Question
After a company is merged or consolidated with another company, do the existing employment contracts remain valid, or must the successor company sign new employment contracts with its employees?
Answer
Under the Vietnamese Labor Code 2019, a merger or consolidation of enterprises does not automatically terminate existing employment contracts. The successor employer is responsible for continuing to perform all valid employment contracts entered into with employees.
Accordingly, if the employees’ positions and the employer’s demand for labor remain unchanged, the successor company is not required to sign new employment contracts solely because of changes in the company’s legal status or organizational structure. Where it is necessary to amend certain terms, such as the employer’s name, job title, workplace, or salary, the parties may execute an addendum to the employment contract or enter into a new employment contract in accordance with applicable laws.
On the other hand, if the merger or consolidation results in organizational restructuring and workforce reductions, the employer may not automatically terminate employment contracts. In such cases, the employer must comply with the procedures governing redundancies due to changes in organizational structure, technology, or economic reasons under the Labor Code 2019, while ensuring that employees’ lawful rights and interests are fully protected.
In practice, many companies require all employees to terminate their existing employment contracts and sign new ones following a merger or consolidation. However, this is not a mandatory legal requirement and may give rise to employment disputes if it adversely affects employees’ rights and benefits.
Conclusion
A merger or consolidation does not invalidate existing employment contracts. The successor employer is generally required to continue performing those contracts unless the parties mutually agree to amend them or the employer carries out workforce reductions in compliance with the procedures prescribed by the Labor Code 2019.
If your business requires legal advice on corporate mergers, employment contracts, workforce restructuring, or other employment and corporate law matters, please contact SB Law. Our experienced lawyers and legal professionals are ready to provide timely and practical legal support.
