Do not want to renew a labor contract – what are matters employers should pay attention to?

Pursuant to Labor Code 2019, there are two types of labor contracts: definite-term and indefinite-term labor contracts. In respect of the indefinite-term labor contract, the employer and employee might terminate the labor contract in the case as follows: (i) Parties jointly agree to terminate the labor contract or (ii) a Party uses the rights of unilateral terminating labor contract in compliance with labor regulations or (iii) employees have imposed a disciplinary measure of dismissal. Regarding the termination of the definite-term labor contract, when the contract expires, employers decide not to renew the labor contract. In this case, whether the labor relations are automatically terminated? What legal issues should employers consider if they do not want to renew a labor contract?

1. Provision of definite-term employment contract   

Following the regulations of Labor Code 2019, a definite-term labor contract is the type of contract in which the employer and employee specify the term and the time of terminating the contract’s validity in a duration not exceeding 36 months since the contract is validated.  

Simultaneously, based on Clause 1 Article 34 Labor Code 2019, one of the situations that lead to the termination of a labor contract is the contract expiring, except for the case stated in Clause 4 Article 177.  

2. Is the employer obligated to notify employees when they do not renew the term of a definite-term labor contract?

The Obligation of Pre-Announcement. According to Clause 1, Article 45 of the Labor Code 2019, the employer must notify the employee in writing of the termination of the labor contract when the labor contract is terminated under the regulations of this Labor Code, except for the cases specified in Clauses 4, 5, 6, 7 and 8, Article 34 of the Labor Code. The termination of the labor contract due to the expiration of the contract term is specified in Clause 1, Article 34 of the Labor Code 2019. Based on the above provisions, the employer must notify the employee in writing when the contract is terminated. 

Notice Period. The current regulations do not state the notice period before the termination of the contract when the term of the labor contract expires. However, according to Clause 2, Article 20 of the Labor Code 2019, if the employee continues to work after the labor contract has expired, within 30 days from the date the labor contract expires, the parties must sign a new labor contract. If a new labor contract is not signed within the above 30-day period, the current contract becomes an indefinite-term labor contract. At the same time, Clause 2, Article 20 of the Labor Code 2019 does not have provisions allowing the employer to notify about the termination of the expired labor contract after the expiration of the term. Consequently, the notice period for non-renewal of the labor contract must be made before the term of the labor contract expires. 

3. The matters need focusing on while sending the announcement of non-renewal 

The termination notice form of labor contract (the announcement of non-renewal). The method of notice must be in writing; specifically, employers may send the announcement to the employees directly through a hard copy or an email provided for employees. In the prudent foundation, employers should implement the above forms and store the documents showing the employees received the employer’s announcement. 

The content of the announcement. In addition to clarifying that the employers will not renew the labor contracts, employers should require their employees to arrange and synthesize the progress of conducting assignments/projects, reports, and the schedule of transferring the rest of tasks to other staff. Particularly for the position with the management title, such as director, the handover is significant for the management and leadership of the employers after the employees leave their jobs. The handover should also be completed before the labor contract expires to ensure employees are timely and refrain from collaborating with employers during the handover of their work.  

The period of sending an announcement. The regulations do not stipulate this case; hence, employers must only notify before the last working day according to a labor contract. Nonetheless, as mentioned, employers should consider the volume of work which the employees carry out. The employers deliberately arrange to notify before the appropriate term (10 – 15 days) to ensure employees have adequate time and proactivity in arranging their work and providing the hand over occurs smoothly. 

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