Terminating the indefinite-term labour contract with the employee, is there any solution for the employer?

When signing the indefinite term labor contract with the employees, employers are supposed to establish a long-term relationship in which the employees have prevailed over the employers to decide whether to continue a relationship or end it. The Labour Code 2019 has better protected the employees in the labour relationship when allowing the employees to terminate the indefinite term labor contract by sending an advance notice at the specific time prior, while this right is not applicable for the employees. 

1. Regulations on the indefinite labor contract

An indefinite term labor contract is a contract in which the two parties neither fix the working term nor the time of termination of the agreement’s validity. The Labour Code 2019 allows the parties to terminate the indefinite-term labour contract in the following cases:

  • Firstly, the employers and the employees reach a mutual agreement on terminating the contract. 
  • Secondly, the employee is disciplined in the form of dismissal.
  • Thirdly, employers/employees unilaterally terminate the labour contract in accordance with the law.

2. Some solutions can also be referred by the employer when wishing to terminate the indefinite-term labor contract

Before deciding on dismissing/ retrenching/ terminating the labour contract with the employee, the employer should be conscious and ensure that its actions are in accordance with the law. In fact, there are many decisions on dismissing/ retrenching/ terminating with the employee are emotion-based determination, being issued when the boss losing temper and not comply with the lawful regulations. As a result, the employer is used by the employee and has to compensate a vast amount of money, and in addition to this, the employer also has to reinstate the employee. Therefore, when terminating the labour contract with the employee, the employer, depending on specific situation, should take into account the following options:

  • The first, the employer should begin with negotiation to terminate the employment contract. This is the preferable method to apply due to its advantages of safest in legal aspects, time-saving. However, since this is an agreement, the parties must reach a mutual agreement for termination. Therefore, the employer must flexibly apply both harsh and soft negotiation measures to persuade the employee to sign the agreement. Besides, employers need to pay to employers an extra amount of money to convince them to sign the termination agreement.

Obviously, this is the safest solution in legal, but its implementation depends on goodwill between the parties, the flexibility and convincing ability of the employer, and the most important thing, how much they agree to pay the employee.

  • The second, applying the dismissal discipline. This method has lower cost but more risky to the employer. Since to dismiss an employee, the employer complies with many requirements on procedures as well as the legal basis, which can be mentioned as follows:

(i) The internal labour regulations come into effect and record circumstances of dismissing an employee in accordance with the law. The discipline applied to the employee is complied with this basis;

(ii) The application of the dismissal labour discipline is still in the handling term under the law; 

(iii) Comply with regulations, procedures for taking disciplinary measures in accordance with the labour code 2019; such as proving the employee’s violation; notifying the invitation of taking disciplinary actions, the presence of the representative organization of the employee at the grassroots level and taking disciplinary measures labor must be recorded in writing;

(iv) Not included in the cases of not allowed to apply the labour discipline toward the employee, who is under certain conditions such as being on annual leave with the consent of the employer; being on sick leave, being detained or temporarily held in prison; a female employee is pregnant,e.t.c

(v) Must not infringe the health, honor, life, prestige, or dignity of employees and other prohibited behaviors as prescribed in The Labour code 2019;

(vi) Other requirements depending on certain circumstances. 

The drawback of this method is most closely adhering to formality conditions. Since the failure in complying with regulations on formality and procedures when processing labour discipline, even it just a small mistake, can become a basis for the employee to file a lawsuit against the employer and request compensation due to wrongly terminate the labour contract. In reality, there are many judgments related to labor disputes, which the employee is judged to win because of the negligence of following the formality requirements of the employer. 

  • The third, carrying out the method of changing structure, technology or economic reasons. Like applying dismissal, the application for this method needs following closely the regulations of formality, and simultaneously proving that changes of structure, technology, or economic reasons which leads to the fact that the employer is forced to cut down on the labor force after finding all measures but cannot arrange work for the employee. 

The application of this method is quite complicated and can cause many risks to employers because it is difficult to prove the changes in restructure, technology, or economic reasons. And, proving the employer has applied all the essential methods is even more challenging. Moreover, there are a lot of other difficulties which the employer must face when collecting opinions of the employee, formulating plans, and informing competent authorities.

Apart from the above measures, the employer can be flexible in simultaneously applying the negotiation measures while in the phrase of starting taking the labor disciplines/changes of structure, etc, and apply other methods to make the employee feel that he is no longer fit the job, thereby gaining the upper hand to reach agreement on the termination of the labour contract.

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