CASE LAW DRAFT NO. 21/2024 On Determining the Salary as the Basis for Compensation for Employees (Please note that this image is not related to the specific case being discussed).

CASE LAW DRAFT NO. 21/2024

On Determining the Salary as the Basis for Compensation for Employees

Approved by the Judges’ Council of the Supreme People’s Court on [date] [month] 2024 and published under Decision No. [number]/QĐ-CA on [date] [month] 2024 by the Chief Justice of the Supreme People’s Court.

Source of the Case Law:

The Cassation Decision No. 05/2023/LĐ-GĐT dated September 14^th, 2023, of the High People’s Court in Hồ Chí Minh City concerning the labor case of “Unilateral Termination of Labor Contract Dispute” between the plaintiff, Mrs. Chu Thị Thu H, and the defendant, B Co., Ltd.

Location of the Case Law’s Content:

Paragraph 1 of the “Court’s Opinion” section.

Summary of the Case Law:

– Factual Background:

The employee filed a lawsuit requesting compensation from the employer for unlawfully unilaterally terminating the labor contract. The two parties could not agree on the salary the employee was entitled to.

– Legal Resolution:

In this case, the court must base its decision on the salary the employer paid for social insurance contributions for the employee as the basis for compensation.

Relevant Legal Provisions:

– Article 41, 96 of the Labor Code 2019;

– Law on Social Insurance 2014.

Keywords:

“Unlawful Unilateral Termination of Labor Contract”; “Compensation”; “Salary for Social Insurance Contributions”.

CASE DETAILS

According to the lawsuit and the proceedings, the plaintiff, Mrs. Chu Thị Thu H, provided the following account:

Mrs. Chu Thị Thu H entered into Labor Contract No. 003 – HĐLĐ/2019 – AMC with Nhuận B Co., Ltd. (hereinafter referred to as the Company). This contract was valid for a term of three years, from April 1^st, 2019, to March 31^st, 2022. Mrs. H’s role under the contract was in Human Resources, and she was entitled to a monthly salary of VND 12,000,000.

After serving more than ten months, Mrs. H received Dismissal Decision No. 01/01-2020/QĐST from the Company at 3:00 p.m. on January 15^th, 2020. The dismissal was attributed to her lack of proficiency in Chinese. The Company provided only 1 hour and 30 minutes’ notice for her to hand over her duties.

Following the Lunar New Year, Mrs. H attempted to claim her benefits from the Company. However, the security personnel barred her entry, and the Company failed to address her claims for benefits.

Mrs. H subsequently filed a lawsuit demanding the following compensation from the Company:

1. An amount equivalent to two months’ salary for the termination of the labor contract, totaling VND 24,000,000 (2 months x VND 12,000,000/month).
2. Compensation for the breach of the 30-day notice period, calculated as VND 12,000,000 per month divided by 30 days, amounting to VND 13,864,000.
3. Salary for the period during which she was barred from working, from January 15, 2020, until the end of the contract term on March 31, 2022. This amounts to 27 months x VND 12,000,000/month, totaling VND 324,000,000.
4. Contributions to social insurance, health insurance, and unemployment insurance for the days she was prevented from working until the contract’s end. For 27 months, this totals VND 12,000,000 per month x 27 months x 21.5%, equaling VND 69,660,000.
5. In accordance with Clause 4, Article 14 of Decree No. 05/2025/NĐ-CP, the Company is required to pay a severance allowance for employees who have worked for 12 months or more. Mrs. H’s contract duration was 36 months, entitling her to at least two months’ salary, which amounts to VND 24,000,000 (2 months x VND 12,000,000/month).
6. Payment of the 13th month salary for 2019, calculated for 10 out of 12 months, totaling VND 10,000,000 (VND 12,000,000/month x 10 months).
7. Payment for the salary for January 2020, calculated for 14 days, amounting to VND 6,461,538 (14 days x VND 12,000,000/month).
8. Payment for annual leave as specified in the labor contract (36 days), totaling VND 16,615,384 (VND 12,000,000/month divided by 26 working days x 36 days).
9. Interest for late payment as stipulated in Article 96 of the Labor Code 2012, calculated for the 13th month salary of 2019, annual leave for 2019, and salary for January 2020. The total interest amounts to VND 4,465,384 (VND 33,076,922 x 6.0% per year x 27 months).
10. Compensation for sick leave days eligible for social insurance and health insurance benefits, calculated until March 2020. The Company failed to report these sick leave days to the social insurance authority. The amount requested is VND 4,875,000 (VND 12,000,000 per month x 75% x 13 days). Supporting documents include a certificate of sick leave for social insurance.
11. Unemployment insurance for 3 months, totaling VND 21,600,000 (VND 12,000,000 per month x 60% x 3 months). Due to the Company’s delay in finalizing and returning the social insurance book, Mrs. Hwas unable to complete the unemployment insurance procedures, as per Clause 2, Article 50 of the Employment Law. Supporting documents include the payment process for unemployment insurance.
12. Mrs. H does not seek compensation for medical examination and treatment expenses.

In total, Mrs. H requests that the Company compensate her an amount of VND 519,541,306.

The defendant, Nhuận B Co., Ltd, presented the following:

Mrs. Chu Thị Thu H submitted a job application and was recruited by Nhuận B Co., Ltd on March 11^th, 2019, on a probationary basis until March 31^st, 2019. On April 1^st, 2019, Mrs. H and the Company signed Labor Contract No. 003 HĐLĐ/2019 for a term of one year, from April 1^st, 2019, to March 31^st, 2020.

Her position was in human resources without a formal title, and her basic salary was VND 5,500,000 per month. During her tenure with the Company, Mrs. H worked in a normal capacity, with no exceptional achievements or violations recorded.

As the Lunar New Year holiday of 2020 approached, Mrs. H expressed her intention to change jobs following the holiday and submitted her resignation letter, effective from February 5^th, 2020, the day the Company resumed operations after the holiday. Based on her resignation letter, the Company issued a termination decision on January 15^th, 2020.

After her resignation, the Company attempted to contact Mrs. H to collect her January 2020 salary and related documents, but she did not respond or come to retrieve them. The Company made several attempts to reach her, but she remained unresponsive. As of now, the Company still holds her January 2020 salary amounting to VND 3,953,692, which it is prepared to pay.

As a human resources staff member, Mrs. H was responsible for maintaining personal files for all employees, including her own, as well as the Company’s daily use seal. Upon receiving court notifications regarding Mrs. H’s lawsuit, the Company was surprised to find that her resignation letter could not be located, which the Company alleges she may have taken back.

Furthermore, the labor contract submitted by Mrs. H to the court was inconsistent with the Company’s standard practices and appeared to show signs of forgery. While all employees are typically issued one-year contracts post-probation, Mrs. H’s contract indicated a term of three years. Other documents submitted by Mrs. H also showed inconsistencies.

The Company had hired Mrs. H with the knowledge that she did not speak Chinese, which could not have been a legitimate reason for her dismissal. All documents Mrs. H provided during the lawsuit were scanned copies, which made it impossible to verify the signatures and seals. There is a possibility that the original documents were altered or fabricated by Mrs. H to support her litigation.

The Company has requested the Court to verify the authenticity of the evidence submitted by Mrs. H and, if found to be falsified, to refer the case to the police for investigation into potential crimes involving forgery of seals and documents of agencies and organizations. For these reasons, the defendant does not agree with any of Mrs. H’s claims.

In the First-instance Labor Judgment No. 03/2021/LĐ-ST dated September 30^th, 2021, the People’s Court of Bắc Tân Uyên District, Bình Dương Province rendered the following decision:

1. The court partially accepted the claims of the plaintiff, Mrs. Chu Thị Thu H, against the defendant, Nhuận B Co., Ltd, including:

1.1. Salary due to the violation of the 30-day notice period, amounting to VND 13,864,000;

1.2. Compensation as per the labor contract for the period from February 2020 to March 2022, totaling VND 324,000,000;

1.3. Payment of two months’ salary for contract termination, equaling VND 24,000,000;

1.4. Payment for the remaining salary of January 2020, amounting to VND 6,461,538;

1.5. Severance allowance for two months (February 2020 and March 2020), totaling VND 24,000,000.

Nhuận B Co., Ltd is required to pay Mrs. Chu Thị Thu H a total of VND 392,325,538.

2. The court did not accept certain claims of Mrs. H against the defendant, including:

2.1. Payment of the 13th-month salary for 2020, amounting to VND 10,000,000;

2.2. Annual leave salary, totaling VND 16,615,384;

2.3. Social insurance, health insurance, and unemployment insurance for the period from February 2020 to March 2022, amounting to VND 69,660,000;

2.4. Payment for 24 days of sick leave, totaling VND 4,875,000;

2.5. Unemployment insurance for three months, amounting to VND 21,600,000;

2.6. Interest due to late payment, totaling VND 4,465,384.

Additionally, the court addressed court fees and the parties’ rights to appeal.

On October 14^th, 2020, Mrs. Chu Thị Thu H filed an appeal requesting the appellate court to amend part of the first-instance judgment. She sought the inclusion of additional claims for the payment of the 13th-month salary for 2019, amounting to VND 10,000,000; the 2019 annual leave salary, totaling VND 16,615,384; direct payment of social insurance to Mrs. H, amounting to VND 69,660,000; payment of unemployment insurance, totaling VND 21,600,000; interest due to late salary payment, amounting to VND 4,465,384; unpaid sick leave days, totaling VND 4,875,000; and medical examination and treatment expenses, amounting to VND 4,241,157, making a total of VND 131,456,925.

On October 29^th, 2021, Mr. Trần Quang Tâm, the representative of Nhuận B Co., Ltd, filed an appeal against the entire first-instance judgment.

In the Appellate Labor Judgment No. 02/2022/LĐ-PT dated March 28^th, 2022, the People’s Court of Bình Dương Province rendered the following decision:

1. The court did not accept the plaintiff’s appeal but accepted part of the defendant’s appeal, amending certain aspects of the First-instance Labor Judgment.

1.1. The court declared Decision No. 01/01-2020/QĐST dated January 16^th, 2020, by Nhuận B Co., Ltd regarding the termination of the labor contract with Mrs. Chu Thị Thu H to be unlawful.

1.2. The court partially accepted Mrs. Chu Thị Thu H’s lawsuit, ordering Nhuận B Co., Ltd to pay Mrs. Chu Thị Thu H the following amounts:

– Two months’ salary as per the contract, totaling VND 13,600,000;

– Salary for the days not worked from January 16, 2020, to March 30, 2022, amounting to VND 180,461,500;

– Two months’ salary for contract termination, totaling VND 13,600,000;

– Salary for January 2020, amounting to VND 3,953,692.

The total amount ordered was VND 218,415,192.

1.3. The court did not accept Mrs. Chu Thị Thu H’s claims for the following amounts:

– 13th-month salary for 2020: VND 10,000,000;

– Annual leave pay: VND 16,615,384;

– Social insurance, health insurance, and unemployment insurance from February 2020 to March 2022: VND 69,660,000;

– Sick leave for 24 days: VND 4,875,000;

– Unemployment insurance for three months: VND 21,600,000;

– Interest due to late payment: VND 4,465,384.

Additionally, the appellate court addressed court fees and judgment enforcement.

On December 20^th, 2022, Mrs. Chu Thị Thu H filed a petition for cassation review against the above Appellate Labor Judgment.

In the Cassation Appeal Decision No. 159/QĐ-VKS-LĐ dated July 13^th, 2023, the Chief Procurator of the High People’s Procuracy in Hồ Chí Minh City appealed the Appellate Labor Judgment No. 02/2022/LĐ-PT dated March 28^th, 2022, requesting the High People’s Court in Hồ Chí Minh City’s Judges’ Committee to vacate the aforementioned Appellate Labor Judgment and remand the case for re-adjudication by the appellate court.

At the cassation hearing, the representative of the High People’s Procuracy in Hồ Chí Minh City proposed that the Judges’ Committee accept the entire appeal of the Chief Procurator.

COURT’S OPINION:

[1] Concerning the calculation of compensation salary: The parties disagreed on the monthly salary received by Mrs. H. Mrs. H claimed that her monthly salary and allowances totaled VND 12,000,000 but failed to provide supporting evidence. The pay slips submitted by her lacked signatures and the company representative’s stamp. Conversely, the company disputed Mrs. H’s stated salary, asserting that it was VND 5,500,000 per month but also did not provide corroborative evidence.

According to documents from the Social Insurance of Bắc Tân Uyên District, Nhuận B Co., Ltd reported paying social insurance for Mrs. H based on a salary and allowances totaling VND 6,800,000, which included a base salary of VND 6,500,000 and an allowance of VND 300,000. Thus, the appellate court’s use of VND 6,800,000 per month as the basis for calculating compensation for Mrs. H was deemed appropriate.

The appeal’s argument that the compensation should be based on the VND 12,000,000 salary and allowances mentioned in the labor contract was incorrect. The labor contract referred to other allowances without specifying their nature, and in practice, the company only paid a hazard allowance of VND 300,000 and a salary of VND 6,500,000, totaling VND 6,800,000.

[2] The appeal contended that the rejection by both courts of Mrs. H’s claim for social insurance and health insurance payments was erroneous. After leaving Nhuận B Co., Ltd, Mrs. H continued to work and participate in social insurance and health insurance through various employers, who paid these insurances on her behalf.

Under Articles 82, 83, 84, 85, and 86 of the 2014 Labor Code, both employees and employers are required to contribute to social insurance based on the monthly salary and make payments directly to the social insurance agency for the social insurance fund. This fund is then used to provide social insurance benefits to employees as stipulated by law. Employers are not obligated to make direct payments for social insurance or health insurance to employees.

Therefore, the decisions by the first-instance and appellate courts not to compel the company to pay social insurance and health insurance directly to Mrs. H were correct.

[3] The appellate court and the first-instance court accurately addressed issues related to the 13th-month salary for 2019, late payment interest, annual leave pay, and sick leave days for health insurance and social insurance purposes. Thus, there is no basis for accepting the appeal.

In light of the foregoing,

IT IS DECIDED:

Pursuant to Articles 325, 334, 342, and 343 of the 2015 Civil Procedure Code:

1. The Cassation Appeal Decision No. 159/QĐ-VKS-LĐ dated July 13^th, 2023, of the Chief Procurator of the High People’s Procuracy in Hồ Chí Minh City,is not accepted.
2. The Appellate Labor Judgment No. 02/2022/LĐ-PT dated March 28^th, 2022, of the People’s Court of Bình Dương Province, concerning the “Dispute over unlawful unilateral termination of a labor contract” between the plaintiff, Mrs. Chu Thị Thu H, and the defendant, Nhuận B Co., Ltd, remains in effect.
3. The cassation judgment is effective from the date of issuance.

CONTENT OF THE CASE LAW:

“[1] Concerning the calculation of compensation salary: The parties disagreed on the monthly salary received by Mrs. H. Mrs. H claimed that her monthly salary and allowances totaled VND 12,000,000 but failed to provide supporting evidence. The pay slips submitted by her lacked signatures and the company representative’s stamp.

Conversely, the company disputed Mrs. H’s stated salary, asserting that it was VND 5,500,000 per month but also did not provide corroborative evidence. According to documents from the Social Insurance of Bắc Tân Uyên District, Nhuận B Co., Ltd reported paying social insurance for Mrs. H based on a salary and allowances totaling VND 6,800,000, which included a base salary of VND 6,500,000 and an allowance of VND 300,000.

Thus, the appellate court’s use of VND 6,800,000 per month as the basis for calculating compensation for Mrs. H was deemed appropriate. The appeal’s argument that the compensation should be based on the VND 12,000,000 salary and allowances mentioned in the labor contract was incorrect. The labor contract referred to other allowances without specifying their nature, and in practice, the company only paid a hazard allowance of VND 300,000 and a salary of VND 6,500,000, totaling VND 6,800,000.”

THE RATIONALE FOR THE CASE LAW DRAFT’S PROPOSAL

According to Article 41 of the 2012 Labor Code, if an employer unlawfully unilaterally terminates a labor contract, the employer must compensate the employee based on the contractual salary. However, in practice, employees might not be able to provide the labor contract, the employer might dispute the employee’s proposed salary, or neither party may be able to provide evidence of the salary paid. This situation complicates the court’s task of determining the appropriate salary for compensation calculations.

In the cassation decision mentioned, the Judges’ Committee of the High People’s Court in Hồ Chí Minh City observed: “According to documents from the Social Insurance of Bắc Tân Uyên District, Nhuận B Co., Ltd reported paying social insurance for Mrs. H based on a salary and allowances totaling VND 6,800,000, which included a base salary of VND 6,500,000 and an allowance of VND 300,000. Thus, the appellate court’s use of VND 6,800,000 per month as the basis for calculating compensation for Mrs. H was deemed appropriate.”

Thus, in instances where there is a disagreement between the employee and employer regarding the salary, it is appropriate for the court to use the salary on which social insurance contributions were made as the basis for compensation when the employer unlawfully terminates the labor contract. Establishing a precedent on this matter is essential to ensure consistent application of the law in similar cases.

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