AGREEMENT TO TERMINATE A LABOR CONTRACT 2025
Topic 12:
AGREEMENT TO TERMINATE A LABOR CONTRACT
MSc. Hoàng Thị Minh Tâm
SUMMARY OF THE CASE AND COURT DECISION
[Judgment No. 01/2020/LĐ-PT dated April 29, 2020, of the People’s Court of Hải Phòng City]
Summary of the Case:
Phạm Thị Dung and SW Vietnam Shoe Company Limited (abbreviated as SW Company) entered into an indefinite-term labor contract starting on May 2, 2006. On July 12, 2017, Ms. Dung submitted a resignation request effective August 1, 2018, using a pre-drafted form provided by SW Company. Clause 12 of the form stated: “The employee requests to resign in accordance with regulations, and after three months, if there is a desire to return to work, the employee will be rehired.”
Based on Ms. Dung’s resignation request, SW Company issued a decision to terminate the labor contract and settled her entitlements. However, Ms. Dung contended that she did not intend to resign to terminate the labor contract permanently but rather sought a temporary leave to seek medical treatment. Consequently, she requested the court to declare SW Company’s termination decision as an unlawful unilateral termination of the labor contract.
The court found that Ms. Dung’s submission of the resignation request was entirely voluntary and free from coercion, and that she possessed sufficient cognitive capacity to understand the contents of the form she had completed. SW Company’s issuance of the termination decision was deemed an acceptance of Ms. Dung’s resignation request. Therefore, the termination of the labor contract between Ms. Dung and SW Company was considered a case of mutual agreement to terminate the labor contract.
Court Decision:
The termination decision issued by SW Company with respect to Ms. Dung complied with legal provisions, and thus, SW Company was not required to compensate the employee. […]
COMMENTARY
I. Introduction
The termination of a labor contract is understood as an event whereby the employee and the employer end the rights and obligations agreed upon in the labor contract. Various reasons may lead to the termination of a labor contract. Such termination may arise from the intent of one party, the mutual intent of both parties in the employment relationship, or other causes, such as the death of the employee, the employee being sentenced to imprisonment, or the death of an individual employer.
Among these, termination of a labor contract based on the mutual intent of both parties occurs when both parties express and demonstrate a desire to end the employment relationship, or when one party proposes termination and the other party accepts.
II. Legal Issues
- Form of the Agreement to Terminate a Labor Contract
Typically, when an agreement to terminate a labor contract is reached, the intent of the employee and the employer is expressed clearly and is easily recognizable. By its nature, an agreement to terminate a labor contract arises from the voluntary consent of the parties in the employment relationship. Consequently, labor law does not impose restrictions on the form of such an agreement. In other words, the parties may agree to terminate the labor contract in writing, but they may also do so verbally, provided both parties mutually consent.
In the case at hand, the employee submitted a resignation request, which can be regarded as a proposal to agree on the termination of the labor contract. This proposal was accepted by the employer through SW Company’s issuance of a decision to terminate the labor contract. Thus, this can be considered a case of mutual agreement to terminate the labor contract.
The author agrees with the court’s ruling, which held that the employee’s signing of the resignation request and SW Company’s acceptance of Ms. Dung’s resignation were entirely voluntary and not contrary to the law. Accordingly, SW Company’s decision to terminate the labor contract was lawful. Furthermore, current law does not prescribe specific formal requirements for an agreement to terminate a labor contract, so Ms. Dung’s signing of a pre-drafted resignation form fully complied with the provisions of Clause 3, Article 34 of the 2019 Labor Code (equivalent to Clause 3, Article 36 of the 2012 Labor Code).
However, in certain cases, the distinction between an agreement to terminate a labor contract and a unilateral termination can be quite tenuous. For instance, in a case resolved under Judgment No. 41/2021/LĐ-PT dated January 15, 2021, of the People’s Court of Ho Chi Minh City [According to the case details, Ms. Yên and Company G entered into a 12-month fixed-term labor contract. During the performance of the contract, Company G deemed that Ms. Yên had failed to fulfill her assigned duties and, for humanitarian reasons, proposed an agreement to terminate the labor contract with her.
The agreement was verbal and not documented in writing. The company issued a notice terminating the labor contract with Ms. Yên effective February 4, 2019, and Ms. Yên signed to acknowledge receipt of the termination notice. The company argued that the employment relationship ended based on a lawful agreement, while the employee contended that no agreement to terminate the labor contract existed between the parties.]
The court held that there was no connection between the employee’s actions—such as receiving the termination notice and handing over her work—and an agreement to terminate the labor contract. In other words, the employee’s lack of objection did not equate to consent to terminate the labor contract. The employer also failed to prove that a genuine agreement to terminate the labor contract existed between the parties.
Consequently, the court determined that the employer had unilaterally terminated the labor contract unlawfully and was required to compensate the employee for damages. It can be observed that, although labor law does not mandate a specific form for an agreement to terminate a labor contract, for such an agreement to be deemed lawful, the parties must demonstrate a mutual alignment of intent between them when terminating the labor contract.
- Consequences of an Agreement to Terminate a Labor Contract
When an agreement between the employee and the employer is deemed lawful, it serves as the basis for terminating the employment relationship between the parties [Clause 3, Article 34 of the 2019 Labor Code]. The employee’s entitlements will be settled in accordance with the corresponding legal provisions. Specifically, the employee is entitled to receive full salary up to the date of termination of the employment relationship, severance allowance for the period of employment during which unemployment insurance was not contributed, and other benefits as stipulated by labor law.
Within 14 working days from the date of termination of the labor contract, both parties are responsible for fully settling all amounts related to their respective entitlements. The employer is obligated to complete the procedures for confirming the duration of social insurance and unemployment insurance contributions, return these documents along with any other original papers retained from the employee, and provide copies of documents related to the employee’s work history upon request. The costs of copying and delivering such documents are borne by the employer [Article 48 of the 2019 Labor Code].
In the case under discussion, although the employee argued that she only requested leave to seek medical treatment and did not intend to terminate the employment relationship, the resignation request clearly indicated an intent to terminate the labor contract, and the employee completed it voluntarily. Consequently, the termination of the labor contract between the parties was voluntary and lawful. The employee is entitled to severance allowance from the employer as provided under Article 46 of the 2019 Labor Code for the period during which unemployment insurance was not contributed [The court applied the provisions of the 2012 Labor Code to resolve the case. This approach remains entirely consistent if the corresponding provisions of the 2019 Labor Code are applied].
III. Conclusion
During the performance of a labor contract, the parties have the right to agree to terminate the employment relationship at any time. The provision allowing the parties to mutually terminate a labor contract is rooted in the foundational principles of labor contract formation. A labor contract is established and performed based on the voluntary intent of the two parties—the employee and the employer.
Therefore, when either party, or both, no longer wish to continue the employment relationship with the other, they may fully agree to terminate the labor contract before its expiration. The law does not impose procedural or formal requirements on such an agreement. The basis for this termination rests entirely on the voluntary consent of both parties and is not subject to any formal constraints [Article 34 of the 2019 Labor Code does not differ from the 2012 Labor Code with respect to the case of mutual agreement to terminate a labor contract].
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