Question 33. When terminating the LC, can the Employer withhold part or all of the amount payable to the Employee or keep the Employee’s social insurance book until the Employee completes his or her obligations to the Employer? If the Employee causes damages to the enterprise or refuses to hand over the property to the enterprise, does the Employer have the right to deduct the Employee’s salary from the final payment to him or her?


1. Responsibilities of the Employer and the Employee when terminating the LC

The responsibilities of the Employer and the Employee when terminating the LC under the Labour Code as follows[1]:

  • Within 14 working days from the termination date of the LC, the parties must pay all amounts related to the other’s interests. The payment term may be extended but must not exceed 30 days from the termination date of the LC if it falls into any of the following cases[2]:
    • The Employer who is not an individual terminates its operation;
    • The Employer changes structure, technology, or economic reasons;
    • Division, separation, consolidation, merger; sale, lease, and conversion of business type; to transfer the ownership and use rights of assets of the enterprise or co-operative; and
    • Due to a natural disaster, fire, enemy sabotage, or dangerous epidemic.
  • In addition to the responsibility to settle the Employee-related payments, the Employer must also carry out the procedure with the competent social insurance agency to return the social insurance book and other documents (if any) to the Employee[3].

Based on the above analysis, it can be seen that the responsibility to fully pay or refund the amounts related to the interests of the other does not belong to the Employer or the Employee only but belong to both parties. However, in the context of the Labour Code’s regulations that always aim to protect the interests of the Employee as the weak party in the labour relation, the Employer is still obliged to pay benefits to the Employee whether the Employee fulfiled his or her obligations or not. In other words, failure to fulfill the Employee’s obligations will not be an acceptable reason to exclude the Employer’s obligations when the LC terminates.

If the Employer fails to comply with the payment obligation to the Employee within 14 working days from the date of termination of the LC, the Employer may be sanctioned for administrative violations at the highest level of VND4,000,000 if the Employee complains at the competent labour inspection agency[4]. Therefore, the Employer needs to fulfil their obligations to the Employee whether or not the Employee has fulfilled all the obligations of the Employee to avoid legal risks as mentioned above. After that, if the Employee fails to fulfill the Employee’s obligations to the Employer when the LC terminates, the Employer can sue the Employee to the competent Court to request the Employee to pay compensation.

2. Does an Employer have the right to deduct an Employee’s salary in order to ensure that the Employee fulfil his or her obligations to the enterprise?

In principle, the Employer is not entitled to deduct the value of the property that the Employee has not yet returned to the Employer from the Employee’s unpaid salary and payable amounts. According to the Labour Code, the payroll deduction of the Employee is only made by the Employer to compensate for the damage caused by the Employee to the tools and equipment of the Employer[5]. In particular, the Employee must compensate at the most 03 months of the salary stated in the LC of the last month preceding the month of causing damage and the compensation will be deducted from the monthly salary if the Employee negligent damages tools and equipment belonging to the enterprise’s assets with the actual damage value not exceeding 10 months of applicable regional minimum salary at the place where the Employee works which is announced by the Government from time to time[6]. Besides the above case, no regulation of the Labour Code allows the Employer to deduct other amounts (other than the amount used to compensate for damages as mentioned above) from the Employee’s salary.

Therefore, if the Employee is not in the case of compensation for the Employer, there is no legal basis for the Employer to have the right to deduct the Employee’s salary. Thus, the Employer still has to pay in full the unpaid amounts to the Employee. If, after fulfiling the Employer’s obligations and exceeding the period of time prescribed by law, the Employee still fails to return the assets to the Employer as required, if such assets are of great value and/or if it is necessary to make an example of the Employee, the Employer can sue the Employee at a competent Court to reclaim the assets and demand compensation for non-contractual damage. Under civil law, an owner of or a subject having other rights with respect to the property has the right to reclaim his or her property from a person unlawfully possessing, using, or receiving benefits from the property[7]. However, in practice, the civil proceedings for property claims at a Court of law often take a lot of time and effort of the plaintiff, sometimes the cost is even higher than the assets to be recovered. Therefore, the Employer may consider additional negotiation with the Employee to require the Employee to return the assets in a reasonable time.

[1]Article 48 of the Labour Code

[2]]Article 48.1 of the Labour Code

[3]Article 48.3 of the Labour Code and Article 48.1 of the Law on Social Insurance

[4]Article 11.1 (a) of the Decree No. 28/2020/ND-CP of the Gorvenment dated 22 August 2013

[5]Articles 102.1 and 129of the Labour Code

[6]Articles129.1of the Labour Code

[7]Article 166 of the Civil Code