Responsibilities for Failing to Extend an Employment Contract

1. Conditions for Extending an Employment Contract

According to Article 20 of the 2019 Labor Code, employment contracts must be entered into in one of the following forms:

• Indefinite-term employment contract: An agreement in which the parties do not specify a term or an end date for the contract’s validity.
• Fixed-term employment contract: An agreement in which the parties specify a term and an end date, with the total duration not exceeding 36 months from the effective date of the contract.

Provisions Regarding Contract Extension:

• Within 30 days after the expiration of a fixed-term contract, the parties must sign a new contract. During this period, the rights and obligations of both parties continue to be governed by the expired contract.
• If no new contract is signed after 30 days, the expired contract automatically converts into an indefinite-term employment contract.
• A fixed-term contract may only be renewed once. Beyond this, if the employee continues to work, the contract must become an indefinite-term contract.

Conditions for Extending a Contract:

To validly extend an employment contract, the following conditions must be met:

• Mutual Agreement: Both the employer and the employee must agree to the extension. This agreement can be expressed explicitly or implicitly.
• Written Confirmation: The extension must be documented either in the form of a written agreement or an annex to the existing contract.
• Duration Limit: The total duration of the fixed-term contract, including any extensions, must not exceed 36 months. If the employee continues working beyond this period without a new contract, the relationship automatically converts into an indefinite-term contract.
• Validity of the Contract: The original contract must still be valid at the time of the extension.
• Compliance with Labor Laws: The extension must adhere to the provisions of the Labor Code and relevant regulations.
• Employer Notification: Employers are required to notify employees about the extension, typically before the current contract’s expiration.
• Formal Documentation: Employers must prepare an annex to the contract or execute a new contract to confirm the extension details.

2. Responsibilities for Failing to Extend an Employment Contract

Employer’s Responsibilities

Under Article 20 of the 2019 Labor Code, if an employer fails to extend a fixed-term contract upon its expiration but the employee continues working, the contract automatically converts into an indefinite-term contract.

According to Article 9 of Decree 12/2022/ND-CP, employers may face administrative penalties for failing to comply with legal requirements for employment contracts, including:

• Failure to sign the correct type of contract (e.g., signing a fixed-term contract instead of an indefinite-term contract).

Penalties for violations are as follows:

• From 2,000,000 VND to 5,000,000 VND: For violations involving 1 to 10 employees.
• From 5,000,000 VND to 10,000,000 VND: For violations involving 11 to 50 employees.
• From 10,000,000 VND to 15,000,000 VND: For violations involving 51 to 100 employees.
• From 15,000,000 VND to 20,000,000 VND: For violations involving 101 to 300 employees.
• From 20,000,000 VND to 25,000,000 VND: For violations involving more than 300 employees.

In addition to monetary penalties, employers must undertake corrective measures, such as:

• Signing the appropriate type of contract as required by law.
• Fully compensating employees for all entitlements during the period of non-compliance, including salaries and social insurance benefits (if applicable).

Employee’s Responsibilities

Under Article 35 of the 2019 Labor Code, employees have the right to unilaterally terminate their employment contracts but must provide prior notice to the employer:

• At least 45 days: For indefinite-term contracts.
• At least 30 days: For fixed-term contracts with a duration of 12 to 36 months.
• At least 3 working days: For fixed-term contracts with a duration of less than 12 months.

If an employee fails to provide the required notice and unilaterally terminates the contract, they may:

• Be subject to disciplinary action.
• Be required to reimburse training costs incurred by the employer (if any).

3. Mandatory Contract Extension in Certain Cases

According to Article 34 of the 2019 Labor Code, an employment contract terminates upon expiration unless otherwise specified under Clause 4, Article 177 of the Labor Code. This clause mandates that:

“The employment contract must be extended until the end of the term for an employee who is a member of the leadership of the employee representative organization at the workplace and whose contract expires during their term of office.”

This provision ensures the protection of employees holding leadership roles within labor organizations, safeguarding their rights and representative duties during their tenure.

4. Maximum Duration for Extending a Fixed-Term Contract

Under Article 20 of the 2019 Labor Code, the following rules apply when a fixed-term contract expires, and the employee continues to work:

• Within 30 days after the contract’s expiration, the parties must sign a new contract. During this period, the rights, obligations, and benefits of both parties continue under the expired contract.
• If no new contract is signed within the 30-day period, the expired contract automatically converts into an indefinite-term contract.
• If a new fixed-term contract is signed, it may only be extended once. After this, if the employee continues working, the contract must convert into an indefinite-term contract.

Thus, the maximum number of extensions for a fixed-term contract is two (the original contract and one extension).

In conclusion, extending employment contracts requires strict adherence to the provisions of the 2019 Labor Code to ensure compliance and protect the rights of both employers and employees. Failure to extend contracts properly can result in legal and financial liabilities for employers, while employees must fulfill their obligations when terminating contracts. By understanding and applying these regulations, parties can minimize risks and maintain harmonious labor relations.

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1. Lawyer Vu Thi Phuong Thanh, Chairman of the Members’ Council, Ha Noi Bar Association

Email: vtpthanh@tlalaw.vn

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Email: tmle@tlalaw.vn.

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