💼 Labor Law · Foreign-Invested Employers · Case Study · In a Legal Nutshell
Three People In, Three People Out: A Foreign Company's "Restructuring" Costs It Nearly 7 Billion Dong 🏢🔄
📖 Word Nerd Corner: The Original "Pretext"
The word "pretext" comes from the Latin praetexere: prae- ("in front") + texere ("to weave"). A pretext is literally something woven in front of something else, a cloak draped over the real picture. 🧵 In today's case, a foreign company said it was ending a manager's contract because of a regional restructuring. The courts did what courts do with cloaks: they held up the fabric and counted what was actually underneath. 🔍
🎭 Meet the Cast (Names Changed for Clarity)
🧑💼 Director Victor
Head of the Representative Office and Regional Director in Vietnam since 2013. He ran the office and grew the company's business locally. The plaintiff.
Head of the Representative Office and Regional Director in Vietnam since 2013. He ran the office and grew the company's business locally. The plaintiff.
🌍 Lumina Group
A foreign company with a representative office in Ho Chi Minh City. The defendant, and the appellant on appeal.
A foreign company with a representative office in Ho Chi Minh City. The defendant, and the appellant on appeal.
👥 The Rep Office Trio
The representative office's whole team: three people. Remember this number. It decides the case. 3️⃣
The representative office's whole team: three people. Remember this number. It decides the case. 3️⃣
🎬 The Story in a Nutshell
- 📅 Sept 1, 2013: Victor and Lumina signed an indefinite-term labor contract. His title: Head of Representative Office and Regional Director.
- 💶 The pay package: in the final appendix, base salary of 89,931 EUR per year and total salary of 123,931 EUR per year, plus allowances for housing, living costs, and children's school fees.
- 📩 Sept 7, 2017: Lumina's general director sent notice that the contract would end on Oct 7, 2017. Victor disagreed and repeatedly asked for an explanation, without, he says, a reasonable answer.
- 🤝 Sept 19, 2017: The two sides met. The company kept asking him to hand over work, documents, assets, and the rep office seal.
- 📄 Oct 20, 2017: The general director issued the formal termination decision.
🗣️ Two Versions of the Story
| Lumina's position | Victor's position |
|---|---|
| Termination followed a restructuring in the Asia region: business budgets were cut and the management model changed. It also alleged problems with how Victor handled clients, not following his superiors, and being no longer suitable for the role. After the notice, it says he did not cooperate in handover, particularly on the seal, accounts, and certain assets. | The company unilaterally terminated his contract in violation of labor law, harming his rights, interests, and reputation. He asked the court to declare the termination unlawful, reinstate him, and award compensation of over 378,309 EUR (nearly 9.9 billion VND). At the first-instance hearing, his representative raised the figure to 395,522 EUR (over 10.1 billion VND). |
🥇 Round One: First Instance
The Ho Chi Minh City People's Court partly accepted Victor's claims and declared the termination unlawful. It ordered Lumina to pay nearly 7 billion VND:
| Item | Amount (VND) |
|---|---|
| 💰 Salary for the period he could not work | over 4.3 billion |
| 💰 Two months' salary under the contract | over 385.7 million |
| 🏠 Housing rent | over 1.1 billion |
| 🛒 Living expenses allowance | over 482 million |
| 🎒 School fees for 3 children | over 644 million |
- ❌ Rejected: his request for an extra 7 months' salary as compensation for termination
- 🚫 Dismissed (by his own withdrawal at the hearing): the claim for late-payment interest and the claim that his work permit not be revoked
Lumina appealed on Dec 13, 2019, asking for the entire first-instance judgment to be annulled and the case to be dismissed.
🥈 Round Two: The Appeal (Judgment 05/2021/LĐ-PT, March 30, 2021)
The High People's Court in Ho Chi Minh City rejected the appeal and upheld the first-instance judgment. Unlike many appeals, there was no change in the outcome, so the interesting part is why. Here is what the appellate court's reasoning added:
| Issue | Appellate court's finding |
|---|---|
| ⚖️ Which court, which law? | The indefinite-term contract was made and performed in Vietnam, and the parties agreed Vietnamese law applies. So the first-instance court's jurisdiction was correct. |
| 🔢 Was it really "restructuring"? | While Victor worked there, the rep office had 3 people. After he left, it still had 3 people. Only the person in the head's seat changed. The court held this was an employer dismissing one employee, not a change of structure or technology under the 2012 Labor Code. |
| 🏛️ Labor authority's view | The court cited the opinion of the Ho Chi Minh City Department of Labor, Invalids and Social Affairs: dismissing an employee at a rep office on the ground that the foreign trader changed its structure does not meet legal requirements. |
| 📉 Result | The termination was unlawful. |
| 🧮 How compensation was calculated | Based on the contract's salary and allowances (housing, living costs, school fees). The non-working period ran from Oct 8, 2017 to Aug 23, 2019, matching the term of his work permit. |
| ❌ Extra claims | His request for 7 additional months' salary, including claims tied to unemployment time, material and moral losses, lawyer fees, and a revoked temporary residence card, was rejected. |
🤔 Did you know? A rough sanity check on the numbers: two months' salary of about 385.7 million VND implies roughly 192.9 million VND per month. The claimant's own conversions in the source (378,309 EUR ≈ 9.9 billion VND) suggest about 26,000 VND per euro, which puts that monthly figure near the base salary of 89,931 EUR/year (about 7,494 EUR/month), not the 123,931 EUR total. Also, the 4.3 billion for roughly 22.5 months of non-work lines up with that monthly rate. (This is my own back-of-envelope estimate, not something the source states.) 🧮
🔑 Three Takeaways
- 1️⃣ "Restructuring" has to look like restructuring. If the organization's size and shape are the same before and after, with only one person swapped, it is hard to call that a structural change.
- 2️⃣ Foreign employer, Vietnamese contract, Vietnamese court. When a contract is signed and performed in Vietnam and picks Vietnamese law, a Vietnamese court has the jurisdiction to hear the dispute.
- 3️⃣ The allowances count. Housing, living costs, and school fees written into the contract were awarded alongside salary. They are not "extras" the court can ignore.
💡 Why the work permit date matters: The court set the compensation window to end on the day Victor's work permit expired. For foreign employees, the permit's validity period can shape how long the "unable to work" period is calculated.
🏠🚗 Real-Life Parallels
- 🏠 Landlords: You say you are "renovating the whole building" to end a tenant's lease, but once the tenant leaves, you re-let the same unit to someone else at the same rent. The stated reason and the actual facts are now in tension.
- 🚗 Fleets: A taxi company says it is "downsizing" and lets one driver go, then hires another driver the next week to drive the same car on the same route.
- 🛒 Shops: A store claims it is "closing the weekend shift" to dismiss a clerk, and the weekend shift is still staffed by a new hire.
🌿 Nature's Version of This Rule
Ecologists don't declare a "population decline" on a hunch. They count the animals before and after the supposed event. If a nest held three birds before the storm and three after, no one can credibly report that the colony shrank, even if one bird in the nest is a different individual. 🐦🪺 The court's headcount test works the same way: it compared before and after, and found the same number.
💡 Practical Tips
🏢 If you are a foreign company with a Vietnam representative office
- Match the legal ground to the real facts. If the reality is "we want a different person in this role," treat it as that, and plan accordingly rather than using a ground that doesn't fit.
- Check the headcount and role structure before relying on a "restructuring" ground. If the roles stay the same, expect the ground to be tested.
- Keep performance concerns and restructuring reasons separate and documented. Mixed reasons make a clean legal basis harder to prove.
- Review which Labor Code applies. This case concerned events in 2017 under the 2012 Labor Code. The Labor Code that now applies is the 2019 one, so check the current provisions before relying on this case for similar facts.
🧑💼 If you are an expat manager or senior employee
- Keep every contract appendix. The final appendix and the allowances for housing, living costs, and school fees mattered for the calculation here.
- Know your work permit's validity period. It can affect how a court measures the loss period.
- Ask for the reason in writing and keep a record of the exchange.
⚠️ Balance check: Lumina also raised concerns about Victor's conduct and about handing over the seal, accounts, and assets. The source does not say how the court treated these points beyond upholding the unlawful-termination finding, so please read the full judgment before drawing wider conclusions. Every case turns on its own evidence.
📝 Quick Self-Check Quiz
Q1. What fact most undermined the company's "restructuring" explanation?
Reveal answer
The rep office had 3 people before and 3 people after. Only the head of the office changed.Q2. Why did a Vietnamese court have jurisdiction over a foreign company's dispute?
Reveal answer
The indefinite-term contract was concluded and performed in Vietnam, and it provided for the application of Vietnamese law.Q3. What period did the court use to calculate compensation for the time Victor could not work?
Reveal answer
Oct 8, 2017 to Aug 23, 2019, matching his work permit's term.Q4. Did the appellate court change the first-instance outcome?
Reveal answer
No. It rejected the company's appeal and upheld the first-instance judgment. Victor's extra claim for 7 months' salary stayed rejected.😂 Company: "We are restructuring!" Court: "Great. Please show me the old org chart and the new org chart." 📊🙃 Company: "...they look the same." 👥👥
🗣️ Your Turn
Is a before-and-after headcount a fair test of whether a restructuring is real? What other facts would you want a court to look at? Share your thoughts in the comments. 👇
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Category: Labor Law · Case Study · Foreign-Invested Employers
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