Initiating legal proceedings against enterprises for failure to fulfill insurance obligations toward employees

In labor relations, the full execution of insurance obligations is a fundamental legal responsibility of employers, particularly social insurance, health insurance, and unemployment insurance. However, in practice, many organizations and individuals either fail to execute or do not fully execute their statutory insurance obligations, resulting in serious infringement of employees’ lawful rights and interests. The below article by NPLaw analyzes the relevant legal provisions governing lawsuits concerning enterprises’ failure to execute insurance obligations toward employees.

I. Current situation of lawsuits concerning enterprises’ failure to execute insurance obligations

At present, many enterprises delay or fail to fully and timely pay mandatory insurance contributions for employees, including social insurance, health insurance, and unemployment insurance. Such situations deprive employees of their lawful entitlements or forces them to take expenses themselves when risks arise.

• Primary causes: Enterprises encounter financial difficulties, lack legal compliance awareness, or deliberately evade obligations to reduce operating costs. Some enterprises also engage in fraudulent practices, such as misreporting labor data to evade insurance contributions.
• Impacts: Employees suffer losses due to not receiving full insurance benefits, adversely affecting their livelihood and social security. At the same time, failure to fulfill insurance obligations creates inequality in the labor environment and negatively affects enterprises’ reputation.
• Increasing number of lawsuits: In recent years, the number of lawsuits related to enterprises’ failure to properly execute insurance obligations has increased, reflecting heightened awareness and proactive protection of employees’ rights.

II. Legal regulations on lawsuits concerning failure to execute insurance obligations

1. Definition of lawsuits concerning failure to execute insurance obligations

Pursuant to Clauses 1 and 2, Article 17 of the Law on Social Insurance 2014, the following acts are prohibited:

• Evasion of compulsory social insurance and unemployment insurance contributions;
• Late payment of social insurance and unemployment insurance contributions.

Accordingly, a lawsuit concerning failure to execute insurance obligations means an employee files a lawsuit before a court or a competent authority to compel the enterprise taking insurance obligations to properly and fully complete its obligations in accordance with the law.

2. Jurisdiction to resolve lawsuits concerning failure to execute insurance obligations

Pursuant to Point d, Clause 1, Article 32 of the Civil Procedure Code 2015, disputes regarding social insurance under the law on social insurance, health insurance under the law on health insurance, unemployment insurance under the law on employment, and occupational accident and disease insurance under the law on occupational safety and hygiene are labor disputes falling within the jurisdiction of the Court.

III. Common questions regarding lawsuits concerning failure to execute insurance obligations

1. How will enterprises be sanctioned when sued for failure to execute insurance obligations?

Pursuant to Clauses 6 and 10, Article 39 of Decree No. 12/2022/NĐ-CP, employers who fail to pay compulsory social insurance and unemployment insurance for all employees, but whose violations have not reached the threshold for criminal liability, shall be subject to a fine ranging from 18% to 20% of the total amount of compulsory social insurance payable at the time of making the violation record.

In addition, employers are compelled to pay the full outstanding social insurance and an additional amount equal to twice the average investment interest rate of the social insurance fund of the immediately preceding year.

If the employer fails to comply, banks, other credit institutions, or the State Treasury are responsible for deducting from the employer’s deposit accounts the unpaid amounts and interest calculated at the highest non-term deposit interest rate of State-owned commercial banks.

Note: The above fines apply to individuals. For organizations committing the same violations, the fines shall be twice those imposed on individuals, in accordance with Article 6 of Decree No. 12/2022/NĐ-CP.

2. What is the social insurance contribution rate in lawsuits concerning failure to execute insurance obligations?

Currently, the total insurance contribution rate is 32% for three types of insurance: social insurance, health insurance, and unemployment insurance. The specific contribution rates are as follows:

• Social insurance: 25.5%, of which employees contribute 8% and employers contribute 17.5%;
• Health insurance: 4.5%, of which employees contribute 1.5% and employers contribute 3%;
• Unemployment insurance: 2%, of which employees contribute 1% and employers contribute 1%.

3. Are violations of insurance obligations publicly disclosed in lawsuits concerning failure to execute insurance obligations?

By nature, lawsuits concerning insurance obligations constitute civil or administrative disputes involving a party’s failure to execute or incomplete execution of insurance contribution or payment obligations under the law or contractual agreements.

Generally, civil court proceedings are public, meaning that hearings, judgments, and decisions are disclosed in accordance with civil procedure law. Case contents include evidence and arguments regarding insurance obligation violations. However, disclosure may be limited within the scope permitted by law to protect business secrets, personal privacy, or other sensitive information.

4. Procedures for initiating a lawsuit concerning failure to execute insurance obligations

The procedures for initiating such lawsuits under the Civil Procedure Code 2015 include:

• Preparing the statement of claim and relevant evidence;
• Filing the claim with the People’s Court of the district where the defendant resides or has its head office;
• Court acceptance of the case if the dossier is valid;
• Conducting mediation and trial proceedings;
• Issuance of a judgment or decision resolving the dispute;
• Enforcement of the judgment upon request.

5. Measures to protect employees’ rights in lawsuits concerning failure to execute insurance obligations

• Filing complaints or denunciations against employers with social insurance authorities or competent state management agencies;
• Initiating lawsuits before courts to compel employers to fulfill social insurance contribution obligations;
• Requesting social insurance authorities to conduct inspections and impose sanctions in accordance with law;
• Retaining evidence such as labor contracts, payroll records, and social insurance contribution receipts;
• Seeking legal assistance from lawyers or labor rights protection organizations.

IV. Legal consultancy services on lawsuits concerning failure to execute insurance obligations

Above is the comprehensive information provided by NPLaw to assist clients regarding enterprises’ failure to fulfill insurance obligations. Should you have any questions concerning the above issues or other legal matters, please contact NPLaw for direct consultation and guidance from our professional team.