Precedent no. 20/2018/AL on establishment of employment relationship after the probation period

The employer has issued a job invitation letter in which the type of employment contract and the probation period are determined.  The employee has worked on probation according to the probation period specified in the job invitation letter.  

Although the probation period has ended, the employee still continued doing at his job without any other agreements made with his employer.

Mr. Tran Cong T has worked at L Co., Ltd. – L Supermarket – B Branch since September 09, 2013 according to the job invitation letter dated August 20, 2013 issued by L Co., Ltd. According to the job invitation letter, Mr. T was invited to work as the Head of Non Food Department under the employment contract of a fixed term (12 months or longer), with probation period: 02 months, gross salary during the probation period: VND 15,300,000, basic monthly salary: VND 12,600,000, and fixed monthly allowances: VND 5,400,000.

Mr. T began his job on September 09, 2013. After the 02-month probation period ended (from September 09, 2013 to November 09, 2013), Mr. T still continued doing at his job.  On December 19, 2013, Mr. T quit his job. On December 28, 2013, the Personnel Department of L Co., Ltd. has invited Mr. T in writing to the Company for attending the meeting and entering into the “written agreement on early termination of employment contract”. According to his opinions specified in such agreement, Mr. T stated that he disagreed with the termination of employment contract. On December 29, 2013, L Co., Ltd. has issued a Decision No. 15/QDKL- 2013 on unilateral termination of the employment contract with Mr. Tran Cong T with the reason that Mr. T repeatedly failed to fulfill his duties under the contract terms, and being effective as from December 28, 2013. On January 06, 2014, Mr. T received the said Decision on termination of employment contract.   

On February 24, 2014, Mr. Tran Cong T filed a petition against the unilateral termination of employment contract with the following requests:

1. Invalidate the Decision No. 15/QDKL-2013 dated December 29, 2013 issued by L Co., Ltd. on unilateral termination of employment contract.

2. Request L Co., Ltd. to make the following payments:

- Penalty for failure to give a prior notice of 45 days before unilaterally terminating the employment contract as VND 27,000,000.

- 02-month salary as compensation for illegal termination of employment contract: VND 36,000,000. The Company has paid VND 19,466,000. Now, The Company is required to pay the remaining amount of VND 16,534,000.

- Wage for overtime work in the period of 45 days: VND 48,150,000.

- Payment in lieu of untaken annual leave of 11 days: VND 6,600,000.

- Payment in return for compensatory time off of 11 days: VND 6,600,000. 

- Remaining unpaid amount of salaries of November and December calculated on the basis of monthly salary of VND 18,000,000 per month: VND 5,400,000.

- Total amount of social insurance, health insurance and unemployment insurance contributions: VND 24,696,000.

-Compensation for illegal unilateral termination of employment contract as regulated in Article 42 of the Labour Code for the period commencing from January, 2014 to the court date: VND 18,000,000/month.  Total amount temporarily calculated for 07 months: VND 126,000,000.

- Compensation for moral damage suffered from the unilateral termination of employment contract inconsistently with laws.

The authorized representative of L Co., Ltd. believed that:  L Co., Ltd. decided to terminate the employment contract with Mr. T because he repeatedly failed to fulfill his duties under the contract terms. To be specific: After 02-month probation period, according to the work and performance evaluation plan dated November 10, 2013, Mr. T was found to fail work requirements for the Head of Non Food Department, so Director of L supermarket – B Branch decided to allow Mr. T to take an additional probation period of 01 month so as to facilitate Mr. T in fulfillment of his duties and have more time to make exact evaluation of his working capacity. The probation period is prolonged because the official opening day of L supermarket – B Branch was December 05, 2013. After the additional probation period of 01 month has ended, on December 12, 2013, the Head of sales supervision department of L supermarket – B Branch concluded that Mr. T failed work requirements and requested the Company to appoint another person as a replacement for Mr. T.

On December 24, 2013, according to the minutes of meeting No. 10 on evaluation of performance of Non Food Department managed by Mr. T, Director of L supermarket – B Branch stated:  “The Board of Directors is requested to appoint another person who should have much experience of managing Non Food Department as a replacement for Mr. T”.

On December 28, 2013, the Company invited Mr. T in writing to the meeting on termination of his employment contract.  According to the minutes of meeting on early termination of employment contract, the Company has given the following opinions about Mr. T:  “After considering the performance of Mr. T during the period from September 09, 2013 to December 19, 2013 (including 02-month probation period), Mr. T is deemed to fail work requirements for the job position that he is holding (supported by the written performance evaluation of Director of L supermarket – B Branch). Thus, L Co., Ltd. decides to enter into an agreement on termination of employment contract and make payment for wages and untaken days off (if any) and compensation of 01 month’s salary for failure to give prior notice before terminating the employment contract”. Mr. T disagreed with the Company about these judgments.

On the same day, December 28, 2013, L Co. Ltd. has made a written agreement on early termination of employment contract with Mr. T. Mr. T has been informed of stopping employment with this Company from December 28, 2013, and this Company will make full payment for salary, untaken leave and 01 month's salary as compensation for its failure to give a prior notice before terminating the employment contract.  Mr. T refused to terminate the employment contract ahead of schedule.

L Co., Ltd. believed that its decision on termination of employment contract with Mr. T has been issued in accordance with regulations laid down in the Labour Code.  Mr. T has been paid an amount of 01 month’s salary as compensation for the Company’s failure to give a prior notice before terminating the employment contract.  In response to Mr. T’s request for compensation for damage, L Co., Ltd. agreed to pay Mr. T an amount of VND 5,292,000 of social insurance, health insurance and unemployment insurance contributions which must be covered by L Co., Ltd. in 02 months (after the probation period), and an amount of VND 6,600,000 as payment for 11 days of his compensatory time off.  L Co., Ltd. refused other requests for compensation of Mr. T.

According to the first-instance court’s judgment on labour dispute No. 01/2014/LD-ST dated August 12, 2014, the People’s Court of Binh Thuan Province judged:

The request of the petitioner – Mr. Tran Cong T for invalidation of the Decision No. 15/QDKL-2013 dated December 29, 2013 issued by General Director of L Co., Ltd. on unilateral termination of employment contract with Mr. T is rejected.

The request of the petitioner – Mr. Tran Cong T requesting L Co., Ltd. to make compensation and payment for salary, social insurance, health insurance and unemployment insurance contributions for the period Mr. T is not allowed to work at L supermarket – B Branch is also rejected.

The voluntariness of L Co., Ltd. in making the following decision is acknowledged:  L Co., Ltd. agreed to pay Mr. T an amount of VND 5,292,000 of social insurance, health insurance and unemployment insurance contributions which must be covered by L Co., Ltd. in 02 months (November and December), and an amount of VND 6,600,000 as payment for 11 days of his compensatory time off. The sum of these amounts which must be paid by L Co., Ltd. to Mr. T is VND 11,892,000.Additionally, the judgment made by the first-instance court also indicates the court fees and litigants’ rights to make appeal.

On August 26, 2014, Mr. Tran Cong T filed an appeal against all contents of the first-instance court’s judgment.

According to the appellate court’s judgment No. 01/2015/LD-PT dated April 13, 2015, the appellate court of the People's Supreme Court of Ho Chi Minh City judged:

The appeal is rejected and all contents of the first-instance court’s judgment are kept unchanged.

Additionally, the appellate court also made its decision on the court fees.

On April 07, 2016, Mr. Tran Cong T submitted a petition for reconsideration of the said appellate court’s judgment according to cassation procedure.

According to the Decision No. 04/2016/KN-LD dated December 26, 2016, the Chief Judge of the People’s Supreme Court appealed against the appellate court’s judgment No. 01/2015/LD-PT dated April 13, 2015 on labour dispute issued by the appellate court of the People's Supreme Court of Ho Chi Minh City; requested the Council of Justices of the People’s Supreme Court conducting cessation procedure to invalidate the appellate court’s judgment No. 01/2015/LD-PT dated April 13, 2015 on labour dispute issued by the appellate court of the People's Supreme Court of Ho Chi Minh City and the first-instance court’s judgment on labour dispute No. 01/2014/LD-ST dated August 12, 2014 by the People’s Court of Binh Thuan Province.

At the trial of cessation, representative of the People’s Supreme Procuracy has requested the Council of Justices of the People’s Supreme Court to accept the appeal by the Chief Judge of the People’s Supreme Court.

Regarding the court jurisdiction: 

[1] Pursuant to Article 34, Article 35, Article 36 of the Civil Procedure Code, the People’s Court of Phan Thiet City, Binh Thuan Province, has the jurisdiction to hear the case of dispute over the unilateral termination of employment contract between the petitioner – Mr. Tran Cong T and the defendant – L Co., Ltd. according to first-instance procedure.  The fact the People’s Court of Binh Thuan Province has handled and tried the case according to first-instance procedure is unlawful.   

Regarding determination of employment relationship:  

[2] Mr. Tran Cong T has worked at L Co., Ltd. according to the job invitation letter dated August 20, 2013 which indicates “Type of employment contract: Fixed term (12 months or longer). Probation period: 02 months”. At the end of the probation period (from September 09, 2013 to November 09, 2013), although Mr. T received no notice of result of his probation, he still continued doing his job. L Co., Ltd. thought that after 02-month probation period, Mr. T failed work requirements, so L Co., Ltd. decided to allow him to take an additional probation period of 01 month so as to facilitate him in fulfillment of his duties and have more time to make exact evaluation of his working capacity. However, there is no document proving the agreement on extension of the probation period made between Mr. T and L Co., Ltd.  
[3] Clause 1 Article 27 of the Labour Code stipulates that "The probationary period of a holder of job title who is required to possess associate degree or higher shall not exceed 60 days”. According to the written statement dated June 14, 2014, representative of L Co., Ltd. stated:  “L Co., Ltd. thoroughly knows that if the employment contract is not yet concluded after the probation period (60 days), the employee is entitled to work as an official employee under an employment contract of 12-month term". Thus, representative of L Co., Ltd. has admitted that after the probation period, Mr. T became an official employee working under an employment contract of 12-month term.  Actually, L Co., Ltd. has negotiated with Mr. T about the termination of employment contract on December 28, 2013, and no agreement reached through such negotiation. On December 29, 2013, General Director of L Co., Ltd. has issued a Decision No. 15/QDKL-2013 on unilateral termination of employment contract with Mr. T. For these reasons, it is a well-founded affirmation that the relationship between Mr. T and L Co., Ltd. after the probation period is a contractual employment relationship.  

Regarding the legality of termination of employment contract:  

[4] L Co., Ltd. has unilaterally terminated the employment contract with Mr. Tran Cong T on December 29, 2013 with the reason that “Mr. T repeatedly failed to fulfill his duties under the contract terms” as regulated in Point a Clause 1 Article 38 of the 2012 Labour Code. At the time L Co., Ltd. unilaterally terminated the employment contract with Mr. T, there are no regulations applicable to evaluation of the employee’s performance degree.  

[5] Before the 2012 Labour Code is effective, Clause 1 Article 12 of the Government’s Decree No. 44/2003/ND-CP dated May 09, 2013 providing elaboration and guidelines for the Labour Code is employed as the basis for concluding that an employee repeatedly fails to fulfill his/her duties under the contract terms. This regulation stipulates that:  

“1. An employee is found to have failed to fulfill his/her duties under an employment contract terms when he/she fails to meet the predetermined employee productivity or fulfill his/her assigned duties because of subjective causes and such violation is recorded or he/she is warned in writing at least twice a month but he/she fails to rectify such fault.  

The degree of an employee’s failure to fulfill his/her duties is defined according to the signed employment contract, the collective labour agreement or the enterprise's internal labour regulations."  

The Government’s Decree No. 44/2003/ND-CP dated May 09, 2013 providing elaboration and guidelines for the Labour Code is no longer effective as from July 01, 2013. However, the regulation laid down in the said Clause 1 Article 12 is not contrary to basic principles of the Labour Code. Thus, this regulation may be employed as the basis for handling the case.  

[6] L Co., Ltd. has presented the written job description, the violation warning letter dated December 06, 2013, violation warning letter dated December 16, 2013, and the work and performance evaluation plan dated December 12, 2013, and has used these documents as the basis for its conclusion that Mr. T failed to fulfill his duties under the contract terms.  Mr. T stated that he received neither the written job description nor these two violation warning letters from L Co., Ltd. L Co., Ltd. cannot provide documents proving that it has provide the written job description and violation warning letters for Mr. T.  Thus, the conclusion that Mr. Tran Cong T repeatedly failed to fulfill his duties under the contract terms as regulated in Clause 1 Article 12 of the Government's Decree No. 44/2003/ND-CP dated May 09, 2003 on the basis of the documents presented by L Co., Ltd. is unconvincing. 

[7] After the probation period, L Co., Ltd. has not yet entered into the employment contract with Mr. Tran Cong T, and it has neither collective labour agreement nor internal labour regulations.  Thus, there are no grounds for evaluating the degree of employee’s failure to fulfill his duties.  The first-instance court's and the appellate court’s conclusion that Mr. Tran Cong T repeatedly failed to fulfill his duties under the contract terms and refusal to Mr. T’s petition are unfounded.  

For the said reasons;

“[2] Mr. Tran Cong T has worked at L Co., Ltd. according to the job invitation letter dated August 20, 2013 which indicates “Type of employment contract: Fixed term (12 months or longer). Probation period: 02 months”. At the end of the probation period (from September 09, 2013 to November 09, 2013), although Mr. T received no notice of result of his probation, he still continued doing his job. L Co., Ltd. thought that after 02-month probation period, Mr. T failed work requirements, so L Co., Ltd. decided to allow him to take an additional probation period of 01 month so as to facilitate him in fulfillment of his duties and have more time to make exact evaluation of his working capacity. However, there is no document proving the agreement on extension of the probation period made between Mr. T and L Co., Ltd.

[3] Clause 1 Article 27 of the Labour Code stipulates that "The probationary period of a holder of job title who is required to possess associate degree or higher shall not exceed 60 days”. According to the written statement dated June 14, 2014, representative of L Co., Ltd. stated:  “L Co., Ltd. thoroughly knows that if the employment contract is not yet concluded after the probation period (60 days), the employee is entitled to work as an official employee under an employment contract of 12-month term". Thus, representative of L Co., Ltd. has admitted that after the probation period, Mr. T became an official employee working under an employment contract of 12-month term.  Actually, L Co., Ltd. has negotiated with Mr. T about the termination of employment contract on December 28, 2013, and no agreement reached through such negotiation. On December 29, 2013, General Director of L Co., Ltd. has issued a Decision No. 15/QDKL-2013 on unilateral termination of employment contract with Mr. T. For these reasons, it is a well-founded affirmation that the relationship between Mr. T and L Co., Ltd. after the probation period is a contractual employment relationship.”

Pursuant to Clause 3 Article 343, Clause 1 and Clause 2 Article 345 of the Civil Procedure Code;

The appeal through cessation procedure No. 04/2016/KN-LD dated December 26, 2016 by the Chief Judge of the People’s Supreme Court is accepted; both the appellate court’s judgment No. 01/2015/LD-PT dated April 13, 2015 by the appellate court of the People's Supreme Court of Ho Chi Minh City and the first-instance court’s judgment No. 01/2014/LD-ST dated August 12, 2014 by the People’s Court of Binh Thuan Province regarding the dispute case over unilateral termination of employment contract between the petitioner – Mr. Tran Cong T and the defendant – L Co., Ltd. are annulled.

The case file is transferred to the People’s Court of Phan Thiet City, Binh Thuan Province, for re-trying the case at first instance in accordance with applicable laws.