Legal notes before entering labor agreement (from 01 January 2021)

Writer: Vi Tran, Huy Nguyen & Thao Nguyen

The new Labor Code (“LC 2019”) will become effective from 01 January 2021. There are significant changes regarding labor agreement signed between employer and employees (“LA”). Hence, the parties of LA must pay attention to such updates to not only comply with the law but also avoid the risks and challenge from competent authority.

Throughout this article, BLawyers Vietnam will summarize those changes for the related parties to consider and comply with the new regulations.

Legal note before entering labor agreement from 01 Jan 2021

1. Name of LA will no longer make a wrong understanding on its nature

According to the LC 2019, any contracts governing labor relationship between employer and employee are LA. Before LC 2019, some employers used a so-called “service contract” to sign with employees. In which, employees provided service to employers but terms of such contract were about paid job, working place, rights and obligations of both LA parties. From 01 January 2020, the contract’s name will no longer determine its nature if there are elements about labor relationship.

Good tip: 4 notable changes to new labor laws of Vietnam

2. Form of labor agreement

Except for the LA with less than 01 month-term, all LA must be in writing-form. Notwithstanding, both parties can use an electronic LA. It means contracts established by the means of data messages according to Law on Electronic transactions 2005. In the meantime, LC 2019 recognized that kind of contract’s validity as well as the paper ones.

3. Types of labor agreement

Not same as the former Labor Code providing 3 types of LA, now the LC 2019 only recognize 2 following types of LA:

    1. The fixed-term LA with the maximum term of 36 months; and
    2. The indefinite-term LA.

Of note, employer and employee can only sign the former type of LA for 2 times. After that, if both continue their employment, they must sign an indefinite-term LA instead.

4. Probation

Probation is not applicable for the LA with 01-month term or less. Significantly, the probation term of manager position could last up to 180 days.

5. Postpone on performance of labor agreement

The LC 2019 allows more cases than the Labor Code 2012 in which the employees can postpone the execution of the LA. Accordingly, employees can stop their LA temporarily, if they are appointed as managers of single-member limited liability companies with 100% State’s owner; or are authorized to represent the rights and responsibilities of State owners, enterprise ownership in other enterprises.

6. Unilateral termination of employees

Employees can unilaterally terminate the LA without reasons if notice prior to the period prescribed in LC 2019. The employee can terminate the LA immediately if he/she find a violation as follows:

    1. Not working with the job, workplace, or working conditions as agreed;
    2. Not receiving salary in full or timely;
    3. Suffering maltreated, hit, or insulting words or acts affecting health, dignity and self-respect, or forced labor;
    4. Suffering sexual harassment at work;
    5. Pregnant employee who must stop working following doctor’s instruction;
    6. Being at retirement age; or
    7. Not being provided faithful information from employers, which affects the LA performance.

7. Unilateral termination without prior notice to employees

Employers have the right of unilateral termination without any prior notice if their employees not presenting at workplace for more than 15 days from the end of the postponed-term, or quitting job intentionally for 05 continuous working days without reasons.

Good tip: How is illegal one-sided termination of labor contracts by employers pursuant to the law of Vietnam?

8. Handling period of labor agreement termination

Within 14 days from the date of termination, the parties of LA must pay for all outstanding obligations. However, the parties could handle the following cases longer than 14 days but no more than 30 days:

    1. The organizational employers stop doing business;
    2. The employers change in structure, technology or due to economic reasons;
    3. Division, separation, merger or consolidation of enterprise; sold, rental or restructured enterprises; transferring ownership and property of enterprise; or
    4. Natural disasters, conflagration, war, or pandemic.

Good tip: Common risks happened after mergers and acquisitions (M&A) transactions

The above is not official advice from BLawyers Vietnam. If you have any questions or suggestions about the above, please contact us at BLawyers Vietnam would love to hear from you.


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