CASE LAW NO. 20/2018/AL On the Establishment of an Employment Contract Relationship After the Probationary Period. (Please note that this image is not related to the specific case being discussed).

CASE LAW NO. 20/2018/AL

On the Establishment of an Employment Contract Relationship After the Probationary Period

Approved by the Judicial Council of the Supreme People’s Court on October 17^th, 2018, and published under Decision No. 269/QD-CA on November 6^th, 2018, by the Chief Justice of the Supreme People’s Court.

Source of the Case Law:

The Cassation Decision No. 01/2017/LD-GDT dated August 9^th, 2017, by the Judicia; Council of the Supreme People’s Court regarding the labor case of  “Dispute over unilateral termination of the employment contract” in Bình Thuận Province between the plaintiff, Mr. Trần Công T, and the defendant, Limited Liability Company L (legal representative is Mr. H).

Location of the Case Law’s Content:

Paragraphs 2 and 3 of the “Court’s Opinion” section.

Summary of the Case Law:

– Case Background:

The employer issued an offer letter specifying the type of employment contract and the probationary period. The employee performed the probationary period as stated in the offer letter. After the probationary period ended, the employee continued to work without any further agreement between the employer and the employee.

– Legal Resolution:

In this case, it must be determined that the employer and the employee have established an employment contract relationship.

Relevant Legal Provisions:

Articles 26, 27, 28, and 29 of the Labor Code 2012.

Keywords:

“Probation”; “Probationary period”; “Offer letter”; “No employment contract is signed after the probationary period”; “Employment contract.”

CASE DETAILS

Mr. Trần Công T worked at Limited Liability Company L – L Supermarket – Branch B from September 9^th, 2013, according to the offer letter dated August 20^th, 2013, from Limited Liability Company L. According to the offer letter, Mr. T was employed as the Head of the Non-Food Department, with a fixed-term contract (12 months or more), a probationary period of 2 months, a total gross salary during the probationary period of VND 15,300,000, a monthly base salary of VND 12,600,000, and a monthly allowance of VND 5,400,000.

Mr. T started working on September 9^th, 2013. After the 2-month probationary period (from September 9^th, 2013, to November 9^th, 2013), Mr. T continued to work for Company L. On December 19^th, 2013, Mr. T resigned. On December 28^th, 2013, the Human Resources Department of Limited Liability Company L invited Mr. T to a meeting about “Agreement on Early Termination of the Employment Contract”. 

Mr. T noted in the minutes: Disagreeing with the decision to terminate the employment contract. On December 29^th, 2013, Limited Liability Company L issued Decision No. 15/QDKL-2013 unilaterally terminating the employment contract with Mr. Trần Công T, citing the reason: Frequently failing to complete the work according to the contract; the contract termination took effect from December 28^th, 2013. On January 6^th, 2014, Mr. T received the termination decision.

On February 24^th, 2014, Mr. Trần Công T filed a lawsuit regarding the unilateral termination of the employment contract, with the following claims:

1. Vacate the Decision No. 15/QDKL-2013 dated December 29^th, 2013, of Limited Liability Company L regarding the unilateral termination of the employment contract with him.
2. Request Limited Liability Company L to pay the following amounts:

– Compensation for 45 days’ notice period violation, amounting to VND 27,000,000.

– Compensation for 2 months’ salary due to unlawful termination of the employment contract amounting to VND 36,000,000. The company has already paid VND 19,466,000, and now the company still owes VND 16,534,000.

– Overtime wages for 45 days, amounting to VND 48,150,000.

– Compensation for unused annual leave for 11 days, amounting to VND 6,600,000.

– Compensation for days worked without compensatory leave for 11 days, amounting to VND 6,600,000.

– Outstanding wages for November and December, at VND 18,000,000 per month, amounting to VND 5,400,000.

– Social insurance, health insurance, and unemployment insurance totaling VND 24,696,000.

– Compensation for unlawful termination of the employment contract according to Article 42 of the Labor Code, calculated from January 2014 to the trial date, at VND 18,000,000 per month. Temporarily calculated for 7 months, amounting to VND 126,000,000.

– Compensation for emotional distress due to unlawful termination of the employment contract.

The authorized representative of Limited Liability Company L argued that the reason for terminating Mr. T’s employment contract was due to his frequent failure to complete the work according to the contract; specifically: After the 2-month probationary period, according to the Performance Plan and Evaluation Table dated November 10^th, 2013, Mr. T did not meet the job requirements as the Head of the Non-Food Department.

Therefore, the Director of L Supermarket – Branch B decided to extend Mr. T’s probationary period by 1 month to give him the opportunity to complete his tasks and to allow more time to assess his capabilities. The extension was due to L Supermarket – Branch B officially opening on December 5^th, 2013. However, after the 1-month extension, on December 12^th, 2013, the Head of Sales Supervision of L Supermarket – Branch B assessed Mr. T as not meeting the requirements and proposed a replacement for Mr. T.

On December 24^th, 2013, in the Meeting Minutes No. 10 on assessing the performance of the Non-Food Department managed by Mr. T, the Director of L Supermarket – Branch B proposed to the Board of Directors to replace Mr. T with someone experienced in managing the Non-Food Department.

On December 28^th, 2013, the company invited Mr. T to a meeting to discuss terminating the employment contract. In the minutes of the meeting about early termination of the employment contract, the company assessed Mr. T as follows: “Considering Mr. T’s work performance from September 9^th, 2013, to December 19^th, 2013 (including the 2-month probationary period), the company assessed that Mr. T was not suitable for the current job position (attached with the assessment by the Director of L Supermarket – Branch B).

Therefore, the company agreed to terminate the contract and settle the working days, leave days if any, and compensate 1 month’s salary in lieu of the notice period.” Mr. T did not agree with the company’s assessment.

On the same day, Limited Liability Company L drafted an agreement to early termination of the employment contract with Mr. T. The company informed Mr. T that he would cease working for the company starting from that day, and the company would settle all salary payments, leave compensation, and pay one month’s salary in lieu of the notice period. Mr. T did not agree to the early termination of the employment contract.

The company asserted that the decision to terminate Mr. T’s employment contract was in accordance with the Labor Code. The company had paid Mr. T one month’s salary for the notice period before terminating the employment contract.

Regarding Mr. T’s claim for damages, the company agreed to pay Mr. T social insurance, health insurance, and unemployment insurance that the company was required to contribute for 2 months (after the probationary period), amounting to VND 5,292,000, and compensation for 11 days of unclaimed compensatory leave, totaling VND 6,600,000. The company did not agree to Mr. T’s other compensation claims.

In the First-Instance Labor Judgment No. 01/2014/LD-ST, the People’s Court of Bình Thuận Province ruled:

– Dismissed the plaintiff Mr. Trần Công T’s claim to vacate the Decision No. 15/QDKL-2013 dated December 29^th, 2013, of the General Director of Limited Liability Company L regarding the unilateral termination of the employment contract with Mr. T.

– Dismissed Mr. Trần Công T’s claim that Limited Liability Company L must pay compensation and salaries; social insurance, and health insurance during the period Mr. T was not working at L Supermarket – Branch B.

– Acknowledged the voluntary payment by Limited Liability Company L: Limited Liability Company L will pay and support Mr. T with social insurance, health insurance, and unemployment insurance for 2 months (November and December), totaling VND 5,292,000, and compensation for 11 days of unclaimed compensatory leave, totaling VND 6,600,000. In total, Limited Liability Company L must pay Mr. T VND 11,892,000.

Additionally, the first-instance court ruled on the court fees and the right of the parties to appeal.

On August 26^th, 2014, Mr. Trần Công T appealed the entire First-Instance Judgment.

In the Appellate Labor Judgment No. 01/2015/LD-PT, the Appellate Court of the Supreme People’s Court in Hồ Chí Minh City ruled:

– Rejected the appeal, upholding First-Instance Judgment.

Additionally, the appellate court ruled on the court fees.

On April 7^th, 2016, Mr. Trần Công T filed a petition to review the Appellate Judgment according to cassation procedures.

In Decision No. 04/2016/KN-LD dated December 26^th, 2016, the Chief Justice of the Supreme People’s Court appealed against the Appellate Labor Judgment No. 01/2015/LD-PT of the Appellate Court of the Supreme People’s Court in Hồ Chí Minh City; proposed that the Judicial Council of the Supreme People’s Court to conduct a cassation trial to vacate the Appellate Labor Judgment No. 01/2015/LD-PT and the First-instance Labor Judgment No. 01/2014/LD-ST of the People’s Court of Bình Thuận Province.

At the cassation hearing, the representative of the Supreme People’s Procuracy proposed that the Judicial Council of the Supreme People’s Court accept the appeal of the Chief Justice of the Supreme People’s Court.

COURT’S OPINION:

Regarding the jurisdiction over the case:

[1] According to Articles 34, 35, and 36 of the Civil Procedure Code, the dispute over the unilateral termination of the employment contract between the plaintiff, Mr. Trần Công T, and the defendant, Limited Liability Company L, falls under the jurisdiction of the People’s Court of Phan Thiết City, Bình Thuận Province, for first-instance trial. The People’s Court of Bình Thuận Province accepting and adjudicating the case at the first-instance level was not in accordance with the law.

Regarding the determination of the employment relationship:

[2] Mr. Trần Công T began working at Limited Liability Company L under the offer letter dated August 20^th, 2013, with the following content: “Type of employment contract: Fixed-term (12 months or more). Probationary period: 2 months.” After the probationary period (from September 9^th, 2013, to November 9^th, 2013), Mr. T did not receive any notice of the probationary results but still continued to work.

Limited Liability Company L asserted that after the 2-month probationary period, Mr. T did not meet job requirements, so the company decided to extend Mr. T’s probation by 1 month to give him the opportunity to complete his tasks and to allow more time for performance evaluation. However, there was no evidence showing an agreement between Mr. T and Limited Liability Company L to extend the probationary period.

[3] Clause 1, Article 27 of the Labor Code stipulates that the probationary period “shall not exceed 60 days for jobs requiring professional or technical qualifications of college level or higher.” In the written statement dated June 14^th, 2014, the representative of Limited Liability Company L stated: “The company understands that after the probationary period (60 days), if no employment contract is signed, the employee shall officially work under a fixed-term contract of 12 months”. 

Therefore, the representative of Limited Liability Company L acknowledged that after the probationary period, Mr. T became an official employee under a fixed-term employment contract of 12 months. In practice, Limited Liability Company L negotiated with Mr. T to terminate the employment contract on December 28^th, 2013; when negotiations failed, on December 29^th, 2013, the General Director of Limited Liability Company L issued Decision No. 15/QDKL-2013 on the unilateral termination of the employment contract with Mr. T.

Hence, it is sufficiently established that the relationship between Mr. T and Limited Liability Company L after the probationary period was an employment contract relationship.

Regarding the legality of the termination of the employment contract:

[4] Limited Liability Company L unilaterally terminated the employment contract with Mr. Trần Công T on December 29^th, 2013; the reason for the termination was “Frequently failing to complete work according to the employment contract,” falling under the case specified in point a, clause 1, Article 38 of the Labor Code 2012. At the time Limited Liability Company L unilaterally terminated the employment contract with Mr. T, the labor laws and regulations did not have any provision applicable as a basis for evaluating the employee’s work performance.

[5] Before the 2012 Labor Code came into effect, the basis for determining that an employee frequently failed to complete work according to the labor contract was stipulated in Clause 1, Article 12 of Decree No. 44/2003/ND-CP dated May 9^th, 2003, of the Government detailing and guiding the implementation of several provisions of the Labor Code, as follows:

“1. An employee who frequently fails to complete work according to the labor contract is someone who fails to meet the work quota or assigned tasks due to subjective factors and has been recorded or reminded in writing at least twice in one month, and still fails to rectify the shortcomings thereafter. The extent of failure to complete work is specified in the labor contract, collective labor agreement, or internal labor regulations of the employers.”

Decree No. 44/2003/ND-CP dated May 9^th, 2003, ceased to be effective from July 1^st, 2013. However, the provision in Clause 1, Article 12 mentioned above is not contrary to the fundamental principles of the Labor Code and thus can be applied as a basis for adjudicating the case.

[6] Limited Liability Company L presented the Job Description, Violation Reminder Notice dated December 6^th, 2013, Violation Reminder Notice dated December 16^th, 2013, and the Performance Plan and Evaluation Table dated December 12^th, 2013, and based on these documents claimed that Mr. T did not complete his work according to the labor contract. Mr. T asserted that he was not given the job description and did not receive the two reminder notices from the company.

Limited Liability Company L failed to provide evidence that Mr. T had been given the job description and the reminder notices. Thus, the evidence provided by Limited Liability Company L is insufficient to determine that Mr. Trần Công T frequently failed to complete work according to the labor contract as per Clause 1, Article 12 of Decree No. 44/2003/ND-CP dated May 9^th, 2003, of the Government.

[7] After the probationary period, Limited Liability Company L did not sign a labor contract with Mr. Trần Công T; the company also did not have a collective labor agreement or internal labor regulations. Therefore, there is no basis to evaluate the extent to which the employee failed to fulfill work requirements. The first-instance court and the appellate court’s conclusion that Mr. Trần Công T frequently failed to complete work according to the labor contract and the rejection of Mr. T’s claim are unfounded.

In light of the foregoing;

DECISION:

Pursuant to Clause 3, Article 343, Clauses 1 and 2, Article 345 of the Civil Procedure Code;

Accept the Cassation Decision No. 04/2016/KN-LD dated December 26^th, 2016, of the Chief Justice of the Supreme People’s Court; vacate the entire Appellate Labor Judgment No. 01/2015/LD-PT dated April 13^th, 2015, of the Appellate Court of the Supreme People’s Court in Hồ Chí Minh City and the First-instance Labor Judgment No. 01/2014/LD-ST dated August 12^th, 2014, of the People’s Court of Bình Thuận Province regarding the labor dispute over unilateral termination of the labor contract between the plaintiff, Mr. Trần Công T, and the defendant, Limited Liability Company L.

Remand the case file to the People’s Court of Phan Thiết City, Bình Thuận Province for first-instance re-trial according to the correct legal procedures.

CONTENT OF THE CASE LAW:

“[2] Mr. Trần Công T began working at Limited Liability Company L under the offer letter dated August 20^th, 2013, with the following content: “Type of employment contract: Fixed-term (12 months or more). Probationary period: 2 months.” After the probationary period (from September 9^th, 2013, to November 9^th, 2013), Mr. T did not receive any notice of the probationary results but still continued to work.

Limited Liability Company L asserted that after the 2-month probationary period, Mr. T did not meet job requirements, so the company decided to extend Mr. T’s probation by 1 month to give him the opportunity to complete his tasks and to allow more time for performance evaluation. However, there was no evidence showing an agreement between Mr. T and Limited Liability Company L to extend the probationary period.

[3] Clause 1, Article 27 of the Labor Code stipulates that the probationary period “shall not exceed 60 days for jobs requiring professional or technical qualifications of college level or higher.” In the written statement dated June 14^th, 2014, the representative of Limited Liability Company L stated: “The company understands that after the probationary period (60 days), if no employment contract is signed, the employee shall officially work under a fixed-term contract of 12 months”. Therefore, the representative of Limited Liability Company L acknowledged that after the probationary period, Mr. T became an official employee under a fixed-term employment contract of 12 months.

In practice, Limited Liability Company L negotiated with Mr. T to terminate the employment contract on December 28^th, 2013; when negotiations failed, on December 29^th, 2013, the General Director of Limited Liability Company L issued Decision No. 15/QDKL-2013 on the unilateral termination of the employment contract with Mr. T. Hence, it is sufficiently established that the relationship between Mr. T and Limited Liability Company L after the probationary period was an employment contract relationship.”

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