O massmann protecting the protected_27_aug09

Agenda
● Message
● Current legal framework
 Governing Laws
 Overview of labor
regulations
● Recommendations for Employers

MESSAGE
Vietnamese labor law is employee
friendly

Message: Reasons
● The protection of worker’s rights and employment conditions is a central
tenant of Vietnam’s socialist system and its economic renovation policy;
● Influence of the State-managed command economy prior to 1986:
 Prior to the introduction of economic renovation policy (Doi Moi) in 1986, all
employment in Vietnam was provided by the State.
 After 1986, a large percentage of workforce is employed by the private sector.
 Expectation of “cradle to the grave” tenure prevail in the minds of many. Private
employees are therefore expected to provide benefits for the employees in the
same way the State might.
 Many of the expectations have been entrenched in the Labor Code.

CURRENT LEGAL FRAMEWORK
● Governing Laws
● Overview of Labor Regulations
 Recruitment
 Wages, allowance and benefits
 Employee Data Privacy
 Industrial Relations
 Disputes Resolution
 Strikes
 Termination and Redundancy

Governing Laws
● Labor Code dated 23 June 1994, and amended in 2002, 2006 and 2007.
● 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

Governing Laws (cont.)
● 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.

OVERVIEW OF LABOR REGULATIONS
● Recruitment
 Labor contract
 Expatriates and Foreign Workers
 Outsourcing
● Wages, allowance and benefits
● Employee Data Privacy
● Industrial Relations
● Dispute Resolutions
● Strike
● Termination and Redundancy

Labor Contract
● The labor contract must be made in accordance with the standard form
provided by the MOLISA
● Employers should expand on the standard form by specifying further
employment terms and conditions such as non-competition, and
confidentiality.
● Fixed term labor contracts (12-36 months) give employers greater flexibility
with regards termination but cannot be extended more than twice; thereafter
indefinite-term labor contracts must be signed
● Training of employees should be provided under 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.

Expatriates and Foreign Workers
● In principle the Labor Code and other labor regulations apply
equally to foreigners working in Vietnam.
● Employers may hire foreigners but the number of foreigners
must not exceed 3% of total workforce (note: changes expected
to this rule).
● Provincial People’s Committee may allow foreigners to be
employed in excess of 3% general rule on a case by case basis.
● Nearly all expatriates working in Vietnam must obtain a work
permit (maximum term of 36 months but renewable)

Expatriates and Foreign Workers (cont.)
● Members of formal management bodies of joint-stock
companies and 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 requirement (and
not included for purpose of 3% cap).
● Work permit process time-consuming and complicated in
practice.

Outsourcing
● To avoid employment troubles, many employers outsource
to other suppliers.
● Outsourcing may take numerous forms (e.g.- use of 3rd
processor or using persons seconded by a service supplier.
 E.g. - A foreign-invested enterprise (FIE) sign a service supply
agreement with a local company for providing certain services.
The local company recruits a specific person and seconds the
same to work at the FIE. If the FIE wishes to stop working with
this person, it instructs the local company to hire and second a
different person as agreed in the service supply agreement.

Outsourcing (cont.)
Pros:
● The employer has no formal relationship with the employee and thus has
greater flexibility to terminate the employment.
● The employer need not directly handle relevant employment procedures
for the “employee” i.e. social insurance, severance pay, etc.
Contras:
● Employers must pay more for the employment to cover the fee of the
service supplier and wages of the “employee”;
● Employer must address commercial risks of service supply contract;
● Risk that relevant state agencies might take the view that the service
supply agreement is designed to circumvent employment laws.
● Approach may not be feasible for manufacturing company requiring
mass workforce

Wages, Allowance and Benefits
 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;
 Minimum salary
 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;

Wages, Allowances and Benefits
● As of 1 January 2009, unemployment benefits paid by the
Unemployment Insurance Fund. Employers contributing
unemployment insurance of 1% of its salary fund per month is
not obligated to pay severance allowance for period after 1
January 2009;
● 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.

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

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”.

Industrial Relations
● The employer:
In theory, employers operate under the umbrella of the Vietnam
Commercial and Industrial Chamber (VCCI), a socio-political
organisation. However, in practice the role of VCCI is unclear and
ineffective.
● The employee:
Trade Union: If five or more employees wish to establish a trade
union, the local trade union will issue decision recognising 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.

Industrial Relations (cont.)
● The employer must not obstruct to the formation of trade unions.
● Once created, the trade union will engage in numerous employment
issues. For example, employers must consult with the trade union
before unilaterally terminating an employee’s employment. Other
roles of the trade union including negotiating collective labour
agreement (CLA), leading strikes, consulting with the employers on
the formation of wage scales and table, arranging annual leaves, etc.
● Any proposed unilateral termination of employment of a member of
the employer’s TUEC requires prior consultation with the TUEC. If it is
employment of the chair person of the TUEC in, opinion of higher
level trade union must be sought.

Industrial Relations (cont)
Involvement of employees in corporate issues
● The Gov issued Decree 87 dated 28 May 2007 on grassroots
democracy at joint stock companies and limited liability
companies.
● The managers of the joint stock company and limited liability
company must:
 disclose to employees all policies directly related to employees,
company’s annual planned target, internal labor regulations,
establishment and use of the company funds and reserves, etc.
 organize annual employee meeting to consult with employees on the
implementation of the above.

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 (cont.)
● 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 (cont.)
● 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 (cont.)
● 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 (cont.)
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 (cont.)
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 (cont.)
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.

Termination and Redundancy
● 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).

Termination and Redundancy (cont.)
● 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.

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.

RECOMMENDATIONS FOR EMPLOYERS:
APPLICATION OF BEST HR PRACTICES
● carefully prepare a labour contract that set out clear details on employees’
obligations and responsibilities and review same on annual basis
● build up (and register) comprehensive internal labour rules to provide clear
and strong grounds for employee responsibilities, termination of employment
● consider outsourcing the employment where feasible
● strictly follow formal and procedural requirements in cases of unilateral
termination of employment. Dismissal should be sought as the last resort.

RECOMMENDATIONS FOR EMPLOYERS:
APPLICATION OF BEST HR PRACTICES
● settle all employment disputes outside the courts by mutual
agreement as Vietnamese state agencies in general and courts in
particular can be assumed to give strong support to the
employees.
● 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 response
letters to written enquiries are good resources to rely on or to
obtain policy information.

Conclusion
● The labour code of Vietnam is created to protect employees’
rights and conditions of employment.
● Employers cannot rely on a clear framework for accepted
international principles such as non- competition clauses,
conflict of interest.
● Of utmost importance, employers should strictly comply with
the labour code as its implementing regulations in cases of any
trouble with employees.

Q & A

Duane Morris Legal Advisory Team
Thank you!
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 protecting the protected_27_aug09

Empfohlen

Empfohlen

Weitere ähnliche Inhalte

Was ist angesagt?

Was ist angesagt? (20)

Andere mochten auch

Andere mochten auch (20)

Ähnlich wie O massmann protecting the protected_27_aug09

Ähnlich wie O massmann protecting the protected_27_aug09 (20)

Mehr von Dr. Oliver Massmann

Mehr von Dr. Oliver Massmann (20)

O massmann protecting the protected_27_aug09