What risks will the employer face if they dismiss unlawfully an employee from january 01st, 2021?

What risks will the employer face if they dismiss unlawfully an employee from january 01st, 2021?

The relationship between enterprises (employers) and employees has been explicitly provided by the Labor Code, decrees and guiding circulars. However, there are many enterprises in practice that are not willing to adopt and comply with all the regulations.  In fact, this can be proved by the great frequency of the occurrence of disputes between employers and employees, causing various damages and losses to the company. The disputes can be rooted in subjective causes, such as loose management, unclear internal regulations, conducting acts contrary to labor law provisions and the collective labor agreement, or objective causes, such as the employee’s fault, unclear labor law regulations etc. Some common disputes are as follows: labor contract disputes, dismissal decisions, unilateral termination of the labor contract, salary regime, insurance regime for employees, etc. Whether it is a minor or major dispute, complicated or not, it still has a significant impact on the business operation of the company. Therefore, in the beginning, companies need to prepare for themselves a strong management team and comply with the regulations of the laws.

In the previous article, we mentioned some regulations of the laws on conditions, sequences and procedures for dismissing employees in accordance with the Labor Code 2019 (taking effect as of January 01st, 2021). Complying with the statutory sequences and procedures for dismissal will help employers protect their legitimate rights and interests against risks arising from unlawful dismissal. In this article, we will discuss and analyze the risks of unlawful dismissal to help employers understand and jot down some notes before making decisions to lay off employees.

1. How to determine the unlawful dismissal of employees?

As per the previous article, when employers want to lay off employees, they need to meet the conditions of the laws for the grounds, principles, sequences, procedures and the effective period for applying the dismissal as a form of handling breach of labor discipline. The failure to perform properly or adequately the employers’ obligations when applying the dismissal as a form of handling labor discipline under the Labor Code 2019 (“Labor Code”) shall be determined as the act of dismissing the employees illegally.

2. What are the risks employers face if they dismiss illegal employees?

As stipulated in Article 73 of Decree No. 145/2020/ND-CP: “In case the employer decides to handle labor discipline in the form of dismissal contrary to the provisions of the law, in addition to the obligation, responsibilities under the Government’s regulations on settlement of complaints in the field of labor or settlement of individual labor disputes in the order specified in Section 2, Chapter XIV of the Labor Code, the employer shall be obliged to comply with the provisions of Article 41 of the Labor Code”. Therefore, as per this article, the settlement of legal consequences of unlawful dismissal of employees is the same as the case of the illegally unilateral termination of the labor contract.

Accordingly, the legal consequences that employees may incur when dismissing employees unlawfully as follows:

  • The employers will be forced to re-admit the employees to work under the concluded labor contract; must pay wages, pay social insurance, health insurance, unemployment insurance for the days on which the employees did not work; and must pay the employee for a sum of money equal to at least 02 months of salary in accordance with the labor contract (“the Compensation”). After admitting back to work, the employees will refund the employers the severance and job-loss allowance if they have received it from the employers. If there are no longer the working positions or jobs for which the labor contract was entered into, but the employee still wants to continue to work, then the two parties shall reach an agreement to amend and supplement the labor contract.
  • If the employees do not want to continue working, in addition to the Compensation mentioned above, the employer must pay a severance allowance (if eligible as prescribed in Article 46 of the Labor Code) to terminate the labor contract.
  • If the employers do not wish to receive the employee back to work, and the employee also agrees. In addition to the Compensation and the severance allowance payable by the employer, the employer must compensate the employee for an additional amount as agreed upon between the two parties. But the addition amount of compensation must be equal to at least 02 months of salary in accordance with the labor contract.
  • The employers may face administrative sanctions if the labor-management authority determines that the employer has violated regulations related to the illegal dismissal of the employee as follow:

+ The failure to comply with the sequences, procedures or statutory effective time for handling the breach of the labor discipline, compensation for damages and losses would be subject to an administrative penalty of up to VND 10,000,000;

+ Infringing upon the body and dignity of employees when handling the breach of the labor discipline but not reaching the degree of being prosecuted for criminal liability, the employer may be subject to an administrative penalty of up to VND 30,000,000 and applying remedial measures such as publicly apologizing to employees and paying for the total costs and fees for treatment, etc.

+ Handling the breach of the labor discipline but the breach is out of the scope of the labor regulations, the employers may be subject to an administrative penalty of up to VND 30,000,000.

  • Besides, the employers may bear the costs of the settlement of the complaint if the employee executes the right to complain to the competent labor-management authority or the dispute if the employee initiates legal proceedings at court.

In addition to some of the legal risks mentioned above, employers also face other risks, such as adversely affecting the reputation of employers, reducing the employment attraction to employees who intend to apply for work; ruining the trust of business partners and customers, etc.

The above is an analysis of the risks of employers if dismissing employees illegally in accordance with the Labor Law 2019.  Therefore, employers need to master the knowledge of labor laws, namely the principles, sequences, and procedures for dismissal, before applying disciplinary forms of dismissal to employees to avoid risks arising from the illegal dismissal of employees as stated.

If you have any questions or require any additional information, please contact Apolat Legal – An International Law Firm in Viet Nam.

This article is for general information only and is not a substitute for legal advice.