In accordance with clause 1 Article 42, changes in structure, technology, or due to economic reasons are detailed as follows:

Cases considered changes in structure and technology include:

a) Changes in the organizational structure, personnel rearrangement;

b) Changes in processes, technology, and equipment associated with the employer’s business lines;

c) Changes in products or product structure”.

Cases considered changes due to economic reasons include:

“a) Economic crisis or economic depression;

b) Changes in law and state policies upon restructuring of the economy or implementation of international commitments”.

Termination of labor contract when enterprises have changes in structure, technology, or due to economic reasons -

II. Laying off employees in cases of changes in structure, technology, or due to economic reason

Pursuant to clause 11 Article 34 of the Labor Code, a change in structure, technology or economic reasons is one of the reasons for which employers may dismiss employees. However, in order to protect employees against situations where the enterprise does not really need to be restructured or not because of economic reasons but employees are still laid off, at this time, the legal rights of employees will be affected. As a result, the prevailing rules have mentioned a process for termination of labor contract in the above cases. Businesses and employees should pay attention to protect their own interests.

III. Orders and procedures

When enterprises carry out restructuring, changes in technology that affects the employment of many laborers, or case for economic reasons that many employees are at risk of losing their jobs or being dismissed, the employer shall develop and implement a utilization plan based on Article 44 of the Labor Code 2019:

* Particularly in the case of structural and technological change, priority must be given to retraining old employees if there is a new position.

Step 1: Making and implementing a utilization plan

“A labor utilization plan shall have the following contents:

a) The names and number of employees to be retained, employees to be retrained for further employment, and employees to be working on a part-time basis;

b) Number and list of retired workers;

c) The names and number of employees whose employment contracts have to be terminated;

d) Rights and obligations of the employer, employee, and relevant parties regarding the implementation of the labor utilization plan;

đ) The measure and financial sources to implement the plan.”

Step 2: Have a discussion with the internal representative organization at the grassroots level for the employee representative organization of employees to which the employee is a member and notify 30 days in advance the provincial People’s Committee and the workers.

Step 3: Notice of termination of labor contract and issue decision on termination of labor contract.

In case of termination, the employer must pay the employee a redundancy allowance according to the provisions of Article 47 of the Labor Code.

IV. Things enterprise should consider

In order to avoid cases of illegal dismissal of employees, enterprises shall not skip any procedures since this may lead to a legal risk for the employer in the future.

If the employer develops a utilization plan, they need consider whether the changes in structure, technology, or economic reasons in the plan are suitable for the actual situation of the company or not? Moreover, enterprises also need to develop detailed plans for all employees affected by restructuring, changes in technology, or for the above economic reasons, to avoid inconsistencies compared with reality.

Enterprises should also pay attention to the issue of prioritizing the retraining of employees to continue using when there is a new workplace in case of structural and technological changes. In fact, many businesses just introduce other positions to employees and skip the step of training employees, which can be a legal risk in a labor lawsuit.

In practice, enterprises and employees can mutually agree to terminate the labor contract before making up their minds to carry out the above procedure to avoid unwanted legal disputes.

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