In an increasingly competitive business environment, companies often need to restructure their organizations, optimize operations, or adjust workforce structures to adapt to market changes. Such restructuring may require employers to terminate employment contracts due to organizational or technological changes.

However, this process involves significant legal risks under labor law if it is not carried out in strict compliance with applicable regulations. Many companies have faced labor disputes, litigation, and substantial compensation obligations because the termination process was not properly assessed from a legal perspective.

Therefore, conducting a legal compliance and dispute risk assessment before terminating employment contracts is a critical step for employers to minimize potential legal exposure.

When Can an Employer Terminate Employment Due to Organizational Changes?

Under the Vietnamese Labor Code, employers may terminate employment contracts in cases such as:

Organizational restructuring
Technological changes
Economic reasons
Mergers, consolidations, divisions, or restructuring of enterprises
Downsizing or reduction of business operations

However, for such termination to be legally valid, employers must comply with several mandatory requirements, including:

Developing a labor utilization plan
Prioritizing retraining or reassignment of employees
Consulting with the employee representative organization
Notifying the competent labor authorities
Paying statutory redundancy or severance allowances

Failure to comply with any of these procedural steps may result in the termination being deemed unlawful.

Common Legal Risks and Labor Disputes

When implementing employment termination due to organizational restructuring, businesses often face the following risks:

1. Employees Claiming Unlawful Termination

Employees may initiate legal proceedings if they believe that the termination lacks a legitimate basis or proper procedure.

If the employer cannot demonstrate that the organizational change is genuine and necessary, the termination may be considered illegal unilateral termination.

Potential consequences may include:

Reinstatement of the employee
Payment of salary for the period the employee was unable to work
Compensation of at least two months’ salary
Payment of additional benefits and allowances

2. Failure to Develop a Valid Labor Utilization Plan

The law requires employers to prepare a labor utilization plan before implementing layoffs due to restructuring.

Many disputes arise when:

No labor utilization plan is prepared
The plan is incomplete or invalid
The employee representative organization is not consulted

3. Incorrect Financial Obligations

Employers may be required to pay various statutory benefits, including:

Redundancy allowance
Severance allowance
Outstanding salary payments
Social insurance contributions
Other contractual benefits

Errors in calculating these payments can lead to financial disputes and litigation.

4. Non-compliance with Notification Procedures

Employers are required to notify:

Affected employees
The employee representative organization
Local labor management authorities

Failure to comply with these notification requirements may render the termination legally invalid.

Why Businesses Should Conduct Legal Risk Assessment Before Termination

A legal risk assessment prior to workforce restructuring enables businesses to:

✔ Verify the legality of the termination grounds
✔ Identify potential labor dispute risks
✔ Ensure procedural compliance with labor law
✔ Anticipate potential compensation liabilities
✔ Prepare robust legal documentation in case of disputes

This proactive approach helps ensure that the restructuring process is conducted lawfully, transparently, and with minimal legal risk.

Our Legal Assessment Service

Our service provides a comprehensive legal review of employment termination due to organizational restructuring, including:

1. Legal Document Review

We review key documents such as:

Employment contracts
Internal labor regulations
Collective labor agreements
HR policies and internal regulations
Corporate restructuring documents

2. Assessment of Legal Grounds for Termination

Our legal experts assess:

Whether the restructuring meets the legal criteria
The necessity and reasonableness of workforce reduction
The likelihood of potential employee claims or disputes

3. Compliance Review of Legal Procedures

We examine whether the employer has properly implemented:

Labor utilization plans
Consultation with employee representatives
Notification to labor authorities
Internal decision-making procedures

4. Labor Dispute Risk Analysis

Our assessment includes:

Evaluation of potential dispute scenarios
Legal risk exposure
Estimated compensation liabilities

5. Strategic Legal Recommendations

We provide practical recommendations, including:

Risk mitigation strategies
Structuring legally sound documentation
Negotiation strategies with employees

Benefits of Using Our Service

By engaging our legal assessment services, businesses can:

✔ Minimize the risk of labor disputes and litigation
✔ Avoid significant compensation liabilities
✔ Ensure compliance with labor regulations
✔ Strengthen corporate governance and HR management practices

Contact Us

If your organization is planning workforce restructuring or employee termination due to organizational changes, conducting a legal assessment in advance is essential to mitigate legal risks.

We are ready to support businesses with: