On 14 October 2021, our lawyer Ngo Nhat Minh had talks with Conventus Law. He presented some significant changes in Labor Code 2019 that have affected to employment relation in Vietnam.
You can read the full contents at https://www.conventusleadership.com/post/q-a-conventus-law-talks-with-ngo-nhat-minh-founder-of-blawyers-vietnam-about-the-labor-code-2019 or see at below. For information of Conventus Law, find here.
1. Has Labor Code 2019 helped Vietnam with regards to the international free trade agreements (matching international standards etc…)?
In the context of Vietnam joining the international free trade agreements, the Labor Code 2019 was amended to match with the international standards. Specifically, the Labor Code 2019 has been amended according to two documents of International Labor Organization, i.e. Convention No. 98 on Right to Organize and Collective Bargaining and Convention No. 87 on Freedom of Association and Protection of the Right to Organize. Respecting and applying regulations of those Conventions show that Vietnam meets the requirements in joining the EU-Vietnam Free Trade Agreement (EVFTA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Some examples for the above changes are:
- The Labor Code 2019 has regulated the gender equality on salary payment to employees and the prevention of sexual harassment in the workplace.
- Employees can freely establish or join a representative organization of their choice, which such organization is not necessarily a member of the Vietnam General Confederation of Labor.
2. How does Labor Code 2019 help companies protect business and technology secrets?
In general, Labor Code 2019 does not have a significant amendment to the regulations on protecting business and technology secrets in comparison with the previous Code 2012. However, Labor Code 2019 has a supporting document (i.e. Circular No. 10/2020/TT-BLDTBXH issued by the Ministry of Labor, War Invalids and Social Affairs on 12 November 2020), in which guides this matter as follow:
- If an employee performs a job directly related to business and technology secrets, the employer may reach an arrangement with the employee for the protection of such secrets in the employment contract or another document.
- An agreement for the protection of the business and technology secrets shall at least contain the following contents:
- A list of business and technology secrets;
- Scope of using business and technology secrets;
- Duration of protection of business and technology secrets;
- Methods of protection of business and technology secrets;
- Rights, obligations, liabilities of the employer, employee during the duration of protection of business and technology secrets;
- Actions against breaches of the arrangement for protection of the business and technology secrets.
Such Circular also allowed an employer to request its employee to compensate the damage due to the breach of agreement protection of the business and technology secrets, even in case where labor relation is terminated.
3. What should companies know about Vietnam’s new regulations on sexual harassment at the workplace?
Regulations on sexual harassment were regulated in Labor Code 2012. However, those regulations were only to provide basis right of employee on sexual harassment at the workplace. Now, prevention of sexual harassment at workplace is more specified in Labor Code 2019. Thus, employers note the new regulations on sexual harassment as follows:
- “Sexual harassment at the workplace” is legally defined in Labor Code 2019;
- Employers are required to include the regulations on preventing sexual harassment at the workplace in their Internal Labor Regulations (“ILRs”);
- Prevention and solutions to prevent sexual harassment at workplace is one of compulsory contents to be discussed for collective bargaining agreement between employers and employees; and
- Sexual harassment is one of the legal grounds for employee to unilaterally terminate labor relation.
However, the new regulations on sexual harassment at the workplace which have been added to the Labor Code 2019 are not detailed enough for employers to establish a clear procedure for labor discipline against the act of sexual harassment at the workplace. Thus, employers should consider the Code of Conduct about Sexual harassment at the workplace co-issued by VCCI, Vietnam General Confederation of Labor, and Ministry of Labor, War Invalids and Social Affairs to make their own procedure.
4. What other significant changes to Labor Code 2019 regarding labor contracts were made that companies should be aware of?
Besides the new regulations as we mentioned above, Labor Code 2019 also has several changes regarding labor contracts that companies should pay attention to:
- Labor Code 2019 now applies to various labor relations. The labor relation is determined regardless of the name of the document signed between employers and employees. Previously, an employer could sign a “service contract” with its employees, in which the employee would provide “service” and the employer would pay a “service fee” but not pay insurances required by laws. Now, a “service contract” could be considered as a labor contract if covering agreements on the job, working time, wage, salary, management, and supervision of the employer;
- In addition, there are only 2 types of labor contracts: indefinite-term labor contracts and definite-term labor contracts (maximum of 36 months). The seasonal labor contract/ work-specific labor contract is no longer applicable;
- The appendix which is signed between the employers and employees shall not be able to change or extend the duration of the main labor contract; and
- The electronic labor contracts can now be signed via electronic devices and have the same validity as the written form.
5. In your view, have businesses had enough grounds to self-appraised their labor practices and ensure they are compliant as per amendments in Labor Code 2019?
It is hard to confirm this matter. The reasons are Labor Code 2019 has just been come into effect on 01 January 2021 and its governance period was more than 10 months until now while most of enterprises in Vietnam are focusing on how to mitigate the effectiveness of Covid-19 pandemic.
However, during process of consulting some enterprises, we realized that they are still facing a lot of hurdles in terms of applying the Labor Code 2019. In fact, there are some issues regulated by Labor Code 2019 that businesses have no idea to deal with and must wait for guidance from competent authorities. For example, in some foreign countries, there are experts with high skills and experience but they do not possess any wirtten certificate, but for working in Vietnam, they must show suitable certificate to obtain work permits.
In addition, according to a quick report of labor inspectors, there have still enterprises violating Labor Code 2019 due to the lack of understanding of laws.
6. How significant is it that Vietnam will now allow internal employee organizations to operate, and not be supervised by the State-run Vietnam General Confederation of Labor (VGCL)? What does this mean in practice?
Article 170.2 of Labor Code 2019 regulates that employees of enterprises can establish, join and participate in activities of employees’ organizations. An employee’s organiztion is brandnew and independent of the traditional grassroots trade union under Vietnam Trade Union system. Allowing the establishment of internal employee organizations is a part of the process of amending Vietnamese laws when Vietnam enters into free trade agreements like EVFTA and CPTPP which requires the opening of trade union rights.
Moreover, the fact that Labor Code 2019 breaks down the “unique” role of traditional grassroots trade unions in representing employees has a great meaning in practice. It has opened up opportunities for employees to: (i) deal with employers on wages and working conidtions through dialogue and negotiation; (ii) settle labor disputes between employees and employers, in which employees need an organization who can actually act on their behalf and fight against interference of managerial employees (or senior employees appointed by an enterprises); (iii) protection of employees’ rights and interests in case of unilateral termination or dissmisal by employers choose their representative organizations.
7. How have enterprises implemented these changes during the period of lockdown and WFH due to Covid-19 pandemic?
During the period of lockdown and WFH due to Covid-19 pademic, enterprises usually give priority to amendments and supplements of labor documents such as labor contracts, IRLs, or collective bargaining agreements. Besides, enterprises also inform their employees of such changes to help the employee keep up with the new regulations and policies. This may enhance the compliance with amendments in Labor Code 2019.
Regarding documents that are required to submit to/ register to competent authorities, enterprises should prepare dossiers first and implement the process after the lockdown.
8. What are the key benefits for employers of Labor Code 2019?
Labor Code 2019 has serveral improvements that are beneficial for employers. For example:
- The most recognizable thing is that Labor Code 2019 has overcome the shortcomings of Labor Code 2012, helping businesses deal with obstacles in the process of complying with the laws. For example, previously, Labor Code 2012 did not have regulations on the employee fails to provide truthful information, causing difficulties for enterprises but Labor Code 2019 clearly stipulates that the employer has the right to unilaterally terminate such employee’s labor contract in this case to protect the interests of the employer.
- Labor Code 2019 has regulations helping enterprises save time and costs on administrative procedures. For example, the employer no longer must send salary scales and payrolls to competent local State agencies.
9. What are the significant amended/ new regulations that affect expats?
Among others, the below is 3 significant amended/ new regulations of Labor Code 2019 that affect expats:
- According to Labor Code 2019, an expat who is a company’s owner can obtain a work permit if his contribution capital in the company is less than VND3 billion (around USD131,000). This is different from the regulation of Labor Code 2012 which allowed a foreign owner of a company to get a work permit exemption if they held partly or wholly the company’s charter capital;
- The work permit for expats is valid for a maximum of two years and can be extended for another two years for a single time only. Thus, a work permit could last for a total of four years if extended. This regulation was not provided by Labor Code 2012; and
- According to some Decrees guiding Labor Code 2012, if the expat whose an expiry work permit wants to continue his employment at the job position which is the same as defined in his expiry work permit, he/ she needs to submit the application for the work permit as prescribed and certificate of revocation of his expiry work permit. However, this provision is not regulated by Labor Code 2019 and guiding documents, meaning that instead of submitting a certificate of revocation of the expiry work permit, the expat who used to work in Vietnam must show the employment certificate issued by overseas entities to obtain a new work permit.
— Talks with Conventus Law on 14 October 2021 —