1. The Legal Framework for Expatriate Employment

The employment of foreign nationals in Vietnam is governed primarily by Labor Code No. 45/2019/QH14 and its guiding decrees, specifically Decree 152/2020/ND-CP and its subsequent amendments (including Decree 70/2023/ND-CP). Under Vietnamese jurisdiction, foreign employees holding valid Work Permits and employment contracts possess identical statutory protections against unlawful unilateral termination as local citizens.

For corporate employers, the statutory framework surrounding unilateral termination is rigid. Vietnam operates under a cause-based termination system, entirely rejecting the at-will employment doctrine. Consequently, failing to strictly satisfy both the substantive legal grounds and the procedural requirements established by the Labor Code results in absolute liability for the employer. Due to the high compensation packages typically associated with expatriate personnel—including base salaries, housing, and relocation allowances—an unlawful termination ruling carries severe financial consequences for a business.

1.1. Jurisdictional Authority and Applicability

The provisions of the Vietnamese Labor Code apply to all foreign nationals working in Vietnam under an employment contract. Employers cannot contractually bypass Vietnamese labor regulations by inserting choice-of-law clauses favoring foreign jurisdictions in the employment contract. If the work is performed in Vietnam, Vietnamese labor law is the governing authority for termination disputes.

2. Defining Unlawful Unilateral Termination

Article 39 of the Labor Code 2019 explicitly defines unlawful unilateral termination of an employment contract as a termination that fails to comply with the provisions set forth in Article 36 (substantive grounds) or Article 36.2 (procedural notice periods).

2.1. Failure to Meet Substantive Statutory Grounds

An employer may only unilaterally terminate an employment contract based on specific, legally recognized grounds outlined in Article 36.1 of the Labor Code 2019. For foreign employees, the applicable grounds generally fall into the following categories:

• Repeated Failure to Perform Work Duties: The employer must possess a registered Internal Labor Regulation (ILR) or a legally promulgated performance evaluation policy that explicitly defines non-performance. Furthermore, the employer must have documentary evidence proving the employee failed to meet these predefined metrics.
• Prolonged Illness: The employee has been absent due to illness for 12 consecutive months (for indefinite-term contracts), 6 consecutive months (for fixed-term contracts of 12-36 months), or more than half the contract term (for contracts under 12 months), and their health has not recovered.
• Force Majeure: Events such as natural disasters, fires, or dangerous epidemics that force the employer to scale down production and reduce its workforce despite having exhausted all remedial measures.
• Unauthorized Absence: The employee is absent from the workplace without an acceptable legal excuse (such as certified illness or immediate family emergencies) for at least 05 consecutive working days.
• Falsification of Information: The employee provided untruthful information during the recruitment process (such as forged degrees or false employment history) that directly affects the recruitment decision and contract execution.

If a corporate entity terminates a foreign employee for any reason outside these stringent categories, the termination is inherently classified as unlawful.

2.2. Procedural Non-Compliance and Notice Periods

Even if the employer possesses valid substantive grounds, the termination is automatically deemed unlawful if the employer fails to observe the mandatory advance notice periods stipulated in Article 36.2. The statutory notice periods are:

• At least 45 days for an indefinite-term employment contract.
• At least 30 days for a fixed-term employment contract with a duration of 12 to 36 months.
• At least 3 working days for an employment contract with a duration of less than 12 months, or in cases of prolonged illness.

3. Statutory Compensation and Salary Obligations

When a competent authority rules a termination unlawful, the employer is subjected to strict punitive and compensatory obligations defined under Article 41 of the Labor Code 2019.

3.1. Reinstatement and the Rejection of Reinstatement

The primary statutory remedy for unlawful termination is the compulsory reinstatement of the employee to their former position.

• If the employee agrees to return, the employer must reinstate them and pay back wages.
• If the employee refuses reinstatement, the employer must pay the statutory penalties, back wages, and severance pay.
• If the employer refuses to reinstate the employee (and the employee agrees to this refusal), the employer must pay an additional, mutually negotiated compensation amount. The law mandates this extra compensation must be equal to at least two months of the employee’s salary.

3.2. Salary and Benefits During the Mandatory Waiting Period

The employer is legally obligated to compensate the employee for the entire period they were unlawfully prevented from working. The calculation formula is the contractual monthly salary multiplied by the number of months from the termination date to the dispute resolution date. Furthermore, the employer must retroactively pay the mandatory employer portions of Health Insurance and Social Insurance for this exact duration.

3.3. The Mandatory Statutory Penalty

Regardless of actual financial damages proven by the employee, the Labor Code imposes an automatic statutory penalty. The employer must pay the employee a sum equal to at least two months of the salary stipulated in the employment contract.

3.4. Severance Allowance Obligations

Foreign workers in Vietnam are excluded from the mandatory Unemployment Insurance regime. Consequently, foreign employees cannot claim unemployment benefits from the state social insurance fund. Because of this exclusion, the employer is solely responsible for paying Severance Allowance for the entire duration of the foreign employee’s service. The calculation is one-half of a month’s salary for each full year of employment.

4. Contractual Damages and Specialized Allowances

Expatriate compensation structures frequently include ancillary benefits. When an employment contract is unlawfully terminated, the premature cessation of these benefits constitutes a direct financial loss.

4.1. Housing, Dependent, and Educational Allowances

Many corporate employers provide housing allowances, company vehicles, and tuition coverage for the employee’s dependents at international schools. Upon unlawful termination, the employee is entitled to claim the monetary value of these contractual benefits for the remaining term of the contract or the period they were unlawfully prevented from working.

4.2. Relocation and Repatriation Liabilities

Employment contracts for foreign nationals standardly include clauses obligating the employer to cover relocation costs to Vietnam and repatriation flights. An unlawful termination does not absolve the employer of this contractual duty. The employee can file a civil claim enforcing the contract, requiring the employer to pay for flights, shipping of personal effects, and associated transit costs.

4.3. Financial Damages Stemming from Visa and Work Permit Cancellation

Under Vietnamese regulations, an employer must return a foreign employee’s Work Permit to the authorities within 15 days of contract termination, rendering the Temporary Residence Card (TRC) invalid. Employees routinely claim consequential financial damages resulting from this abrupt legal change, including emergency international travel costs, temporary accommodation, and administrative fees required to secure alternative legal residency.

5. Claiming Non-Material, Emotional, or Reputational Damages

Vietnamese law requires a high burden of proof for non-material damages. Compensation in labor disputes focuses heavily on quantifiable financial restitution.

5.1. Separation of Labor and Civil Claims

The Labor Code 2019 does not recognize claims for emotional distress or reputational damage arising from employment termination. To pursue such claims, the foreign employee must rely on the Civil Code 2015, specifically Article 592, which governs liability for damage caused to honor, dignity, and reputation.

5.2. Burden of Proof and Statutory Caps

To succeed in a claim under Article 592, the employee must provide incontrovertible evidence that the employer’s actions were public, defamatory, and directly caused measurable harm to their professional standing. Emotional distress claims require certified medical records from psychiatric professionals. If the court accepts the claim, the maximum statutory cap for non-material damages is ten times the statutory basic salary established by the State. Given the relatively low state basic salary, civil claims for non-material damages yield low financial returns.

6. Procedural Steps for Dispute Resolution and Filing Claims

Foreign employees and employers must adhere to a specific sequence of dispute resolution mechanisms to enforce or defend against compensation claims.

6.1. Direct Negotiation and Internal Grievance

The standard initial procedure involves the employee submitting a formal letter of demand to the employer outlining the statutory breaches. Resolving the matter at this stage via a Mutual Termination Agreement is highly recommended for employers to mitigate legal costs and public exposure.

6.2. Exemption from Mandatory Labor Conciliation

Under Article 188 of the Labor Code 2019, disputes concerning the unilateral termination of an employment contract are legally exempt from the mandatory pre-litigation step of Labor Conciliation. A foreign employee has the statutory right to immediately escalate the matter.

6.3. Arbitration

If the employment contract contains a valid arbitration clause specifying a recognized body, such as the Vietnam International Arbitration Centre (VIAC), the dispute must be resolved there. Arbitration provides confidentiality and finality, making it highly advantageous for corporate employers.

6.4. Initiation of Court Litigation

In the absence of an arbitration agreement, the employee must file a petition with the competent district-level People’s Court where the enterprise is headquartered. The statute of limitations to initiate a lawsuit is one year from the date the employee discovers the violation of their rights.

7. Strategic Recommendations for Corporate Compliance

To prevent financial liabilities associated with unlawful termination, corporate entities must implement rigorous human resources compliance protocols.

7.1. Implement and Register Clear Internal Labor Regulations (ILRs)

Companies must draft detailed performance metrics for expatriate roles and ensure these regulations are formally registered with the provincial labor authorities.

7.2. Document the Performance Management Process

Employers must execute and document a formal Performance Improvement Plan (PIP) to prove that the employee was informed of their deficiencies, provided a timeline to improve, and objectively failed to do so.

7.3. Legal Review Prior to Termination

No termination of a foreign national should be executed without prior review by local legal counsel. Verifying notice periods, assessing substantive grounds, and calculating severance obligations are mandatory steps to avoid the punitive mechanisms of Article 41.

8. Conclusion

Under Vietnamese labor regulations effective as of March 2026, the unilateral termination of a foreign employee is deemed unlawful if a corporate employer fails to satisfy rigid statutory grounds—such as thoroughly documented non-performance—or breaches mandatory advance notice periods. In such events, employers face severe absolute liability, primarily the obligation to pay the employee’s full salary and statutory insurances during the mandatory waiting period, alongside a statutory penalty equal to at least two months’ salary. Furthermore, courts will enforce the restitution of contractual damages and specialized allowances, allowing expatriates to claim the monetary value of disrupted housing subsidies, dependent educational support, relocation and repatriation costs, as well as the calculable financial losses stemming from the immediate cancellation of their Work Permits and legal visa status.

Regarding non-material losses, claiming emotional or reputational damage is highly restricted; the labor framework prioritizes quantifiable financial restitution, requiring employees to file separate civil claims that carry a heavy burden of proof and strict statutory compensation caps. To pursue financial remedies, the steps to file for compensation typically begin with direct negotiation via a formal legal demand to achieve an out-of-court mutual settlement. If unresolved, the foreign employee is statutorily exempt from mandatory labor conciliation and can directly escalate the dispute by initiating proceedings at a commercial arbitration center or by filing a formal lawsuit at the competent People’s Court within the strict one-year statute of limitations.

HARLEY MILLER LAW FIRM

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