How are compensation claims resolved prior to handover?

During the performance and handover of work, it is not uncommon for the parties to face compensation claims arising immediately prior to project completion. The following article by NPLaw provides an in-depth analysis of such an issue, offering a comprehensive overview of the necessary steps to effectively resolving compensation claims prior to handover.  

I. Current practice in resolving compensation claims prior to handover

At present, the resolution of compensation claims prior to work handover upon termination of labor contracts in Viet Nam is facing various shortcomings and challenges. Although the Labor Code 2019 stipulates that employees are responsible for handing over work and assets before terminating their labor contracts, in practice, compliance with such obligations has not always been adequately ensured. According to statistics in 2021, Ho Chi Minh City recorded nearly 1,000 medical resignations, many of whom failed to properly hand over their work, causing significant difficulties for healthcare facilities in maintaining uninterrupted operations.

In addition, determining damages and claiming compensation from employees also encounters many obstacles due to the lack of specific regulations and effective dispute resolution mechanisms. Many enterprises report that they are unable to recover damages because employees have already resigned or refused to cooperate during the settlement process. Such situations highlight the need for further improvement of the legal framework and enforcement mechanisms to ensure the lawful rights and interests of both employees and employers.

II. Legal regulations on the resolution of compensation claims prior to handover

1. What is the resolution of compensation claims prior to handover?

The resolution of compensation claims prior to handover refers to the process of handling issues related to compensation for damages caused by employees during the course of their employment, before they terminate their labor contracts and hand over their work. Such a process aims to safeguard the lawful rights and interests of both employees and employers, while ensuring compliance with current legal regulations.

2. Common cases in which compensation claims arise prior to handover

Pursuant to Articles 129 and 130 of the Labor Code 2019, employees are liable to compensate for damages in the following cases:

• Causing damage to or losing tools, equipment, or assets of the employer;
• Excessively consumpting materials beyond the permissible standards;
• Other acts causing damage to the employer’s assets. 

Accordingly, the level of compensation is determined based on the employee’s fault, the extent of damage, the employee’s actual circumstances, and other relevant factors.

3. Do employees have the right to request the resolution of compensation claims prior to handover?

Employees have the right to request the resolution of issues related to compensation prior to handing over work, especially where they consider the employer’s compensation claim to be unreasonable or inconsistent with legal regulations.

Pursuant to Article 130 of the Labor Code 2019, as guided by Article 71 of Decree No. 145/2020/ND-CP, employees have the following rights:

• Right to be informed and to participate: When the employer conducts procedures for handling compensation for damages, the employee must be notified at least five (05) working days in advance of the time, venue, and contents of the meeting.
• Right to participate and defend: The employee has the right to attend the compensation handling meeting, to defend themselves, or to request a lawyer or a representative organization of employees to provide a defense.
• Right to request information: The employee has the right to request the employer to provide relevant documents and evidence in order to protect their lawful rights and interests.
• Right to file complaints or initiate legal proceedings: If the employee disagrees with the compensation handling decision, they have the right to file a complaint with the labor management authority or initiate a lawsuit before a court in accordance with the law.

In summary, employees fully have the right to request the resolution of compensation-related issues prior to work handover in order to protect their lawful rights and interests. Proper compliance with procedures, processes, and statutory time limits for handling compensation for damages is the responsibility of employers to ensure legality and fairness in labor relations.

III. Certain questions regarding the resolution of compensation claims prior to handover

1. May employees retain assets while awaiting the resolution of compensation claims prior to handover?

Under Vietnamese law, employees are not permitted to retain the employer’s assets while awaiting the resolution of compensation claims prior to handover. Such conduct may be deemed unlawful possession and may constitute violations of civil and criminal law.

Upon termination of a labor contract, employees are obliged to fully hand over all work, assets, documents, and working tools assigned to them during their employment. Failure to do so may result in adverse legal consequences for the employee. Where employees cause damage to the employer’s assets, the enterprise has the right to claim compensation in accordance with Article 71 of Decree No. 145/2020/ND-CP.

Therefore, employees should fully execute their obligation to hand over assets upon termination of labor contracts. If disputes arise in relation to compensation for damages, employees may request the collective labor representative organization or competent authorities to resolve the matter in accordance with the law.

2. Is it permissible to report to the police to resolve compensation claims prior to handover?

Employees are not permitted to report to the police for the purpose of resolving compensation claims prior to handing over assets to the employer. Vietnamese law clearly provides for the procedures and processes for handling compensation for damages in labor relations, and the police are not the competent authority to resolve such disputes in the absence of clear criminal law violations.

Accordingly, in cases where no clear criminal offense has occurred, employees should not report to the police to resolve compensation claims. Instead, both parties should comply with the procedures for handling compensation for damages as prescribed by labor law. If disputes arise, employees may file complaints with competent authorities or initiate legal proceedings before a court to protect their lawful rights and interests.

3. May a lawsuit be initiated to resolve compensation claims prior to handover?

Employees have the right to initiate legal proceedings before a court to request the resolution of disputes related to compensation for damages, even if the handover of assets has not yet been completed, provided that they believe their lawful rights and interests have been infringed.

Pursuant to Article 188 of the Labor Code 2019, most individual labor disputes must be mediated by a labor conciliator before being brought before a court. However, there are certain exceptions where mediation is not mandatory. Specifically, disputes related to compensation for damages or severance/allowances upon termination of labor contracts fall within such exceptions.

Accordingly, if the employee and the employer cannot reach an agreement on compensation liability after termination of the labor contract, the employee may directly file a lawsuit with the court without prior mediation. It is a lawful right protected by law.

4. What documents are required as a basis for resolving compensation claims prior to handover?

To resolve compensation claims for damages caused by employees prior to asset handover, it is necessary to prepare a full set of supporting documents in accordance with legal regulations. These documents help determine liability, the extent of damage, and the applicable handling procedures according to Article 130 of the Labor Code 2019 and its guiding instruments, such as Decree No. 145/2020/ND-CP. The determination of compensation liability must be based on clear evidence, including:

• Labor contract: Serving as the legal basis for establishing the labor relationship and the rights and obligations of the parties;
• Asset and working tool handover minutes: Recording the assets assigned to the employee for management and use during employment;
• Records of violations, incidents, or asset loss: Prepared by the employer to determine the time, status, and extent of damage;
• Employee’s written explanation: Setting out the circumstances of the case, causes, and relevant details;
• Internal verification or investigation minutes: Recording verification results and opinions of relevant parties;
• Documents evidencing actual damage: Such as repair invoices, replacement quotations, asset valuation documents, etc., to determine the value of damages subject to compensation;
• Employer’s notice of handling decision: Reflecting the enterprise’s official position on compensation claims, including the legal basis, compensation amount, and implementation timeline.

In summary, collecting these documents fully and in compliance with prescribed procedures also enables employees to protect their lawful rights and interests in cases where compensation claims are unreasonable.

IV. Legal advisory services on resolving compensation claims prior to handover

The above constitutes NPLaw’s legal overview of resolving compensation claims prior to handover. Should you have any questions or require further clarification, please do not hesitate to contact NPLaw.