On 15 December 2009 the Ministry of Labour, War Invalids and Social Affairs ("Molisa") issued Official Letter No. 4758/LDTBXH-LDTL ("Letter 4758") replying to a written request from Vietnam Electricity Joint Stock Corporation ("VNECO") regarding regimes applicable to the employees working at Green Plaza Da Nang Hotel, a dependent unit of VNECO upon its assignment by VNECO to another enterprise ("Assignee").
Letter 4758 points out that Article 31 of the Labour Code, Article 6 of Decree No. 44/2003/ND-CP dated 9 May 2003 ("Decree 44") and Circular No. 17/2009/TT-BLDTBXH dated 26 May 2009 of Molisa ("Circular 17") as well as the agreements in the hotel assignment contract will apply to the above case.
Article 31 of the Labour Code (as amended) stipulates:
"In cases where an enterprise merges, consolidates, divides, separates, or transfers ownership of, right to manage, or right to use the assets of the enterprise, the succeeding employer shall be responsible to continue performance of the labour contract of the employee. In the case where all available employees are unable to be utilised, there must be a plan for labour usage in accordance with law.
An employee whose labour contract is terminated pursuant to the provisions of this article shall be entitled to a severance allowance."
The "plan for labour usage" mentioned above is explained in Article 6 of Decree 44 as follows:
"In cases where an enterprise merges, consolidates, divides, separates, or transfers the ownership, management right, or right to use the assets of the enterprise, and all of the current employees are unable to be utilised, there must be a plan for labour usage containing the following basic particulars:
The grass-roots trade union must participate in preparation of the plan for labour usage, and when the plan is implemented, it must be notified to the State administrative body for labour at the provincial level."
Circular 17 provides the formula for calculation of a severance allowance:
|Severance allowance||=||Total working
duration at the enterprise calculating such allowance
|x||Wage used as basis to calculate severance
If an employee terminates his or her labour contract after the merger, consolidation, division, separation of the enterprise, or the transfer of the ownership, management right, or right to use the enterprise's assets, the succeeding employer is responsible to calculate the severance allowance, including for the period during which the employee worked for the immediately preceding employer. The basis for calculating the severance allowance is the wage stated in the labour contract, using the average of the wages of the six months immediately preceding termination of the last labour contract.
Letter 4758 concludes that:
For inquiries related to this Legal Update, please contact:
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