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Vietnam: Labor Laws and Practice by Oliver Massmann

Vietnam: Labor Laws and Practice by Oliver Massmann

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080120 Labour Law Presentation Presentation Transcript

  • 1. An Introduction to Vietnam’s Labor Law Law and Practice Oliver Massmann Partner Duane Morris Vietnam LLC
  • 2. Legal Framework
    • The labor Code dated 23 June 1994, amended in 2002, 2006 and 2007, serves as the main legislation for employment relations in Vietnam.
    • Other laws govern various aspects of the employment relations such as:
      • The Law on Social Insurance introducing social insurance policies and schemes
      • The Law on vocational training governing the vocation training activities of vocational centers, the employers and the employees
      • Law on the Vietnamese working overseas providing for the expatriation of Vietnamese to work in foreign countries
  • 3. Legal Framework (Cont’d.)
    • The Civil Procedure Code providing for procedures and formalities for lodging court petitions
    • The Law on Trade Unions on creation and operation of the trade unions within companies;
    • Implementing regulations of the Labor Code and other laws issued by the Government and relevant ministries address specific aspects of employment relations such as: labor contracts, working time, wages, termination of employment, working rules, trade unions, hygiene and safety, labor dispute, etc.
  • 4. Labor laws: key points
    • The employment relations are governed mainly by Government decrees and circulars issued by the Ministry of Labor, Invalids and Social Affairs (MOLISA).
    • The MOLISA is responsible for State management of labor in the whole country.
    • As the labor laws are still under development, specific guidance from the MOLISA in the form of written responses to enquiry letters from employers and local labor agencies play an important role in dealing with complicated and unclear employment issues.
  • 5. Labor laws: Key points (Cont’d)
    • As a socialist-oriented country, Vietnam develops a labor laws system expressly designed to protect employee. Labor laws are routinely interpreted in favor of employees. In practice, labor disputes are often resolved in favor of employees employee.
      • E.g. - employees may easily terminate labor contracts while employers find it much more difficult to do so.
  • 6. Tips in drafting Labor Contracts
    • The labor contracts must be well-drafted so as not to be in consistent with the labor laws, collective labor agreements (if any) or the internal labor rules. Failure to ensure such consistency can affect the validity of labor contracts.
    • The labor contract must be made in accordance with the standard form provided by the MOLISA.
    • In practice, employers are advised to expand on the standard form by specifying further employment terms and conditions. For example: labor contracts should address key issues that are not available in the standard form such as non-competition, and confidentiality.
  • 7. Tips in drafting Labor Contracts (Cont’d)
    • Employers should concurrently issue and register internal labor rules setting out comprehensive and specific obligations and responsibilities of all workers to supplement labor contracts;
    • Fixed term labor contracts (12-36 months) give employers greater flexibility with regards termination. But: fixed term labor contracts cannot be extended more than twice; thereafter indefinite-term labor contracts must be signed.
    • If employees need to be trained, employers should provide a separate training agreement specifying expenses for and obligations and responsibilities of the employee. This provides a basis for employers to seek compensation if a trained employee refuses to resume his/her work as agreed.
  • 8. Benefits and Retirement
    • The employee may be entitled to receive:
    • Severance pay upon termination of labor contracts (except for cases of dismissal for cause) - equal to one half month’s salary for each year of employment;
    • Retrenchment pay if employee is laid off as a result of business restructuring or technology changes - equal to one month’s salary for each year of employment but cannot be less than two months salary;
    • Financial support from the Social Insurance Fund in case of illness, retirement, maternity, death, occupational disease, etc. The Social Insurance Fund is contributed to by both employers and employees. Severance pay upon the termination of labor contract (except for being dismissed) which is equal to a half of month’s salary for each year of employment;
  • 9. Benefits and Retirement (Cont’d)
    • The employee may receive:
    • As of 1 January 2009, unemployment benefits paid by the Unemployment Insurance Fund;
    • Bonuses based on performance of the employer and individual efforts as set out in the employer’s internal bonus policies;
    • Overtime pay where employees works outside normal hours (48 hours max per week);
    • Allowances where employees work in hazardous or heavy conditions.
  • 10. Termination and Redundancy (Grounds)
    • Mutual agreement : Both parties may agree on a mutual termination of the existing labor contract.
    • Unilateral termination : employers may unilaterally terminate employment but only according to strict statutory circumstances (e.g. long illness). Conversely, it is not difficult in practice for employees to terminate labor contracts (usually only requires advance notice).
  • 11. Termination and Redundancy (Grounds)
    • Dismissal : permitted only under strict circumstances (e.g. theft, embezzlement by employee) and such circumstances must be clearly stated in the internal labor rules. Dismissal must comply with time-consuming and complicated procedures (e.g. – notice to labor authorities)]
    • Retrenchment : in case of business structuring or technology changes, employees may be laid off. If the circumstances for retrenchment occur, the concerned employee must be first offered a new position. Final retrenchment only possible when no new job is available. Unilateral termination in the form of retrenchment must strictly comply with procedural requirements set out in the labor laws.
  • 12. Termination and Redundancy (Results of unlawful termination)
    • If a termination is declared illegal by the Labour Court, the employer is required to re-employ the employee and pay the following compensation:
      • Salary for the period during which he/she could not work; and
      • Two months' salaries plus allowances (i.e., compensation for psychological damage).
    • If the employer does not want to accept the employee back to work, it must additionally pay severance equal to 1/2 month salary for each year of work plus an extra amount based on mutual agreement of both parties. In practice, employees can exploit this situation to request high compensation.
  • 13. Labor disputes and strike
    • Two categories of labour disputes:
      • Individual labour disputes: Between an employee and the employer;
      • Collective labour disputes on employees’ rights and interests: Between more than one employee and the employer.
    • Different categories may result in different competent authorities and procedures.
    • Settlement of labour disputes:
      • Concerned parties are encouraged to reach agreement through negotiations with each others or via a mediator.
      • If mediation fails, the disputes may be referred to higher levels such as the Chairman of the district PC or competent court as the case may be.
  • 14. Employee Data Privacy
    • The concept of “employee data privacy” is not highly developed in the labour laws and its guiding instruments.
    • Rather, “employment data privacy” may fall inside a broader concept of “privacy secrets” (“bi mat doi tu” in Vietnamese) provided in Article 38 of the Civil Code of Vietnam dated 26 November 2005.
    • Article 38 says the collection and disclosure of information and data about private life of an individual must be subject to consent of that individual. As the laws does not specify types of privacy secrets, this concept may be broadly interpreted in favour of employees. Such privacy secrets may include health information, criminal records, financial information, other private information such as name, location, gender, date and place of birth, etc.
    • The Civil Code expressly prohibits the illegal accession to mail, telephone, electronic mail and other forms of electronic information of an individual
  • 15. Employee Data Privacy (Cont’d)
    • Exception: the collection and disclosure of privacy secrets may be required by “competent organisations and agencies”. No laws expressly provide what will be the “competent organisations and agencies” might be. Normally, the disclosure of privacy secrets would be based on court order.
    • Without clear guidance, the disclosure of the broadly-defined “privacy secrets” of the employee without his/her consent may subject the employer to a breach of the Civil Code’s provisions and respective remedies (e.g. compensation to the employee in case of damage or issuance of public apology).
      • E.g. - Many employers organise health check for the employer and keep the health record of the latter. This act may be sued by the employee as a breach of “privacy secrets”.
  • 16. Industrial Relations
    • The employer: In theory, the employer operate under the umbrella of the Vietnam Commercial and Industrial Chamber (VCCI), a socio-political organisation. However, the role of VCCI is quite unclear in deal with employment issues of its members.
    • The employee:
    • Trade Union: If five or more employeeswish to set up a trade union, the local trade union will issue decision to recognise it. Within 6 months from the date of establishment, the local trade union is responsible to create a trade union in the enterprise to protect the employer’s rights. Pending that period, the local trade union will appoint a temporary trade union executive committee (TUEC) in the enterprise.
  • 17. Industrial Relations (Cont’d)
    • The employer must not cause obstruction to the formation of the trade union.
    • Once created, the trade union will engage in numerous employment issues. For example, the employer must consult with the trade union before unilaterally terminating employment with the employee. Other roles of the trade union is negotiation the collective labor agreement (CLA), leading a strike, consulting with the employer on the formation of wage scales and table, arranging annual leaves, etc.
    • Unilateral termination of employment with the member of TUEC must be first consult with the TUEC. In case of the chairman of the TUEC, opinion of the trade union of higher level must be sought.
    • Involvement of employee
  • 18. Industrial Relations (Cont’d)
    • Involvement of employees in corporate issues
    • The Gov issued Decree 87 dated 28 May 2007 on grassroot democracy at joint stock company and limited liability company.
    • The managers of the joint stock company and limited liability company must:
      • disclose to the employee regimes and policies directly related to the employee, company’s annual tasks and planned targets, IRLs, establishment and use of the company's funds and reserves, etc.
      • orgainise annual employee meeting to consult with the employee on the emplementation of the above issues.
  • 19. Labor disputes and strike
    • Strike:
    • A strike must be lead by the trade union executive committee. Strike of the enterprise that has no trade union might be lead by the appointed reprehensive of employees and such appointment must be notified to the trade union of district level.
    • The trade union must seek opinions of workers or members of trade union executive committee depending on number of workers in an enterprise. A strike can only start if it is approved by 50% of employees in the enterprise having less than 300 workers and 70% in the enterprise having more than 300 workers.
    • A worker refusing to participate in a strike and having to cease his/her work as a result of the strike still got paid.
    • The court of provincial level will conclude whether a strike is legal. If concluded illegal, workers participating the strike must pay compensation to the employer if damages have been aroused out of the strike.
  • 20. Expatriates and foreign workers
    • The employer can hire foreigners but the number of foreigners must not exceed 3% of total workforce.
    • The chairman of the provincial PC may agree another 1.5% but on case by case basis.
    • The number of expatriates working in representative offices is not limited by the above cap but need to be approved by the provincial PC on case by case basis.
    • All expatriates working in Vietnam must obtain a work permit for a maximum of 36 months. Work permit is extendable.
  • 21. Expatriates and foreign workers (Cont’d)
    • Members of BOM in joint-stock companies, members of the Members’ Council in limited liability companies, heads of representative offices or branches of foreign companies, expatriates working in Vietnam in urgent situations or for less than 3 months are exempted from work permit. Neither are they subject to the above 3% or 4.5% cap above.
    • The licensing of work permit is quite time-consuming and complicated in practice given the documents that the expatriate must submit to the licensing authority.
  • 22. Outsourcing
    • To avoid employment troubles, many employers outsource from other suppliers.
    • Outsourcing may take numerous forms such as involvement of of another processor for a specific production process or using persons seconded by a service supplier.
      • E.g. - A FIE sign a service supply agreement with a local company for providing certain services. The local company will then recruit a specific person as exactly instructed by a FIE and second the same to work at the FIE’s office. If the FIE does not want to continue working with this person, it will request the local company to find and second a new one .
  • 23. Outsourcing- Pros and Contras
    • Pros:
    • The employer has no formal relationship with the employed person and may therefore take the initiative to terminate the employment at any time.
    • The employer need not to proceed with relevant employment procedures for the “employee” i.e. social insurance, severance pay, etc.
    • Contras:
    • The employer must pay a higher amount for the employment including the fee of the service supplier and wages of the “employee”;
    • The employer may get troubles with the service supplier if the service supply agreement is ill-drafted.
    • Relevant state agencies of Vietnam may take the view that the service supply agreement is just a fake one. It real purpose is to cover another employment relationship.
    • This approach may not be feasible for manufacturing company that employ mass workforce. Neither is it attractive to giant companies.
  • 24. Best HR Practices for foreign companies in Vietnam
    • The employer is advised;
    • to carefully prepare a labour contract that give details on obligations and responsibilities of the employee and to sign the same on annual basis
    • in parallel, to build up comprehensive labour internal rules which would serve as a strong ground for holding the employee’s responsibilities, termination of employment, especially in case of dismissal;
    • to outsource the employment to any licensed supplier where feasible;
    • to strictly follow both content and procedural requirements in case of unilateral termination of employment. Dismissal should be sought as the last resort.
  • 25. Best HR Practices for foreign companies in Vietnam (Cont’d)
    • to settle all employment disputes outside the courts as Vietnamese state agencies in general and courts in particular would supposedly give strong support to the employees. Besides, the hearing may be time and money-consuming.
    • not to pay attention only to provisions of the Labour Code and other formal guiding regulations. As a matter of practice, unofficial guidance of the MOLISA in the form of responding letters to concerned enterprises are good resources to rely on or to obtain in dealing with specific employment issues.
  • 26. Conclusion
    • The labour code of Vietnam is definitely created to protect the employee’s rights and conditions of employment. This fact result in a difference in both law and practice between Vietnam and certain other countries in the world.
    • Ones should take into consideration that many employment concepts that have been worldwide accepted such as non-competition, conflict of interests may not be realised in Vietnamese labour laws system.
    • Of utmost importance, the employer must strictly comply with provisions of the labour code and its subordinate instruments in avoidance of any unexpected employment troubles with the employer.