An employer that unilaterally terminates a labor contract without lawful grounds or proper notice is deemed to have terminated unlawfully — and the price is set very clearly by Article 41 of the 2019 Labor Code. This article analyzes the three compensation scenarios so employers can assess risk and employees know their rights.
1. What counts as unlawful unilateral termination?
An employer may only unilaterally terminate in the cases permitted by Article 36 (e.g., the employee regularly fails to perform; prolonged sickness after treatment; force majeure requiring downsizing…) and must give proper advance notice (at least 45 days for indefinite-term contracts; 30 days for definite-term contracts of 12 to 36 months; 03 working days for contracts under 12 months). Termination outside these grounds, or without proper notice, is unlawful.
2. Scenario 1: The employee is reinstated
Under Article 41.1, the employer must:
- Reinstate the employee under the signed labor contract; if the former position no longer exists, the parties agree to amend the contract;
- Pay wages and social, health, and unemployment insurance contributions for all days the employee was not allowed to work — usually the largest amount;
- Pay an additional sum of at least 02 months’ contractual salary;
- If the notice period was violated: pay wages corresponding to the days of notice not given.
Conversely, upon reinstatement the employee must return any severance or job-loss allowances already received (if any).
3. Scenario 2: The employee does not wish to return
Under Article 41.2, in addition to all Scenario 1 amounts, the employer must pay severance allowance under Article 46: half a month’s salary for each year of employment (based on the average salary of the 06 months preceding termination).
4. Scenario 3: The employer does not wish to reinstate, and the employee agrees
Under Article 41.3, the employer must pay: all Scenario 1 amounts + severance allowance under Article 46 + an agreed additional compensation of at least 02 months’ contractual salary. The “at least 02 months” is a floor — the parties may agree on more.
5. The general formula: how much must the employer pay?
- Wages for the days not allowed to work (from the unlawful termination date to reinstatement or the court judgment) + corresponding insurance contributions;
- At least 02 months’ contractual salary;
- Wages for days of notice not given (if the notice period was violated);
- Severance allowance (Scenarios 2 and 3);
- At least 02 additional months’ agreed salary (Scenario 3).
Illustration: contractual salary of VND 15 million/month, unlawfully terminated for 6 months before reinstatement, 30 days’ notice not given: 6 months’ wages (VND 90 million) + at least 02 months’ salary (VND 30 million) + 30 days’ wages for missing notice (VND 15 million) = at least VND 135 million, excluding insurance contributions.
6. The reverse: unlawful termination by the employee
For comparison, Article 40 provides that an employee who unlawfully terminates only owes: half a month’s contractual salary + wages for days of notice not given (if any). Employee liability is far lighter than employer liability — a point employers should remember before terminating.
7. Frequently asked questions
Q: Is a dismissal that skips disciplinary procedure deemed unlawful unilateral termination?
A: Yes. Dismissal without complying with Article 122 (no minutes, no employee representative organization…) is unlawful termination, triggering Article 41.
Q: May the employee keep both compensation and the severance already received?
A: No. If reinstated, the employee must return severance and job-loss allowances already received.
Q: May the agreed additional compensation be less than 02 months’ salary?
A: No. Article 41.3 sets a minimum of 02 months’ contractual salary.
Facing a labor contract termination dispute? Contact us for advice.
Prepared by the FLAW AI Legal Council. This content is pending QA Council review before submission for approval; it is for reference only and does not replace legal advice for your specific situation.