What should enterprises do in case of employees’ frequent inability to perform their tasks?

In the current economic situation, to maintain stable business operations and seek a solution to cushion operating costs, many enterprises also encourage other solutions to improve the effectiveness of their workforce. One of the solutions is that many enterprises often apply consent agreements to terminate the labor contract with employees who frequently fail to perform their tasks assigned under the labor contract.

However, not all employees agree with the agreement offered by the enterprise. At that time, many enterprises still unilaterally terminated labor contracts with employees based on multiple reasons, which led to many potential risks for the enterprise.

So, what should enterprises do when the employees frequently fail to perform the tasks assigned under their labor contracts to abide by laws and avoid potential risks?

Unilaterally terminating the labor contract

Pursuant to Point a Clause 1 Article 36 of the Labor Code 2019, the enterprise is entitled to unilaterally terminate the labor contract if the employee frequently fails to perform the tasks assigned under the labor contract as determined by the criteria on work performance assessment stipulated in performance management policy (“Policy”) of the enterprise. The Policy on work performance assessment is issued by the enterprise on the basis of prior consent from employees’ representative organizations at the grassroots level, where the enterprise’s head office is located.

It can be seen that the Labor Code 2019 allows the enterprise to unilaterally terminate the labor contract with employees who frequently fail to perform their tasks assigned under their labor contracts; however, the factor in the determination of frequently failing to perform their tasks assigned under the labor contract must be recorded in the enterprise’s Policy.

In other words, to have the basis for assessing the performance of employees, the enterprise must first establish the Policy for itself.  

When establishing the Policy, enterprises need to clearly define the phrases such as "fail to perform tasks" means and how to determine "frequently fail to perform tasks" to have the bases for confirming the employees’ frequently fail to perform their tasks assigned under their labor contracts. To be safe, enterprises should specify in minute detail the definition of the phrases "fail to perform tasks" and "frequently fail to perform tasks" by the numbers. For example: "An employee is considered to have failed to perform tasks if he/she does not perform the daily/weekly delivered quantity of products, from cases to cases", or "An employee is considered to have frequently failed to perform tasks if the number of times of failure to perform the daily/weekly delivered quantity of products in a month of such employee is 02 or more", etc. It should be noted that the determination of the criteria on work performance must be suitable with the labor standards[1] formed and issued by the enterprise.

In addition, before issuing the Policy, the enterprise must consult with employees’ representative organizations at the grassroots level, where the enterprise’s head office is located. If the enterprise sets its own Policy without prior consent from employees’ representative organizations at the grassroots level, it will be considered a violation. Accordingly, in this case, the enterprise may be administratively fined from VND 10,000,000 to VND 20,000,000[2].

Moreover, to ensure that the unilateral termination of the labor contract is carried out in accordance with laws, and to avoid possible risks, the enterprise should pay attention to the following issues:

Firstly, the enterprise must comply with the prior notice period for employees, depending on the types of signed labor contract[3];

Secondly, although the enterprise is eligible to unilaterally terminate the labor contract, the Labor Code 2019 stipulates several cases in which the enterprise is prohibited from unilaterally terminating the labor contract[4], such as (i) the employee is suffering from an illness, accident, or occupational disease and is receiving treatment or care prescribed by a competent health institution, except for the cases in which the employee is sick or has an accident and remains unable to work after having received treatment for a period of 12 consecutive months in the case of an indefinite-term labor contract, or for a period of 06 consecutive months in the case of a definite-term labor contract with a duration from 12 to 36 months, or for more than half of the duration of the contract in the case of a definite-term labor contract with a duration of less than 12 months but the ability of work have not recovered yet (ii) ​the employee is on annual leave, personal leave or any other types of leave permitted by the enterprise; and (iii) the female employee is pregnant, or the empoyee is on parental leave or caring for a child who is less than 12 months old. Therefore, when the employees fall into these cases, the enterprise is not allowed to exercise its right to unilaterally terminate the labor contract. The enterprise must kindly note this to avoid possible risks incurred from the illegal unilateral termination of the labor contract.

Taking disciplinary measure as dismissal

Unlike the case of unilateral termination of the labor contract, the basis for the enterprise to conduct disciplinary measures as dismissal when the employees frequently fail to perform their tasks is not specified in the Labor Code 2019.

Specifically, pursuant to Clause 3 Article 125 of the Labor Code 2019, enterprises can implement the disciplinary measure as dismissal if their employees repeat violations which were disciplined by deferment of pay rise or demotion and have not been absolved. Although there is no direct regulation, it is understandable that the enterprise is entitled to indirectly prescribe the act of conducting disciplinary measures as dismissal when the employees frequently fail to perform their tasks.

In detail, enterprises must first stipulate the taking disciplinary measures for deferment of pay rise or demotion when the employees frequently fail to perform their tasks. Then, if the employees repeated a violation before has absolved, the enterprise can apply for dismissal.

It can be seen that, although there is an indirect basis for taking disciplinary measures against the employees, this option still depends on the repeat violations of the employees, if after being disciplined, deferment of the pay rise, or demotion, the employees do not have a repeat violation while the period of labor discipline has not been absolved, the enterprise cannot apply dismissal to the employees. Simultaneously, to have a basis for assessing employees, enterprises still must issue Rule like the case of unilateral termination of the labor contract; therefore, compared with the option of unilaterally terminating the labor contract, the option of dismissing the employees do not seem to bring efficiency and convenience to the enterprise. Moreover, if the enterprise wants to apply this option, the enterprise also needs to strictly comply with regulations on conditions, the deadline for taking disciplinary measures, and procedures for implementing disciplinary measures; this not only costs the resources of the enterprise but also contains many potential risks in case the enterprise has one of the defects in the process of settling labor discipline.

However, this option may be suitable for the enterprise that still wants to create more conditions for the employees who fail to perform their tasks to continue their work at the enterprise, through disciplining in various forms with increasing levels.

In summary, when the solution to negotiate with the employees is no longer effective, the enterprise may consider choosing the solution of unilaterally terminating the labor contract or taking disciplinary measures as above. For each option, the enterprise needs to set a strict and detailed legal base from the very beginning to save resources and minimize risks that the enterprise may face.