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May 26, 2016

Vietnam’s New Penal Code: Employers Face Increased Criminal Liability for Unlawful Dismissals

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Tilleke & Gibbins

Under Vietnam’s new Penal Code No. 100/2015/QH13 (“new code”) coming into force on July 1, 2016, the dismissal of an employee will become more challenging because managers of companies will be exposed to greater risks of criminal liability than under the existing Penal Code No. 15/1999/QH10 as amended by Law No. 37/2009/QH12 (“old code”). This criminal liability would be imposed in addition to any civil liability that might be imposed under Vietnamese labor laws.

Specifically, under Article 128 of the old code, a person can incur criminal liability for unlawfully forcing laborers to leave their employment which causes “serious consequences,” whereas under Article 162 of the new code, the elements of the offense have been reworded to: “(a) unlawful dismissal of an employee, or (b) the use of force or threats to cause an employee to resign if such acts result in hardship for that employee or his/her family, or causes a strike.” In addition, under both laws, the acts must be carried out for “self-seeking purposes or private benefit,” though there has been no elaboration as to how this element might be met.

No detailed guidance was ever issued on the meaning of “unlawfully force laborers to leave their employment” or “serious consequences” under Article 128 the old code. Both terms were probably detrimental to the application of the law because the language, at face value, is vague. To our best knowledge, no one has ever been prosecuted under Article 128. Unlawful dismissals (wrongful termination) in an employment setting have only ended with civil liability.

By comparison, the language of Article 162 of the new code appears to be more precise and utilitarian. For example, if “unlawful dismissal” element can be fulfilled by non-compliance with existing labor laws, as is likely to be the case, there is a large body of existing law that sets out the legal grounds for dismissal and the procedures that must be followed. Hence, there is enough legal guidance to be able to determine if an unlawful dismissal has taken place. As a practical matter under the new code, an investigation into criminal liability might be triggered by the determination of civil liability under an unlawful dismissal case.

In addition to potentially greater exposure to criminal liability, there are enhanced penalties if liability is found. The criminal liability under the old code includes warning, non-custodial reform for up to one year, or imprisonment for a period of three months to one year. Under the new code, the warning is no longer an option and is replaced by a monetary fine from VND 10 million to VND 100 million (approximately USD 450 to USD 4,500). The other potential penalties (non-custodial reform for up to one year or imprisonment for a period of three months to one year) remain unchanged.

Moreover, there are enhanced penalties for aggravating circumstances under the new code that did not exist under the old code. Under the new code, where two or more employees are unlawfully dismissed or forced to resign; or the employee is a female employee who the offender knows is pregnant, or who is raising a child under 12 months of age; or the unlawful dismissal or forced resignation results in the suicide of the dismissed or resigned employee, the offender will be subject to a monetary fine of VND 100 million to VND 200 million (approximately USD 4,500 to USD 9,000) or imprisonment for a period of one to three years. In addition, the offender may also be banned from holding certain positions for a period from one to five years.

Under Vietnamese labor laws, normally only the legal representative of an organization has the authority to dismiss its employees. Hence, legal representatives will be especially vulnerable to liability under this new law.

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