tag: Termination of employment contracts

Termination of employment contracts due to structural and technological changes is a complex legal issue with significant implications for both employees and employers. In the context of businesses needing to adjust their organizational structure and technology to adapt to development trends and optimize efficiency, ensuring employees’ rights as stipulated by law is a critical factor. This article by TNTP outlines the grounds and obligations that companies must follow to when terminating employment contracts due to structural and technological changes.

1. Grounds for Termination of Employment Contracts in Cases of Structural and Technological Changes

Article 42 of the Labor Code outlines three main grounds for businesses to terminate employment contracts due to structural and technological changes. Such changes may affect employees’ jobs.

• Organizational Restructuring or Reorganization of Labor: This includes merging, splitting, dissolving departments, units, or restructuring human resources. These changes must be based on practical needs in business operations.
• Changes in Processes, Technology, Machinery, and Equipment: These modifications must directly relate to the business’s industry. Examples include automating production lines or adopting new technology into workflows.
• Changes in Products or Product Structure: This applies when businesses altering product lines, transitioning business sectors, or adjusting product structures to meet market demands.

Businesses must prove the necessity of these changes and how they directly connect to labor reductions.

2. Corporate Responsibilities in Terminating Employment Contracts Due to Structural and Technological Changes

2.1. Prepare a Labor Utilization Plan in cases of Structural and Technological Changes

The business’s primary and most important responsibility is to develop a detailed labor utilization plan. According to Article 44 of the Labor Code 2019, this plan must be developed with the participation of the employee representative organization at the workplace and be communicated to employees.

The plan must specify the number and list of employees who will continue working, those who will be retrained, and employees whose contracts must be terminated. Additionally, it must outline implementation steps and financial resources to ensure execution.

The labor utilization plan can be a detailed and systematic strategy that manages human resources when structural or technological changes affect many worker’s employment.

2.2. Prioritize employee retraining in cases of Structural and Technological Changes

Businesses are encouraged to prioritize retraining and reassigning employees to suitable positions. To do this, employers should review vacant roles or new positions, then provide targeted training to help employees adapt to the new job requirements.

Retraining can be time-consuming and impact employees’ income. Thus, businesses should clearly present their development plans and allow employees to decide whether they want to participate in retraining programs or quit.

2.3. Consult with employee representative organizations and notify the to the People’s Committee of the province in cases of Structural and Technological Changes.

Employers must consult with the employee representative organization at the workplace. These discussions should be transparent, public, and documented.

Moreover, businesses must notify the Provincial People’s Committee in writing at least 30 days before implementing any employment contract terminations. The notice must clearly state the reasons, number of affected employees, and the implementation timeline.

2.4. Notifying employees in case of Structural and Technological Changes

According to Article 45 of the 2019 Labor Code, when an enterprise changes its structure and technology, leading to the need to cut labor, workers will be at risk of losing their jobs. In such cases, the enterprise must provide written notice to affected employees regarding the termination of their labor contract. This notification will help employees proactively understand the situation and protect their rights.

Enterprises must notify employees in advance according to the legally required timeframe. The notice must be made in writing, clearly stating the reason for terminating the contract.

2.5. Facilitating Workplace Dialogues in cases of Structural and Technological Changes Organize

Workplace dialogues means the exchange of information and opinions between employers and employees or their representatives to foster mutual understanding, cooperation, and find mutually beneficial solutions. Businesses must conduct dialogues when intending to terminate employees due to structural and technological changes.

According to Article 37 of Decree 145/2020/ND-CP, employee representative organization at the workplace are responsible for nominating representatives to participate in dialogues, contributing to workplace democracy regulations, collecting and preparing proposals related to employment contract terminations. Employers should collaborate with employee representatives to address concerns, consider feedback, and find solutions to support employees.

2.6. Settling Employee Benefits in cases of Structural and Technological Changes

According to Article 48 of the Labor Code 2019, both parties must settle all payments related to employee benefits within 14 working days from the contract termination date. This period may be extended but must not exceed 30 days.

Businesses must pay employees for:

• Redundancy allowance
• Payment for untaken leave days
• Unpaid wages
• Social and health insurance contributions as required.

Employers must also verify employees’ social insurance and unemployment insurance periods and return any original documents requested by employees.

This article by TNTP provides insights into corporate responsibilities when terminating employment contracts due to structural and technological changes. We hope this information is helpful. For assistance, please do not hesitate to contact us.
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