Issue of September 2021 – Issue on use and re-arrangement of employees for Enterprises during Covid-19 epidemic

Dear Valued Clients, 

The prolonged Covid-19 epidemic along with the large-scale application of government’s preventation and control measures has been causing various difficulties in production and business to enterprises, which lead to the re-arangement of employees to enterprises. As understanding the concerns of enterprises, the following article will provide solutions related to the use and re-arrangement of employees during the Covid-19 pandemic for enterprises to choose the most appropriate plan for their circumstances.

In the scope of this article, we will focus on providing options of use of employees in case where enterprises self-rearrange their employees as follows: 

I. Use and re-arrangement of employees due to epidemic

Pursuant to the 2019 Labor Code (“LC”), enterprises can allege Covd-19 as a “major epidemic” for applying these following labor re-arangement measures:

1.   Having the employees suspended from work

In accordance with the Documentary No. 264/QHLDTL-TL dated July 15, 2021 of the Department of Labor Relations and Wages and the Ministry of Labor, Invalids and Social Affairs on the payment of suspension wages for employees during the suspension of work related to the Covid-19 epidemic, employees may have to suspend from work due to the direct impact of the Covid-19 epidemic in the following cases:

(i)        Employees must suspend working during the quarantine period at the request of the competent authority.

(ii)       Employees must suspend working because their workplace or residence is locked down at the request of the competent authority.

(iii)      Employees must suspend working because the enterprise or its divisions have to suspend operations for epidemic prevention and control at the request of competent authorities.

(iv)      Employees must suspend working because the enterprise or its divisions cannot operate because the employers or other employees of the same enterprise or its divisions are in quarantine or has yet returned to the enterprise to work.

In the above cases, the employees’ salary is calculated according to Article 99.3 of the 2019 LC as follows:

(i) If the suspension does not exceed 14 working days, the salary shall not fall below the statutory minimum wages.

(ii)  If the suspension is longer than 14 working days, the salary shall be negotiated by both parties and the salary for the first 14 days must not fall below the statutory minimum wages.

2.   Re-assignment of employees against employment contract

While facing difficulties due to major epidemics, enterprises may consider temporarily transferring employees to another jobs against the employment contracts as prescribed in Article 29 of the 2019 LC. In this regard, it is noted that the time limit for the re-asignment must not exceed an accumulated period of up to 60 working days within 01 year, unless otherwise agreed in writing by the employee. In case the employees refuse to be reassigned for more than 60 working days in 01 year and have to suspend the employment, they shall receive the suspension salary from the enterprise in accordance with Article 99 of the 2019 LC as clarified in section 1 hereinabove.

In case of re-assignning employees to another jobs, the enterprise must notify the employees at least 03 working days in advance, specify the reassignment period and only assign works that are suitable for the employees’ health and gender.

The reassigned employees will receive the salary of the new work. If the new salary is lower than the previous salary, the previous salary shall be maintained for 30 working days. The new salary must not be lower than the previous salary for 30 working days then be at least 85% of the previous salary but not less than the regional minimum wages.

3.   Unilateral termination of the employment contracts

Pursuant to Article 36.1(c) of the 2019 LC, enterprises have the right to unilaterally terminate the labor contract “due to a dangerous epidemic […] and the employer has to lay off employees after all possibilities have been exhausted”. Therefore, in order to implement this option, enterprises need to prove that they have done all remedial measures but still have to reduce the workplace, as a basis for unilaterally terminating labor contracts with employees.

In this case, enterprises must notify the employee at least 45 days in advance in case of indefinite-term employment contracts, 30 days in advance in case of employment contracts with a fixed term ranging from 12 – 36 months, and 03 days in advance for the employment contracts with a fixed term less than 12 months. For some specific fields and jobs, the notice period shall comply with Article 7 of the Decree No. 145/2020/ND-CP.

Additionally, the pandemic is not only a direct cause for re-arranging employees in those mentioned cases, but also is an indirect reason due to its negative effect on the economy and financial issue of enterprises. Accordingly, enterprises can allege “economic reasons” due to the impact of Covid-19 to apply the re-arangement measures as follows:

II. Use and re-arrangement of employees due to economic reasons

1.   Temporary suspension of the employment contracts

Under Article 30.1(h) of the 2019 LC, enterprises and employees can agree to temporarily suspend the performance of employment contracts. During the suspension of the employment contract, employees shall not receive the salary and benefits specified in the employment contract, unless otherwise agreed by both parties or prescribed by law.

Within 15 days after the expiration of the suspension period, employees must be present at the workplace and enterprises must have employees returned to work under the signed employment contracts if such contracts are still valid, unless otherwise agreed by the parties or provided by law.

In the context of the Covid-19 epidemic, the Ministry of Labor, War Invalids and Social Affairs also issued the Documentary No. 1064/LDTBXH-QHLDTL dated on 25/03/2020, whereby section 3 stipulates: “[….] if the suspension period is prolonged, affecting the payment ability of enterprise, the employer and the employees can agree to temporarily suspend the employment contracts […]”. Given such guidance, it can be understood that the temporary suspension of employment contracts is applied as a follow-up remedy after the suspension of work has been done, but the prolonged suspension period affects the payment ability of enterprises. However, enterprises can completely choose to agree with their employees on the temporary suspension of a labor contract without taking any previous measures.

2.   Salary reduction agreement

In order to lighten the burden on salary payment, enterprises can consider negotiating to reduce wages with employees through amending the employment contract according to Article 33 of the 2019 LC. In this case, enterprises must notify employees at least 03 working days in advance on the content to be modified. However, if the parties cannot agree on the salary adjustment, the employees will continue to perform the signed employment contracts and the enterprise must choose another option.

3.   Agreement on unpaid leave

Pursuant to Article 115.3 of the 2019 LC, enterprises may consider reaching an agreement with employees on having their employees taken unpaid leave for a certain period of time. This option can only be implemented with the consent of the employee.

4.   Agreement on termination of employment contracts

Pursuant to Article 34.3 of the 2019 LC, enterprises may consider negotiating to terminate the contracts with their employees. In case the employees agree, the parties will sign a liquidation contract, specifying the rights and obligations of the parties when the contract is terminated.

5.   Redundant due to economic reasons

According to Article 42.2(a) of the 2019 LC, cases considered due to economic reasons include “economic crisis or recession”. If this reason puts a large number of employees into a risk of losing or having to quit their jobs, enterprises must develop and implement a labor utilization plan.

In case enterprises are unable to provide jobs and have to dismiss employees, they must pay redundancy allowance to their employees.

In case the enterprise cannot solve the job but has to dismiss the employee, it must pay the job loss allowance to the employee.

The dismissal of employees according to this regulation shall be carried out only after discussing with the union where the employees are members and notify 30 days in advance to the provincial People’s Committee and to the employee.

In short, depending on the situation of each enterprise as well as the positions of employees, enterprises may consider choosing temporary labor arrangement options (such as suspension of work, re-assignment of employees to another jobs, temporary suspension of employment contract, unpaid leave, salary reduction, etc.) or those in long run (such as unilateral termination or agreement on termination of labor contracts, dismissal for economic reasons). It can be seen that most of the above plans for re-arrangement of employees is simple but can only be implemented with the consent of employees. Therefore, enterprises should prioritize finding explanations and persuading employees to support and accompany enterprises in the context of the Covid-19 epidemic. In case there is no consent from employees, enterprises should consider the feasibility of other options such as unilateral termination of the employment contracts or dismissal for economic reasons.

Kind regards,

ENT Law LLC

The full version of this Legal Aritcle can be found here.