The Covid-19 pandemic has negatively impacted on the existence of enterprises and employees' jobs. Enterprises’ difficulty has entailed employees’ suffering. The bright prospects for the employees and the enterprises may not be clear, but a difficult close-up is in sight.
(*) LAWYER. HO THI TRAM – LAWYER. DO DINH LAM - VO TRAN HOANG SA
Slogans exalting role of human resources such as "people are valuable assets", "human resource is core factor" or "human resource is the most important factor of an enterprise" in the difficult circumstance of Covid-19 that it sounds bitter. During the pandemic period, almost enterprises face difficulty due to the burden of many kinds of costs, especially salary costs, testing costs and other costs to maintain their production if they perform option " 3 in place” or “1 route 2 destinations”. Trying to endure, the enterprises unwillingly have to apply many cost-cutting methods to overcome the pandemic. One of the first cost reductions that the enterprises think about is personnel costs by agreeing to reduce wages, reduce working hours, reduce the number of employees, pay stoppages, and owe salaries. When unable to stay in the market, the enterprises unwillingly have to find their own legal exits or dissolve or file a bankruptcy or "sell themselves" to other businesses (M&A). If the enterprises are in a dilemma, employees’ future will be subsequently uncertain.
When the enterprises file a bankruptcy
In legal aspect, the managers of enterprises are responsible for filing a petition to ask for opening bankruptcy proceedings for their enterprises. Within 03 months from the due date of debt payment, if an enterprise is no longer able to pay, one of the people has the duty to file a request for initiation of bankruptcy proceedings is owner of private enterprise, Chairman of the Board of Directors in joint-stock company, Chairman of the Members' Council in multi-member limited liability company, the owner of single-member limited liability company, partner of partnership must actively file the petition to ask for opening bankruptcy proceedings.
Subsequently, the employees in these enterprises are also disadvantaged because in order of assets division in bankruptcy procedures, the first priority that the bankrupted enterprise must pay is bankruptcy costs as prescribed and, respectively, salary debt, severance allowance, social insurance, health insurance for employees and other benefits under the signed labour contract and collective bargaining agreement.
Prioritizing payment after bankruptcy costs is just a small chance for the employees to get their salary and other interests. Normally, enterprises falling into insolvency are the enterprises have run out of cash, fixed assets may only be machinery and are facing liabilities that although the remaining assets sold immediately is not enough to cover all the payments. When the assets are sold off, the enterprises only have enough money to pay the bankruptcy costs. In some cases, the remaining assets after apportioning to the bankruptcy costs of the enterprise are not enough to cover all employees, then the employees will only be paid based on the debt ratio. If the enterprises have no assets, the employees even not only lost their jobs, but also do not receive salary and interests from their employer. This is a case of the parting between the enterprises and their employees!
When the enterprises are dissolved
Currently, dissolution is a reluctant and popular choice of the enterprises if they are still able to pay their debts for their withdrawal from the market. According to the provisions of laws, an enterprise is allowed to be dissolved when it guarantees to pay off all debts and other property obligations and is not in the process of settling disputes at Court or Arbitration. According to the order of payment priority in Law on Enterprise 2020, debts – salary debts, severance allowances, social insurance, health insurance, unemployment insurance according to the provisions of laws and other interests of employees according to the collective labor agreement and signed labour contract. Accordingly, before the enterprise is dissolved, all salaries, insurance and other allowances for employees must be the number one payment priority. In this case, although the employee's interests are guaranteed, the termination of operation of the enterprise also means that the employees no longer have their jobs. This is another case of the parting between the enterprises and their employees!
When the enterprises “sell themselves” (M&A)
In context of the crisis, some enterprises still own intangible assets or have potential growth in post-pandemic period, may also accept to sell themselves, merger or acquire with other enterprises. M&A activities are quite popular and performed in many different forms depending on the commercial purposes of the parties, including some common transactions: (i) buying and selling shares/contributing capital; (ii) merger; (iii) transfer of main assets; or (iv) consolidation. In general, through M&A, many enterprises in the transaction can get many economic interests when focusing on owning "capital and/or assets", interests from synergistic value, or potential, business partner of the target enterprise.
Pursuant to Labour Code 2019, in case of division, separation, consolidation, merger; sale, lease, transforming enterprise type; transferring ownership, right of use of assets of the enterprise affect the many employees’ work, the employer must develop a plan of labor use under the provisions of Article 44 of Labour Code 2019. The consolidated and post-merged enterprises are still responsible for the labor contracts signed with the employees. Accordingly, the merged/consolidated enterprise must ensure to inherit the rights and obligations under the labor contract signed between the employees and the previous enterprise, including maintaining for employees in the same job, salary regime, and other remuneration regimes according to the signed labor contract. However, in a long war, the financial capacity of the enterprises has declined, almost enterprises have to choose the opinion of consent with employees on the termination of labor contracts despite the risks of labor shortage in post-pandemic period. This is another case of the parting between the enterprises and their employees!
In general, if the enterprises have been struggled for their survival situation as this time, it is also difficult for the employees to avoid the same circumstance. Hoping that there are more solutions suggested to help the enterprises to continually exist so that employees could maintain job opportunities and always be the greatest value, sharing the same development path with the enterprises.
(*) ADK & Co Viet Nam Lawyers Ltd. and InvestConsult Group