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Facing difficulties due to Covid-19, do enterprises have the right to terminate labor contracts?

Facing difficulties due to Covid-19, do enterprises have the right to terminate labor contracts?

Thursday 26, 03 2020
The Covid-19 epidemic is having a major impact on the economy. Many businesses are forced to find ways to cut costs to survive, such as ending labor contracts with workers.

However, in the case of forced labor termination, the enterprise also needs to comply with the law to avoid disputes.

Is it unilateral termination of a labor contract or “dismissal”?

The term "dismissal" has been mentioned in newspapers, radio and social networks in recent times when referring to businesses cutting workers due to the Covid-19 epidemic. However, legally, using the term, in this case, is incorrect.

According to the Labor Code, “dismissal” is a form of labor discipline. That is, when an employee violates labor discipline or commits one of the acts prescribed in Article 126 of the Labor Code and is specified in the Labor Code, the enterprise has the right to apply the disciplinary measure to dismiss employees.

However, in this case, instead of the violation of the labor discipline, the reason for the dismissal of the workers is due to the epidemic, thus the enterprise cannot apply the dismissal method, and it can only use the method called “unilateral termination of the labor contract”. Dismissal or unilateral termination of the labor contract all leads to the termination of the labor contract. However, in each case, the grounds and legal consequences will vary.

The Covid-19 epidemic was a force majeure event

Article 38 of the Labor Code does not list cases of "epidemics" as a basis for enterprises to unilaterally terminate labor contracts but stipulates that in case "other force majeure reasons as prescribed by law” happens, provided that the employer has tried to find all remedies but is still forced to reduce production and the labor force, the enterprise then has the right to unilaterally terminate the labor contract.

Meanwhile, Clause 1, Article 156 of the Civil Code stipulates that “A force majeure event is an event that happens objectively and unpredictably and is irreparable although all necessary measures and permissibility have been taken.”

Facing difficulties due to Covid-19, do enterprises have the right to terminate labor contracts?

Based on the above regulation, the Covid-19 epidemic is a force majeure event. Thus, if due to the impact of the Covid-19 epidemic, an enterprise is forced to reduce its workplace, provided that it has put in the effort to find a solution but could not overcome the situation, it has the right to unilaterally terminate the labor contract with its employees.

Unilaterally terminating labor contracts must comply with the order and procedures prescribed by law, including the "prior notice" procedure for employees. If there is no advance notice or if the notice is not in accordance with the provisions of Clause 2, Article 38 of the Labor Code, the unilateral termination of the labor contract will be deemed illegal.

>> Thousands of businesses left the market due to Covid-19 

Source: https://www.thesaigontimes.vn

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