To avoid unexpected labor disputes

Recently, the dispute between CJ CGV Company Limited (“CGV”), the owner of the famous CGV cinema chain in Vietnam, and Mr. Benedict Daniel Sullivan (“Mr. Benedict”), an employee of this company, has been a hot topic of discussion on social media platforms. Most of the public has paid attention to the long time it took to resolve the dispute in court or were surprised by the huge amount of money that Mr. Sullivan asked CGV to pay/compensate him, especially in a labor case. This illustrates the complexity and seriousness of disputes between companies and employees in management positions. So what should companies pay attention to when recruiting, signing and executing contracts with their managers to avoid similar disputes?

A CGV cinema in Vietnam (Source: Internet )

The long legal battle

According to information published in the press^[1], the plaintiff, Mr. Benedict, stated that he had worked for CGV since 2012. As of January 1, 2014, he held the position of Sales and Marketing Director and worked in District 1, Ho Chi Minh City, under an employment contract that expired on April 30, 2015. On October 7, 2014, Mr. Dongwon Kwak, General Director of CGV, suddenly decided to transfer him to the position of Lobby Supervisor of CGV Branch in District 7. On December 17, 2014, Mr. Benedict sent a letter to General Director Dongwon Kwak to resign from the position of Sales and Marketing Director as of January 19, 2015. However, on January 20, 2015, he was forced to resign from CGV Vietnam without receiving any prior notice or decision to terminate his employment contract, except for the official "final payment" letter. Mr. Benedict argued that his resignation did not mean the termination of his employment contract as the employment contract clearly stated: "In the event of early termination of the employment contract, the company must give the employee 4 months' notice" .

Respondent CGV, for its part, stated that it received Mr. Benedict's resignation letter from the position of Sales and Marketing Director and agreed to let him leave his job as of January 20, 2015. On February 13, 2015, the Company paid all of his salary, benefits and commissions up to the date of his resignation. According to CGV, Mr. Benedict's claim that he "resigned from his position and did not terminate his employment contract" is incorrect because at the time of his resignation, he "understood and was aware that he was resigning from his employment" and therefore signed the record of the transfer of his work and assets to the company. From that moment on, CGV did not accept the plaintiff's claims for compensation because they were unfounded.

In the judgment of first instance of the Ho Chi Minh City People's Court in 2023, the court rejected all of Mr. Benedict's claims. The Court of First Instance ruled that Mr. Benedict had submitted a letter of resignation and that CGV's termination of his employment contract was therefore justified. Mr. Benedict disagreed with this ruling and appealed. In July, the Ho Chi Minh City High People's Court accepted Mr. Benedict's appeal, overturned the first-instance judgment and ordered the Ho Chi Minh City People's Court to rehear the case according to the first-instance procedure. The Court of Appeals held that the case file showed that Mr. Benedict had not submitted a letter of resignation from employment, but only a letter of resignation from a position, and that the first instance court's finding that this was a letter of resignation from employment was incorrect. At the same time, the court of first instance found that there was a written agreement between the plaintiff and the defendant on the termination of the contract, but before the court of appeal, both the plaintiff and the defendant confirmed that there was no such agreement^[2].

Based on the information provided by the parties, as well as the views of the first instance and appellate courts as described above, it can be seen that not only between the plaintiff and the defendant, but also between the first instance and appellate courts, there is a conflict in the understanding and interpretation of Mr. Benedict's resignation letter, with one side considering it as a request for termination of employment, while the other side considers it merely a letter of resignation from the management position.

Mr. Benedict Daniel Sullivan in court (Photo: Xuan Duy)

Dependence on the signed agreement between the parties

In fact, resignation from a position will be applied to those who hold a certain position in the company, when they no longer want to hold that position. On the other hand, if the employee submits a letter of resignation, it can be understood that the employee wants to terminate the employment contract with the company. There is nothing to discuss if the employee clearly expresses the intention to terminate the employment contract through the resignation letter, but the resignation letter from a position is different.

Usually, the recruitment of a person for a managerial position in the company can be done in two ways. The first way is that the company recruits the employee to work in an employee position in the company, then appoints this person to the desired management position, and the parties sign an annex to adjust the employment contract. The second way is that the company recruits the employee directly to the management position through the employment contract.

If the first method is used, the employee may simply not want to continue to hold a management position in the company when he or she resigns. After the resignation, the employee continues to work for the company according to the signed employment contract with the employee position. However, this will not be clear if the company hires in the second way. In particular, in the second way, when the employee resigns, this is also the job position for which the employee was recruited to work in the company, so the company must clearly discuss with the employee that the employee's resignation in this case may mean requesting the termination of the employment contract because the employee is not recruited to work in other positions in the company.

Returning to the case at CGV, according to press information, Mr. Benedict has been working at CGV since 2012, and on January 1, 2014, he held the position of sales and marketing director under a labor contract with a term until April 30, 2015. The author is of the opinion that the determination of whether Mr. Benedict's resignation is a request to terminate the labor contract depends on whether the parties signed a new labor contract after Mr. Benedict's appointment to the position of Director or not, or only a contract appendix to the contract signed in 2012. If the parties only signed a rider to the contract, Mr. Benedict's resignation will cause him to return to the position in the employment contract. If, on the other hand, the parties have signed a new employment agreement recognizing Mr. Benedict as a director, his resignation as described above may be tantamount to a request to terminate the employment agreement.

Source: The Saigon Times

Considerations in concluding an employment contract with a manager

In addition to the dispute over whether a of resignation from a position is a letter of resignation from employment, as in the above case, there are other risks that companies often face when hiring their managers.

According to the provisions of the Company Law, the company director is appointed or signs an employment contract[3] by persons/authorities in the company such as the board of members/chairman of the company/board of directors (depending on the type of company). During the company's operation, if the requirements are not met, the company director can be dismissed, the employment contract can be terminated and replaced by another person. Dismissal of a company director is carried out in accordance with the company's regulations, but termination of an employment contract is a bit more complicated in terms of complying with the provisions of the labor law on the basis and procedure.

Therefore, for the positions of company directors, the company may consider recruiting such persons to work in employee positions in the company and then appoint them to the positions of directors. After the appointment, the parties can sign an appendix to the contract to adjust the employment contract, and this appendix will be binding on the company's appointment decision. This will help the company to be more proactive when it needs to replace employees holding the position of director. This is because the dismissal of a director may be carried out in accordance with the company's regulations, but the termination of the director's employment contract will be in accordance with the labor law. Therefore, it will not be easy for companies to terminate the employment contract with the director, but it will be easier if the company only terminates these positions and they continue to work in the company as employees.

As it can be seen, it is not easy for many companies to recruit, conclude and implement employment contracts with employees who hold managerial positions in the company, because these are important positions with great benefits. Therefore, any mistakes made by the company can cause serious material losses to the company and affect the company's reputation and brand. Therefore, prudence in labor relations with company managers will always be an issue that many companies need to pay special attention to.

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The article was written by Lawyer Nguyen Van Phuc and was published on the Saigon Times No. 36 2024, dated 05 September 2024.

Read more at: https://thesaigontimes.vn/de-tranh-cac-vu-tranh-chap-lao-dong-khong-mong-doi/