Companies terminate the labor contract before expiration: What should you note?

Companies terminate the labor contracts before expiration can help businesses restructure personnel, optimize costs and improve operational efficiency. However, contract termination must comply with legal regulations to avoid labor disputes and legal risks. Businesses need to carefully consider the reasons for termination, employee rights and implementation procedures to ensure transparency, fairness and maintain reputation.

Can the company terminate the labor contract ahead of time?

Pursuant to the provisions of Clause 1, Article 36 of the Labor Code 2019, the company terminates labor contract ahead of time in the following cases:

• Employees who regularly fail to complete work according to the labor contract are determined according to the criteria for evaluating the level of work completion in the employer’s regulations. Regulations on evaluating the level of job completion are issued by the employer but must consult with the employee representative organization at the facility for places where there is a representative organization of employees at the facility;
• The employee has been treated for illness or accident for 12 consecutive months for those working under an indefinite-term labor contract or has been treated for 06 consecutive months for those working under a fixed-term labor contract with a term of 12 to 36 months or more than half the term of the labor contract for those working under a fixed-term labor contract with a term of less than 12 months and the ability to work has not recovered. When the employee’s health recovers, the employer will consider continuing to enter into a labor contract with the employee;
• Due to natural disasters, fires, dangerous epidemics, enemy attacks, or relocation or contraction of production and business at the request of a competent state agency, the employer has sought every remedy but is still forced to reduce the workplace;
• The employee is not present at the workplace after the deadline specified in Article 31 of the Labor Code 2019;
• The employee reaches retirement age as prescribed in Article 169 of the Labor Code, unless otherwise agreed;
• The employee voluntarily quits his job without a legitimate reason for 5 consecutive working days or more;
• The employee provides dishonest information as prescribed in Clause 2, Article 16 of the Labor Code when concluding a labor contract, affecting the recruitment of the employee.

When the employer unilaterally terminates the labor contract for other reasons than above, it is considered illegal unilateral termination of the labor contract.

Note: The employer may not exercise the right to unilaterally terminate the labor contract in the following cases:

• The employee is sick or has an accident or occupational disease and is receiving treatment or nursing as prescribed by a competent medical examination and treatment facility, except for the case specified in Point b, Clause 1, Article 36 of the Labor Code 2019.
• Employees are on annual leave, personal leave, and other leaves agreed to by the employer.
• Pregnant female workers; Employees on maternity leave or raising children under 12 months old.

When unilaterally terminating a labor contract, the company also needs to comply with the regulations on termination notice time according to Clauses 2 and 3, Article 36 of the Labor Code 2019.

Rights of employees when the company illegally terminate the labor contract ahead of time

According to the provisions of Article 41 of the Labor Code 2019, a company that terminate the labor contract prematurely contrary to the provisions of law must fulfill the following obligations:

1. Must accept employees back to work according to the signed labor contract; Must pay salary, social insurance, health insurance, unemployment insurance during the days the employee is not allowed to work and must pay the employee an additional amount of money at least equal to 02 months’ salary according to the labor contract.

After being reinstated, the employee shall reimburse the employer for severance pay and job loss benefits, if received from the employer.

In case there is no longer a position or job agreed upon in the labor contract but the employee still wants to work, the two parties will agree to amend and supplement the labor contract.

In case of violation of the provisions on the notice period specified in Clause 2, Article 36 of the Labor Code, an amount corresponding to the salary according to the labor contract for the days without notice must be paid.

2. In case the employee does not want to continue working, in addition to the amount payable in section 1, the employer must pay severance allowance as prescribed in Article 46 of the Labor Code to terminate the labor contract.
3. In case the employer does not want to take back the employee and the employee agrees, in addition to the amount the employer must pay according to sections 1 and 2, the two parties shall agree on an additional compensation for the employee but at least equal to 02 months’ salary according to the labor contract to terminate the labor contract.

Responsibility of the company when terminating the labor contract before its expiration date

Responsibilities when terminating a labor contract are specifically stipulated in Article 48 of the Labor Code 2019 as follows:

1. Within 14 working days from the date of termination of the labor contract, both parties are responsible for fully paying all amounts related to the benefits of each party, except for the following cases which can be extended but must not exceed 30 days:

• The employer is not an individual terminating operations;
• The employer changes structure, technology or for economic reasons;
• Division, separation, consolidation, merger; selling, leasing, converting business types; transfer of ownership and rights to use assets of enterprises and cooperatives;
• Due to natural disasters, fires, enemy attacks or dangerous epidemics.

2. Wages, social insurance, health insurance, unemployment insurance, severance pay and other benefits of employees according to the collective labor agreement and labor contract are given priority for payment in cases where the enterprise or cooperative is terminated, dissolved or goes bankrupt.
3. The employer has the following responsibilities:

• Complete the procedure to confirm the time of social insurance and unemployment insurance payment and return it along with the original documents if the employer has kept the employee’s;
• Provide copies of documents related to the employee’s work history if the employee requests. The cost of copying and sending documents is paid by the employer.

Thus, the company is obligated to compensate when it terminate the labor contract before the expiration date within 14 working days from the date of termination.

Labor consulting service at Long Phan

Long Phan provides professional labor consulting services, supporting businesses and employees to comply with legal regulations, ensuring legal rights and limiting risks. Our scope of services includes:

• Consulting on labor contracts: Drafting, reviewing and adjusting contracts according to the latest regulations.
• Insurance and welfare regime: Guide to social insurance, health insurance, unemployment insurance.
• Recruitment & termination process: Support legal recruitment, firing, and termination procedures.
• Resolving labor disputes: Representing to negotiate and protect rights before competent authorities.
• Develop internal rules and labor regulations: Ensure compliance with regulations and business needs.

Terminating a labor contract prematurely requires businesses to comply with legal regulations to avoid disputes and risks. Implementing the correct process not only protects the company’s rights but also ensures fairness for employees, contributing to maintaining a professional working environment. If you need detailed advice, please contact Long Phan via the hotline 0906735386 for timely support.