Terminating a Labor Contract for Failure to Meet Work Performance Standards: Grounds Under Vietnamese Labor Law, Case Analysis, and Practical Implications for Companies
Terminating a labor contract on the grounds that an employee "frequently fails to complete their work" carries the risk of being found to constitute unlawful dismissal if the evaluation regulations or procedure are deficient. This article explains, based on the provisions of Vietnam's Labor Code and relevant case law, the practical steps companies must take to terminate a contract lawfully. NEXORA LAW FIRM has extensive experience handling labor disputes, including termination of labor contracts, disciplinary dismissal, and negotiation with employees, and supports Japanese-affiliated companies in resolving issues smoothly while complying with the law.
01 - What Constitutes "Failing to Complete One's Work"?
Article 36(1)(a) of Vietnam's Labor Code provides that an employer (company) has the right to unilaterally terminate a labor contract in the following circumstances:
"Where the employee frequently fails to complete the work required under the labor contract (i.e., does not ordinarily complete it), as determined based on the criteria set out in a work-performance evaluation regulation established by the employer. Where a representative organization of employees exists at the workplace, this regulation must be established after consulting that organization's views."
Criteria for Determining "Failure to Complete Work"
Current law does not specify a concrete definition of "failing to complete one's work" (non-performance). Accordingly, whether an employee has "completed" their work depends on the evaluation regulation each company formulates internally.
This evaluation regulation must satisfy the following conditions:
It must be an objective and transparent evaluation standard
It must be suited to the company's business characteristics, job content, and working conditions
Where a representative organization of employees exists, its views must have been sought in advance
What Does "Frequently" Failing Mean?
The term "frequently" (thuong xuyen) has no clear quantitative benchmark under the law. Companies therefore have a degree of flexibility in setting their evaluation criteria, but excessive or arbitrary application carries the risk of being treated as unlawful dismissal.
Where a company terminates a labor contract without having established a clear evaluation regulation, there is a very high likelihood that the termination will be found invalid as "lacking a legal basis."
Practical Points to Note
Where the evaluation regulation was formulated without consulting the employee representative organization, an administrative fine of VND 5 million to VND 10 million may be imposed under Article 12(3)(c) of Decree No. 12/2022/ND-CP.
Where a company dismisses an employee for "failure to meet performance standards" while leaving the regulation vague, the risk of the company losing in labor litigation or arbitration increases significantly.
02 - Case Law in Practice and Lessons for Companies
Case 1: Hanoi High-Level People's Court, Judgment No. 03/2021/LD-PT (June 23, 2021)
Company A1 terminated the labor contract of employee Lam Van A on the grounds that he "frequently failed to complete his work." The court, however, held as follows:
The meeting minutes submitted by the company were mere internal notices of caution and did not present concrete evidence of failure to perform (performance indicators or quality standards).
The company had no formal performance evaluation regulation, and the basis for terminating the contract was therefore lacking.
As a result, the court found the company's unilateral termination unlawful.
(Source: Hanoi High-Level People's Court Judgment No. 03/2021/LD-PT)
Case 2: First-Instance People's Court, Judgment No. 01/2024/LD-ST (April 23, 2024)
Company C (investment company H) dismissed employee Doan Le Minh T on the grounds of "failure to meet performance standards." The court's ruling was as follows:
The reports and inspection records submitted amounted to general cautionary comments and did not constitute evidence based on clear performance evaluation criteria.
The company had not formulated or publicized a legally valid evaluation regulation.
As a result, the court ordered the company to:
Pay compensation of VND 216 million
Make additional social insurance contributions
Pay severance compensation
Legal Lesson — The "Absence of an Evaluation Regulation" Is a Fatal Risk
As these two cases show, terminating a labor contract for "failure to meet performance standards" requires satisfying the following conditions:
A formal performance evaluation regulation must be established
— setting out clear evaluation criteria in writing (KPIs, quality standards, conduct evaluation, etc.).
The views of the employee representative organization must be sought
— failure to reflect the union's views carries a risk of a fine of VND 5 million to 10 million under Article 12(3)(c) of Decree No. 12/2022/ND-CP.
The content of the regulation must be published and disseminated internally
— employees must be able to understand and access the evaluation criteria.
Key Practical Points (Advice for Companies)
Risk | Cause | Recommended response
Termination found unlawful | Absent evaluation regulation, vague evidence | Establish KPIs, job descriptions, and reporting systems
Administrative fine (VND 5-10 million) | No consultation with employee representative organization | Retain records of the consultation
Compensation ordered by the court | Procedural defects in dismissal, insufficient evidence | Systematically retain procedural documents and minutes
03 - The "Advance Notice Period" Required When an Employer Terminates a Labor Contract
Under Article 36(2) of the Labor Code, where an employer (company) unilaterally terminates a labor contract, it must observe the following minimum advance-notice periods depending on the type of contract.
Article 36(2)
Where an employer terminates a labor contract unilaterally for a reason falling under items a, b, c, dd, or g of paragraph 1, it must give the employee advance notice within the following periods.
[Notice Period by Contract Type]
Contract type | Minimum notice period
Indefinite-term labor contract | At least 45 days
Definite-term labor contract (12-36 months) | At least 30 days
Definite-term labor contract (under 12 months) | At least 3 working days
Certain industries/occupations | As specified by government regulation
Accordingly, where a contract is terminated for "frequent failure to complete work," the above notice periods must also be strictly observed. If a company terminates a contract without observing the required notice period, it faces the risk of the termination being found unlawful and being ordered to pay damages.
04 - Does "Failure to Meet Performance Standards" Constitute Grounds for Disciplinary Dismissal?
In short, "failure to meet performance standards" does not constitute grounds for disciplinary dismissal.
This is made clear under Article 125 of the Labor Code.
Main Grounds for Disciplinary Dismissal (Article 125)
1. Theft, embezzlement, gambling, intentional injury, or drug use in the workplace
2. Disclosure of trade secrets or technical secrets, infringement of intellectual property, or conduct causing serious harm to the company's property or interests, or sexual harassment
3. Repeating an offense after having received a disciplinary warning for a salary increase delay or demotion (where the record has not been expunged)
4. Repeated unauthorized absence without justifiable reason
(an accumulated total of 5 days within 30 days, or 20 days within 365 days)
Accordingly, it is clear that failure to meet performance standards alone cannot serve as a legal basis for disciplinary dismissal.
So What Happens in a Case of "Failure to Meet Performance Standards"?
Where the internal labor regulations expressly designate "failure to complete work" as a violation, an employee may be subject to a lighter disciplinary measure, such as:
A warning (khien trach)
Delay of a salary increase (keo dai thoi han nang luong)
Demotion (cach chuc)
However, even these measures must go through a proper disciplinary procedure (notice, an opportunity to respond, and minutes). A measure that lacks proper form risks being found invalid in subsequent labor litigation.
Practical Advice
When considering terminating a contract for "failure to meet performance standards," confirm the three elements together: the evaluation regulation, the procedure, and the notice period.
Because "disciplinary dismissal" differs both in purpose and procedure, internal rules should clearly distinguish between the two so they are not conflated.
Systematically retain procedural documents (notices, minutes, identity-confirmation records) as evidence.