INVALID EMPLOYMENT CONTRACTS 2025
Topic 21:
INVALID EMPLOYMENT CONTRACTS
MSc. Hoàng Thị Minh Tâm
SUMMARY OF THE CASE AND COURT DECISION
[Decision No. 03/2022/QĐST-LĐ dated August 25, 2022, “On declaring an employment contract invalid” by the People’s Court of Việt Trì City, Phú Thọ Province]
Summary of the Case:
Ms. Nguyễn Thanh used the personal records of Ms. Nguyễn Thị Nhung to apply for a job at P Vietnam Textile Joint Stock Company (abbreviated as P Company). From March 1, 2010, to August 2012, Ms. Thanh signed an employment contract and worked at P Company, with social insurance contributions made in accordance with the law.
During the same period, from March 1, 2010, to August 2012, Ms. Nguyễn Thị Nhung worked at Công ty TNHH A Việt Nam (abbreviated as A Company), where A Company also made social insurance contributions as required by law. In October 2021, Ms. Nguyễn Thị Nhung received a notice from the Social Insurance Agency of Phú Thọ Province informing her that she had two social insurance account numbers: one issued by P Company and the other by A Company. The social insurance contribution periods for Ms. Nhung overlapped from March 2010 to August 2012.
Ms. Nguyễn Thị Nhung requested that the court declare the employment contract signed between P Company and Ms. Nguyễn Thanh (using Ms. Nguyễn Thị Nhung’s records) entirely invalid due to deception in the contract’s execution.
Court Decision:
[…] The court declared the employment contract signed between P Vietnam Textile Joint Stock Company and the employee, identified as Ms. Nguyễn Thị Nhung (signed by Ms. Nguyễn Thanh), to be entirely invalid.
The court ordered the recovery of the social insurance contributions and their refund to P Vietnam Textile Joint Stock Company in accordance with the social insurance recovery process. […]
COMMENTARY
I. Introduction
An employment contract is an agreement between an employee and an employer regarding paid work, salary, working conditions, and the rights and obligations of each party in the employment relationship [Article 13 of the 2019 Labor Code]. When entering into an employment contract, the parties must comply with specific conditions concerning the parties involved, the content of the agreement, and the principles of contract execution as prescribed by the Labor Code. Failure to adhere to these conditions may result in the employment contract being declared invalid.
The manner of handling an invalid employment contract varies depending on the extent and cause of the invalidity. While the 2019 Labor Code does not explicitly define the concept of an invalid employment contract, Article 49 of the 2019 Labor Code lists the circumstances under which an employment contract is deemed invalid. This provision serves as a critical basis for identifying instances of invalidity and determining the appropriate remedies accordingly.
II. Legal Issues
- Grounds for Determining an Employment Contract Invalid
Based on the extent of invalidity, employment contracts can be classified as partially invalid or entirely invalid. An employment contract is partially invalid when a specific portion of its content violates the law but does not affect the remaining parts of the contract. Conversely, an employment contract is entirely invalid in the following cases: the entire content of the contract violates the law; the person entering into the contract lacks proper authority or violates the principles of contract execution as stipulated in Clause 1, Article 15 of the 2019 Labor Code; or the work agreed upon in the contract is prohibited by law [Article 49 of the 2019 Labor Code].
Among the three scenarios that may lead to the complete invalidity of an employment contract, the second scenario—violation of the principles of contract execution or lack of proper authority—is considered the most common [Nguyễn Hữu Chí – Nguyễn Văn Bình (co-editors) (2021), Scientific Commentary on the 2019 Labor Code, Judicial Publishing House, pp. 144-145].
A review of recent disputes involving requests to declare employment contracts invalid reveals that violations of the principles of contract execution under Clause 1, Article 15 of the 2019 Labor Code are quite prevalent [See also: Decision No. 01/2022/QĐST-VLĐ dated December 12, 2022, of the People’s Court of N District, Nghệ An Province; Decision No. 04/2022/QĐST-LĐ dated November 28, 2022, of the People’s Court of Châu Thành A District, Hậu Giang Province; Judgment No. 1020/2023/LĐ-ST dated April 12, 2023, of the People’s Court of Thủ Đức City, Ho Chi Minh City; Judgment No. 02/2022/LĐ-ST dated July 5, 2022, of the People’s Court of Nam Định City, Nam Định Province].
It is evident that an employment relationship is established on the basis of voluntariness, and when entering into such a relationship, each party is obligated to provide truthful information to the other. Therefore, if an employee provides false information or falsifies records when applying for a job, this constitutes deception in the formation of the employment contract, rendering the contract entirely invalid.
Applying this to the case at hand, it is clear that Ms. Thanh’s use of Ms. Nguyễn Thị Nhung’s records to apply for a job at P Company was deliberate. Ms. Thanh was fully aware of her deceitful act in providing false information to establish and perform the employment contract, yet she intentionally proceeded. Consequently, at the time the contract was executed, P Company was unaware of Ms. Thanh’s fraudulent behavior. In other words, the employment contract was fundamentally invalid from the moment of its execution.
Thus, the court’s determination that Ms. Thanh’s use of Ms. Nguyễn Thị Nhung’s records to enter into an employment contract with P Company constituted deception, and its subsequent declaration that the contract between Ms. Thanh (under Ms. Nhung’s name) and P Company was entirely invalid, is well-founded and consistent with Article 49 of the 2019 Labor Code.
However, it should be noted that, in practice, the elements of voluntariness and honesty in the execution and performance of employment contracts are not always clear-cut. For instance, in the case referenced in Judgment No. 595/2022/LĐ-PT dated September 23, 2022, of the People’s Court of Ho Chi Minh City, the parties had indeed signed an employment contract, but the court found that it was a sham contract intended to conceal a different relationship. The court concluded that no genuine employment relationship existed between the employee and the employer. As a result, the court rejected the employee’s claims for salary payment and compensation for unlawful unilateral termination of the employment contract by the employer.
It is evident that employment relationships typically span an extended period and are closely tied to the rights and interests of both the employee and the employer. For the employee, participation in an employment relationship is not solely about income or salary; it also involves other personal matters specific to the employee, such as social insurance and unemployment insurance benefits. Therefore, the goodwill of both parties is essential for an employment contract to be validly established and performed.
From the two cases discussed above, it is clear that the elements of voluntariness and honesty in the execution and performance of an employment contract determine its validity. When one party believes that the execution or performance of the contract exhibits violations as stipulated in Article 49 of the 2019 Labor Code, they have the right to request that the contract be declared invalid.
- Authority to Declare an Employment Contract Invalid
Article 50 of the 2019 Labor Code designates the People’s Court as the authority responsible for declaring an employment contract invalid [This differs from Article 51 of the 2012 Labor Code, which granted both labor inspectors and the People’s Court the authority to declare an employment contract invalid]. When grounds for declaring an employment contract invalid under Article 49 of the 2019 Labor Code are established, the court will issue such a declaration in accordance with civil procedure regulations. This provision in the 2019 Labor Code aligns fully with prior provisions in the Civil Procedure Code regarding the authority to declare employment contracts invalid.
However, some opinions suggest that this regulation reduces the opportunities and time available to protect employees’ rights. Resolving disputes through the courts can be time-consuming, whereas in some cases, the primary goal of addressing an invalid employment contract is to swiftly ensure the employee’s salary, working conditions, and other benefits [Nguyễn Hữu Chí – Nguyễn Văn Bình, op. cit., p. 146].
In the case at hand, the employment contract was executed on March 1, 2010, at P Company’s headquarters in Việt Trì City, Phú Thọ Province. Accordingly, the People’s Court of Việt Trì City, Phú Thọ Province, had jurisdiction to hear and resolve the matter, consistent with Clause 2, Article 39 of the Civil Procedure Code. Thus, the court’s decision to declare the employment contract invalid was entirely within its authority as prescribed by Article 50 of the 2019 Labor Code. Concurrently with declaring the contract invalid, the court also addressed the legal consequences of this determination.
- Legal Consequences of Declaring an Employment Contract Invalid
When a contract is declared invalid, the court will address the legal consequences differently depending on the circumstances. In cases where the contract is invalid due to a violation of the principles of contract execution, the resolution is as follows: the employee and employer must re-execute the employment contract in accordance with legal requirements. If the contract is not re-executed, the parties shall proceed to terminate the employment contract [Article 10 of Decree No. 145/2020/NĐ-CP].
The rights and obligations of the parties, particularly those of the employee, remain protected. The employee may still be entitled to severance allowance and other benefits as stipulated in Article 10 of Decree No. 145/2020/NĐ-CP.
In the case under analysis, by the time the court adjudicated the matter, the employment contract signed between Ms. Thanh (using Ms. Nhung’s name) and P Company had already terminated, and the parties did not re-execute a new contract. Pursuant to Clause 3, Article 7 of Decree No. 145/2020/NĐ-CP, the period during which Ms. Thanh worked at P Company is still considered working time for the purpose of determining her entitlements. However, in the court’s decision addressing the legal consequences of the invalid employment contract, the focus was solely on resolving the social insurance issue, without addressing other employee benefits.
This approach appears reasonable, as Ms. Nhung’s request was limited to declaring the employment contract between P Company and Ms. Thanh (using Ms. Nhung’s name) invalid. It was this contract that led to the situation where Ms. Nhung had two social insurance account numbers for the same period, resulting in inconsistent contribution records. Other relevant parties, including Ms. Thanh and the social insurance agency, also agreed with Ms. Nhung’s request. Therefore, the author finds the court’s decision to grant Ms. Nhung’s request—declaring the employment contract invalid, ordering the recovery of social insurance contributions, and refunding P Company the amounts paid for Ms. Thanh’s contributions from March 2010 to August 2012—to be entirely persuasive.
Referencing other cases with similar circumstances, the resolution approach of most courts is consistent and aligns with labor law regulations [Typically, courts declare the employment contract entirely invalid, order the recovery of social insurance contributions, and refund the employer]. Based on the current labor law provisions regarding the resolution of consequences of an invalid employment contract, it is evident that the approach varies flexibly depending on the cause of the invalidity and the feasibility of remedying or maintaining the employment relationship between the parties.
However, the author believes that when an employee falsifies records or provides untruthful information during the execution of an employment contract, such actions are intentional and deliberate. Consequently, legal provisions should lean toward protecting the rights of the other party—the employer. If the employer can demonstrate that the employee’s deceitful or dishonest conduct caused harm, the employer should be entitled to seek compensation from the employee commensurate with the damage incurred.
Additionally, resolving the consequences of an employment contract declared invalid should take into account the fault leading to the invalidity. This would allow for an assessment of compensation claims and the respective responsibilities of the parties, ensuring the protection of the rights of the non-faulting party and maintaining the stability of the employment relationship.
III. Conclusion
The provisions on invalid employment contracts and the methods for addressing each case of invalidity represent a progressive development in the 2019 Labor Code. These regulations establish a legal framework that enables the parties to safeguard their lawful and legitimate rights when participating in an employment relationship. However, certain limitations persist, particularly in identifying violations of the principles of contract execution and resolving the legal consequences of an invalid employment contract.
These shortcomings impact the rights of the parties involved in the employment relationship and affect its stability. Therefore, continued research to address these limitations and refine the labor law provisions on invalid employment contracts is highly necessary.
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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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