Question: I am an administrative staff member who has been working at a garment company for 03 years. Yesterday morning, the Human Resources Department met with me and notified me that my labor contract would be terminated after the 2026 Lunar New Year. The reason provided is that the company is dissolving the Administration Department to merge it into the Human Resources Department to streamline the organizational structure, resulting in the inability to arrange another position for me. Therefore, may I ask if the company has the legal right to unilaterally terminate my employment for this reason? Am I entitled to any compensation for the job loss in this case?
Answer
According to the regulations in Clause 1, Article 42 of the Labor Code 2019, cases considered as structural or technological changes include:
- Changes in the organizational structure, personnel rearrangement;
- Changes in processes, technology, equipment associated with the employer’s business lines;
- Changes in products or product structure.
Based on the information you provided, from a legal perspective, the grounds for termination cited by the company are based on Clause 1, Article 42 of the 2019 Labor Code. Accordingly, the law permits enterprises to reorganize their workforce in cases of structural changes, labor restructuring, or changes in processes, technology, or machinery. This means that if your company can demonstrate that it has a plan to restructure departments—resulting in the dissolution of your department and the necessity to terminate labor contracts with certain employees - such a reason is recognized as valid under the law.
Specifically, the 2019 Labor Code provides that in cases where structural or technological changes affect the employment of many employees, the company is strictly required to formulate and implement a labor usage plan. It is also important to note that, to ensure objectivity and guarantee the employees' right to be heard, the process of formulating this plan requires discussion and consultation with the grassroots-level employee representative organization. A labor usage plan is considered valid only when it fully includes the following basic contents::
- The names and number of employees to be retained, employees to be retrained for further employment, and employees to be working on part-time basis;
- The names and number of employees to retire;
- The names and number of employees whose employment contracts have to be terminated;
- Rights and obligations of the employer, employee and relevant parties regarding implementation of the labor utilization plan;
- The measure and financial sources to implement the plan.
Once the labor usage plan is adopted, the company must publicly notify the employees within 15 days from the date of adoption.
Notably, the spirit of the law prioritizes the retention of the employees' employment. Therefore, the company must make efforts to retrain employees for assignment to new positions.
However, in the event that the Company is unable to arrange continued employment for the employee, the Company shall pay job loss allowance to the employee as follows:
- The Company shall pay job loss allowance to an employee who has worked regularly for the Company for 12 months or more and loses his/her job, at the rate of one (01) month’s salary for each year of service, but not less than two (02) months’ salary.
- The period of service used to calculate the job loss allowance is the total actual working time of the employee for the employer minus the period during which the employee participated in unemployment insurance in accordance with the law on unemployment insurance, and minus the period of service for which the employee has already been paid severance allowance or job loss allowance by the employer.
- The salary used to calculate the job loss allowance is the average salary of the six (06) consecutive months under the labor contract immediately preceding the time the employee loses his/her job.
Besides, termination of employment may only be carried out after consultation with the Trade Union and at least 30 days’ prior notice has been given to the provincial-level People’s Committee and the employee.
Legal basis: Clauses 2, 3, 5, and 6; Article 44 and Article 47 of the 2019 Labor Code.
Based on the analysis and grounds mentioned above, when the company terminates employment due to organizational changes or restructuring, it is strictly required to comply with the proper procedures, ensure the prior notice period, and fully pay the job loss allowance to you. Conversely, if the company omits these steps or fails to comply with regulations, such action shall be deemed an unlawful unilateral termination of the labor contract.
Consultancy: Labour and employment services
