FORM OF EMPLOYMENT CONTRACTS
Topic 6:
FORM OF EMPLOYMENT CONTRACTS
MSc. Hoàng Thị Minh Tâm
SUMMARY OF THE CASE AND COURT DECISION
[Judgment No. 951/2019/LĐ-PT dated October 28, 2019, of the People’s Court of Ho Chi Minh City]
Case Summary:
Mr. Phạm Đăng began working at N Trading and Services Co., Ltd. (hereinafter referred to as Company N) on March 1, 2016. No formal employment contract was signed between the parties, though there was an agreement regarding job duties, salary, and working hours.
Due to business losses, Company N terminated Mr. Đăng’s employment, along with that of several other employees, effective September 6, 2016. Company N paid Mr. Đăng’s salary for the period from September 1 to September 6, 2016, and Mr. Đăng acknowledged receipt of this amount.
However, Mr. Đăng contended that he was working under an indefinite-term employment contract, and thus Company N’s termination without prior notice constituted an unlawful unilateral termination, entitling him to compensation for damages. In contrast, Company N argued that Mr. Đăng was employed under an employment contract with a term of less than 12 months and that the termination was based on a mutual agreement between the parties.
Consequently, Company N refused to pay the compensation demanded by Mr. Đăng. The court found that the payroll records and timesheets submitted by both parties only demonstrated that Mr. Đăng was paid from April 2016 to September 6, 2016, providing insufficient evidence to establish that the employment contract was indefinite-term.
Furthermore, based on the timesheet from September 1 to September 6 maintained by Company N, the court determined that the employer and employee had mutually agreed to terminate the employment contract on a voluntary basis, consistent with the provisions of the Labor Code. Therefore, Mr. Đăng’s claim that Company N had unilaterally terminated the employment contract unlawfully was deemed baseless and not accepted.
Court Decision:
[…] The court rejected Mr. Phạm Đăng’s claims seeking to compel Company N to pay compensation for damages arising from an alleged unlawful unilateral termination of the employment contract. […]
COMMENTARY
I. Introduction
An employment contract represents an agreement between an employee and an employer. However, to protect the lawful rights and interests of the parties in the employment relationship and to maintain legal order, the law prescribes specific forms for each type of employment contract.
The form of an employment contract refers to the manner in which the parties express their mutual intent when entering into the contract. This form enables the determination of the agreed-upon terms between the parties. The form of the employment contract also serves as a crucial basis for evidentiary purposes in the event of a dispute, confirming the existence of an employment relationship between the parties. This, in turn, facilitates the identification of the rights and obligations of each party when disputes arise or violations occur within the employment relationship.
II. Legal Issues
- Requirements for the Form of Employment Contract Execution
Like many other types of contracts, an employment contract may be executed either verbally or in writing. In most cases, an employment contract must be executed in writing and prepared in two copies, with the employee retaining one copy and the employer retaining the other.
An employment contract executed via electronic means in the form of a data message, as regulated by the law on electronic transactions, holds the same legal value as a written employment contract. The parties may enter into a verbal employment contract for contracts with a term of less than one month, except in cases involving minor employees, domestic workers, or authorized representatives entering into contracts on behalf of a group of employees aged 18 or older for seasonal work or specific tasks with a term of less than 12 months [Article 14 of the 2019 Labor Code].
In most countries worldwide, the form of an employment contract is not considered a condition for determining its validity. The form primarily serves as evidence, protects rights and interests, and proves the existence of the employment contract rather than determining its legal effect. Current Vietnamese labor law follows this approach. Beyond Article 14 of the 2019 Labor Code, which governs the form of employment contracts, Article 49 of the same Code, addressing cases of invalid employment contracts, does not list violations of form as a ground for invalidity.
Thus, the provisions of the 2019 Labor Code do not treat the form of the contract as a mandatory condition for recognizing the existence of an employment relationship or the validity of the contract. Where the parties fail to comply with the prescribed form for executing an employment contract, the resolution tends toward imposing administrative penalties for the violation, while requiring the parties to re-execute the contract in the proper form; however, the existence of the employment relationship is still acknowledged. No regulation mandates the termination of an employment relationship due to a violation of the form of contract execution [Article 9 of Decree No. 12/2022/NĐ-CP].
Nevertheless, in certain cases, the absence of a written employment contract can create difficulties in determining whether a relationship falls under civil law or labor law. In the case at hand, the court recognized the existence of an employment relationship based on an implied employment contract, despite the agreement being verbal.
Similarly, in Judgment No. 01/2019/LĐ-ST of the People’s Court of Cà Mau City, Cà Mau Province, which resolved a dispute between an employer and a domestic worker, the court confirmed the existence of an employment relationship despite the lack of a written contract. The basis for the court’s determination included the employee’s work process, the employer’s management and oversight, and salary payments—characteristic indicators of an employment contract as outlined in Article 13 of the 2019 Labor Code. Thus, failure to adhere to the proper form of contract execution does not affect the validity of the employment contract that the parties have implemented.
In contrast, in a prior case, different court levels exhibited divergent views on the impact of the form of an employment contract on its validity [Mr. Đặng Hoàng Khương worked at the Liên Hoa Company branch in District 3, Ho Chi Minh City, starting December 1, 2003, without a written employment contract. On June 16, 2004, the company cited a reduction in production as the reason for terminating his employment, which Mr. Khương contested and subsequently filed a lawsuit.
The trial court held that since no employment contract was signed between Mr. Khương and the company, there was no formal employment contract, and either party could terminate the employment relationship at any time. Consequently, the court ruled that the company’s termination was lawful.
The appellate court similarly noted that the absence of a written contract and the lack of an agreed-upon term in the verbal agreement allowed either party to end the relationship at any time, affirming the legality of the company’s termination. However, when the Supreme People’s Court reviewed the case, it determined that “the failure to execute a written employment contract between Mr. Khương and Liên Hoa Company was unlawful and rendered the contract invalid. As such, there was no basis to grant Mr. Khương’s claims.”
See more: https://nld.com.vn/quyen-va-nghia-vu/toa-phan-quyet-chua-chinh-xac–thiet-hai-quyen-loi-nld-101695.htm, accessed January 21, 2025].
The author submits that establishing an employment relationship requires consideration of two aspects: first, the form in which the contract is expressed, and second, the content of the agreement between the parties. Where the parties voluntarily agree on the conditions for establishing an employment relationship, including the rights and obligations of each, the form of the employment contract merely serves as the means of expression and does not affect the substance of their agreement.
The form of an employment contract holds evidentiary value in proving and protecting the rights of the parties in the employment relationship. Due to this advantage, in most cases, the 2019 Labor Code requires the parties to conclude contracts in writing. However, this does not mean that an employment relationship between the parties is unrecognized solely because it violates formal requirements.
The 2019 Labor Code has broadened the forms through which employment contracts can be concluded while narrowing the cases where oral contracts may be established. In addition to written contracts as previously required, the parties may now conclude contracts through electronic means in the form of data messages as prescribed by the laws on electronic transactions. This form of conclusion is considered equivalent to a written employment contract. Recognizing this form of conclusion is an advancement of the 2019 Labor Code.
With the rapid development of information technology, electronic transactions have increasingly demonstrated their utility; acknowledging this form of conclusion diversifies ways to establish employment relationships while ensuring the rights of the contracting parties.
Meanwhile, oral employment contracts are a form that is not widely encouraged when establishing employment relationships. According to the 2019 Labor Code, the parties may conclude oral contracts for employment contracts with a term of less than one month, whereas previously this form could apply to temporary jobs with a duration of less than three months.
- Determining the type of employment contract when the parties violate the form of conclusion
Unlike previous regulations, Article 20 of the 2019 Labor Code specifies two types of employment contracts that the parties may conclude: fixed-term employment contracts and indefinite-term employment contracts (under Article 22 of the 2012 Labor Code, three types of contracts were identified, including indefinite-term contracts, fixed-term contracts, and seasonal or specific job contracts with a duration of less than 12 months). When one party unilaterally terminates the employment contract, the procedure to be followed varies depending on the type of contract. Therefore, identifying the type of employment contract plays a vital role in determining whether the unilateral termination of the contract by the parties complies with legal provisions.
In this case, there was a dispute between the employee and the employer regarding the type of employment contract and the basis for its termination. The employee argued that the employment contract being executed by the parties was an indefinite-term contract, but this was not acknowledged by the respondent, and the claimant had no other evidence to substantiate their argument. Meanwhile, the employer asserted that this was a fixed-term contract of less than 12 months.
The court relied on the payroll and attendance records submitted by both parties, showing that the employee received wages from April 2016 to September 6, 2016, to determine that the type of employment contract concluded by the parties was a fixed-term contract of less than 12 months. The author believes that this reasoning by the court is not entirely persuasive. The duration of the employment relationship should not be the basis for determining the type of employment contract. Instead, it should be based on the work agreed upon by the parties and the provisions of Article 20 of the 2019 Labor Code (i.e., Article 22 of the 2012 Labor Code) to identify the type of contract.
- Resolving the Rights of the Parties When the Employment Contract Violates the Form of Conclusion
As mentioned above, labor laws do not include any provisions requiring the termination of an employment relationship or denying its recognition solely due to a violation of the formal requirements of the contract. Therefore, in cases where the parties establish an employment relationship that does not meet the formal conditions for conclusion, the court still recognizes the actual employment relationship and resolves it under general labor law provisions.
Regarding the rights of the parties within the employment relationship, the court will rely on the actual rights and obligations agreed upon and performed by the parties to serve as the basis for resolution. If the claimant provides evidence to support their request, the court will consider this as the basis for its judgment. If there is no specific evidence, the court will base its decision on the parties’ acknowledgment of the employment relationship’s implementation.
Similarly, in this particular case, the court’s approach was also based on the consistent testimonies of Mr. Dang and Company N. Although Mr. Dang did not provide a written employment contract to support his claims, Company N acknowledged his period of employment. Therefore, the establishment date of the employment relationship was determined based on mutual acknowledgment by both parties. Wages and other benefits of the employee were also resolved on this basis. This reasoning seems appropriate and protects the employee’s rights.
However, it is important to note that since the agreement between the parties was not recorded in writing, proving the content of such an agreement can be very challenging unless mutually acknowledged by both parties. If one party is uncooperative or acts in bad faith, determining the rights becomes significantly more difficult.
III. Conclusion
Regulations on the conclusion of employment contracts in general, and on the forms of employment contract conclusion, have positively contributed to protecting the rights of the parties involved, ensuring that employment relationships are established based on mutual goodwill and voluntary agreement. However, compliance with regulations on the form of employment contract conclusion remains problematic. Some parties either do not want to formalize the employment relationship through signed contracts and only rely on verbal agreements, or some employers avoid written agreements to evade social insurance obligations.
This creates challenges in determining whether an employment relationship exists and on what basis the parties’ rights and obligations should be identified. Misidentifying the nature of the employment relationship can even lead to incorrect identification of the applicable governing body and misapplication of legal documents. Such errors would ultimately disadvantage the parties involved, especially the employees.
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“The article’s content refers to the regulations that were applicable at the time of its creation and is intended solely for reference purposes. To obtain accurate information, it is advisable to seek the guidance of a consulting lawyer.”
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