O massmann legal aspects of collective labor agreements

Summary of Presentation
● Legal Aspects of Collective Labor Agreements
● Dispute Resolution
● Strike

Relevant Laws
● Labor Code of Vietnam dated 23/6/1994 and its 2002 and 2006
Amendments;
● Decree 196/CP dated 31 December 1994 on Collective Labor Agreements as
amended by Decree 93 dated 11/11/2002;
● Decree No. 12/2008/ND-CP dated 30/1/2008 on postponement and
suspension of strike; and
● Other relevant laws and regulations.

Collective Labor Agreement (“CLA”)

Collective Labor Agreements (“CLA”)
What is a CLA?
● Roughly speaking, a CLA is a [written] agreement between the employees
(via their trade union) and the employer addressing mainly working conditions
and employment-related rights/obligations of both parties.
Is a CLA compulsory?
● No, it is made on VOLUNTARY basis. This means the employer is not forced
to reach the CLA like it is with the labor contracts (LC).
● Without having a trade union (TU), the employees and the employer may not
negotiate and enter into a CLA.
Note: Regardless of the number of workers a business employs, if there are
05 workers or more in the business desiring to establish a TU, the higher
level TU will issue a decision to recognize and establish it.

What is so special about a CLA?
● It is made between the so-called “employee collective” (via the trade union)
and the employer. There is no clear definition of the “employee collective
under the law though it is often interpreted to refer to all employees of a
business in general.
● Benefits/rights of employees must not be lower than those stated in the laws
but the higher is encouraged.
● Though voluntarily made, the CLA, once signed, is binding on the signing
parties and prevails other employment-related documents such as labor
contract and internal labor rules in case of inconsistency.

Why a CLA?
● To provide better benefits for employees’ benefits/rights than those
provided by the laws.
● To fill in what the law is silent on.
● To serve as a source of legal basis in case of labor dispute.
And some believe
● To prevent potential labor disputes and strike.
● To strengthen the employees’ attachment to the enterprise, especially
production units.

When is a CLA negotiated and signed
● At the request of ANY party, the other party must accept the invitation for
negotiation and start the negotiations no later than 20 days from the
accepting date.
and How?
● Step 1: The requesting party informs the other of proposed negotiations. The
requested party must come back with suggestion on agenda of and
representatives for the negotiation.
● Step 2: Authorized representatives of both parties enter into negotiation
process.
● Step 3: The draft CLA must be approved by at least 50% employees.

● Step 4: Both parties sign on the CLA
● Step 5: Registration of the CLA with provincial department of labor, invalids
and social affairs (DoLISA) or BOM of industrial zones at provincial level
depending on whether the relevant company is located outside or inside an IZ
respectively.
Note: The registration with competent state bodies is of utmost important as it
may fully guarantee the enforceability of the CLA.
Who negotiate and sign the CLA (at Step 2&4 above)?
● Employees’ side: Executive Committee of the Trade Union to negotiate & and
the Chairman/authorized representative of the Trade Union to sign
● Employer’s side: (General) Director or his authorized representative.

What do the employees and the employer agree in a CLA?
● Employment and employment guarantees
● Working time
● Salaries, allowances and bonuses
● Work limits (allocated time and/or product limit for employees)
● Labor safety and hygiene
● Social insurance
● Other employment-related issues that both parties may agree

What is the term of a CLA?
● From 1 – 3 years from its effective date (i.e. – the registration date with
competent state bodies). The first CLA may have 1-year term.
● Both parties may extend the current CLA or sign a new one upon its expiry.
● In case of merger, the former CLA still takes effect if more than 50%
employees of the “new” enterprise are those used to benefit from that CLA
prior to the change of control. For other form of “change of control” like de-
merger, transfer of major assets or other cases of merger, the negotiation
must be commenced within 06 months from the “change of control” date (for
example, the date on which the merger is officially valid)

Can a signed CLA be challenged?
● Yes, a part of the whole CLA may be challenged in term of its validity if:
(i) Its provision(s) goes against the law;
(ii) The signatory to the CLA has no authority to sign; or
(iii) Signing procedure is inconsistent with the law including the registration
with the CLA.
● If this is the case, the provincial DoLISA will declare the invalidity of the CLA
in whole or in part.

Do you need a CLA?
● For labor-intensive production establishments, a CLA might be a prevention
of potential labor dispute and strike.
● A well-prepared CLA may effectively fill in loop-holes in Vietnamese labor law
and therefore preclude unexpected discretionary judgment by competent
state bodies in case of labor dispute.
● A fair CLA help to build up a long-term relationship between the employees
and the employer.

Labor Dispute

Dispute Resolution
Types of dispute
● There are two types of labor dispute: (i) individual labor dispute and (ii)
collective labor dispute. Different types of dispute lead to different proceeding
process and legal consequences.
● If an individual employee is involved with a labor dispute with his/her
employer, it is considered individual labor dispute. If trigged by a group of
employees in the same enterprise or a unit of that enterprise, it is called
“collective labor dispute”.
● Individual Labor Dispute: First heard by (i) labor mediation board (in an
enterprise) or (ii) labor mediator (appointed by a competent state body if no
labor mediation board is established). If fails, the dispute may be brought to
the competent court for final settlement. An Individual Labor Dispute is not
able to revoke a strike.

Dispute Resolution
● Collective Labor Dispute: Classified as (i) dispute about rights (“Rights
Dispute”) and (ii) dispute about benefits (“Benefit Dispute).
● Right Dispute is about the claim of employees on the employer’s breach
of labor law, CLA, internal labor rules or other related rules/agreements.
Right Dispute first heard by the labor mediation board or the labor
mediator. If fails at this stage, the Chairman of district people’s committee
will settle. If still fails, the dispute will, at the employees’ discretion, either
be referred to the competent court or turn into a strike.
● Benefit Dispute, in contrast, is about request of employees to establish
new [and better] working conditions as compared to current the above
rules/regulations.
Like Right Dispute, Benefit Dispute will be first heard by labor mediation
board or the labor mediator. If fails, the Labor Arbitration Council will jump
in for dispute settlement. A failure at this step may lead to a strike.

Strike!!!

Strike
Strike: Law and Practice
● By laws, a strike means “a temporary, voluntary and organized cessation of
work by the “employee collective” in order to resolve a collective labor
dispute.
● Through out Vietnam: 2006: 387 cases; 2007; 541 cases; the first three
months of 2008: 300 cases (estimated around 1,000 cases by year end).
Most are illegal.
Legality of a strike
● A lawful strike must be organized by the [provisional] Trade Union (TU) in the
enterprise (or the authorized representative appointed by the collective
employees in the absence of the TU).

Strike
● Before that, the TU must seek approval of at least (i) 50% employees if the
relevant enterprise or its related part has less than 300 employees or (ii) 75%
of several positions in the enterprise including the TU’s members, heads and
deputy heads of the TU’s divisions and/or production teams if the
enterprise/its related part has more than 300 employees.
Illegal strike
● A strike which does not arise from a collective labor dispute.
● A strike not held by employees jointly working within the one enterprise.
● A strike held when a collective labor dispute remains unresolved in
accordance with the proceedings set out by the Labor Code.
● Failure to seek approvals of employees or beach of relevant procedures set
out by the Labor Code.
● The organization and leadership of the strike are inconsistent with provisions
of the Labor Code.

Strike
● Strike revoked in special enterprise that all strikes are strictly prohibited.
● When there is a decision staying or suspending the strike.
Rights of relevant parties before and during the strike
● The Employer: To request the competent court to settle the Right Dispute
(not the Benefit Dispute) or review the legality of the strike.
● The Employee: (via its Executive Committee of the Trade Union/authorized
representatives of the collective employees) To terminate the strike or
request the competent court to settle the Right Dispute or review the legality
of the strike.
Employees not participating in the strike but suffering from the suspension of
work due to the strike are entitled to salary payment (as agreed with the
employer but not less than minimum salary rate).
Employees participating in the strike are not entitled to receive salary and
other benefits unless otherwise agreed by the employer.

Strike
Prohibited acts before, during and after the strike
● Interfering with exercise of the right to strike; or inciting, embroiling or forcing
employees to strike; preventing an employee from not participating in a strike
and from going to work;
● Using violence; causing damage to machinery, equipment and assets of the
enterprise;
● Infringing public order and safety;
● Terminating a labor contract or applying a labor disciplinary penalty to
employees or to organizers of a strike or transferring employees or
organizers of a strike to do other work or to work at another location because
of preparation for, or participation in a strike.

Strike
Prohibited acts before, during and after the strike
● Taking revenge on or victimizing any employee participating in a strike or any
person organizing a strike.
● Arbitrarily terminating activities of the enterprise in order to oppose a strike.
● Taking advantage of a strike in order to act contrary to law.

Strike
Veto by the Primer Minister
● The Prime Minister may decide to suspend or terminate a strike if it is
considered posing a danger of serious infringement to the national economy
or the public interest.
● The Prime Minister may then assign a state body or organization to resolve
the dispute.
Review legality of the strike
● Both the employer and the employee may request the competent court to
review the legal validity of the strike in question within 03 months from
the date on which the strike is terminated.
● If concluded illegal, the participants of the strike must pay compensation
to the employer. If an employee refuses to get back to work, he/she may
be subject to several form of labor disciplines.

Q&A

Duane Morris Legal Advisory Team
Thank you!
Oliver Massmann, Giles Cooper, Chris Muessel,
Ngo, Thuy Quang, Hoang Duc Minh
Duane Morris Vietnam LLC Duane Morris Vietnam LLC
Pacific Place, 13th Floor, Suite 1308 Suite 809, Saigon Tower
83B Ly Thuong Kiet, Hanoi, Vietnam 29 Le Duan Street, District 1
Tel.: +84 4 946 1310-14 Ho Chi Minh City, Vietnam
Fax: +84 4 946 1311 Tel.: +84 8 827 9460
Fax: +84 8 827 9470

O massmann legal aspects of collective labor agreements

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