The Labor Code is one of many key legal instruments in terms of regulating labor relations, affecting all economic sectors, enterprises, organizations, and employees. Revision of the Labor Code is an essential step to overcome obstacles during the course of applying labor regulations, internalizing international labor standards in order to establish a legal framework for such integration.
The purpose of this article is to help our clients have a more comprehensive view of the changes of the recently issued Labor Code 2019 as well as the positive legal consequences that the Labor Code 2019 brings to employees and employers in the forthcoming time.
1. Expanding the scope of regulation
For the first time, the Labor Code extends its scope of regulation to workers without labor relations. Workers without labor relations mean those who work without an employment contract. Such provisions shall help the Labor Code 2019 to solve the problems that Labor Code 2012 has yet been able to do, that is, choosing which regulations to apply to cases where the “hirer” and the “worker” execute a personal service contract. Certainly, such cases shall be governed by the Labor Code 2019. Thereby, it shall protect the legitimate rights and interests of this group in labor relations.
2. Employment contract
The Labor Code 2019 basically shares the same definition of “employment contract” as the Labor Code 2012, whereby, an employment contract is an agreement between employer and employee on paid work, wages, working conditions, rights and obligations of each party in the labor relation. However, the Labor Code 2019 supplements that, in case the two parties agree on an employment contract with a different name but otherwise contains provisions on a paid job, wages, management and supervision of a party, such agreement shall be considered as an employment contract.
The above-mentioned provision reaffirms that whether an agreement is considered to be an employment contract depends on the contents of said agreement, not its title. This helps prevents employers from abusing loopholes in the Labor Code 2012 to execute agreements, titled service contracts or such other names, with employers to avoid the regulations of labor law. Thereby, it ensures the legitimate rights and interests of the employees – the weaker party in any labor relation.
3. Types of Employment contract
In practice, executing an Employment contract has always been the concern of any person having the intention to establish labor relations. Pursuant to the Labor Code 2012, the parties are entitled to choose one of three types of Employment contract: (i) Indefinite-term employment contract; (ii) Definite-term employment contract from 12 months to 36 months; and (iii) Seasonal or work-specific employment contract with term under 12 months. At present, the Labor Code 2019 only provides for two types of employment contracts: (i) Indefinite-term employment contract; and (ii) Definite-term employment contract with a term up to 36 months. This amendment by lawmakers is especially important for employers and employees.
Under the Labor Code 2012, the parties are not allowed to enter into a seasonal or work-specific employment contract with term under 12 months for a regular job which has a duration of more than 12 months, except for temporary replacement of employees subject to military service, maternity leave, sick leave, labor accident or other temporary leave. However, the Labor Code 2012 provides no specific guidance nor definition on “job with the regular nature”. This makes it difficult for enterprises to sign a seasonal or work-specific employment contract with term under 12 months when it is not clear whether such job is a regular job that has a duration of more than 12 months. Simultaneously, there are also enterprises taking advantage of this loophole to sign a seasonal or work-specific employment contract with term under 12 months with employees for regular jobs having a duration of more than 12 months.
Hence, the abolishment of such regulations on seasonal or work-specific employment contracts with term under 12 months has solved the above-mentioned problem, which not only allows more flexibility for enterprises in executing contracts for short-term employment but also helps employees avoid signing a short-term contract for a long-term job (more than 12 months), ensuring that employees receive the benefits that they are entitled to in accordance with the laws.
Additionally, the Labor Code 2019 stipulates that within a period of 30 days since the expiry of employment contract, both parties must sign a new employment contract; during the period where new employment contract is not yet executed, rights, interest and obligations of both parties shall be implemented in accordance with the previously executed employment contract. Regarding this issue, the Labor Code 2012 on the other hand, does not stipulate how the rights and obligations of the parties will be implemented during the same period as mentioned above. Therefore, the Labor Code 2019 sets out specific provisions to fully ensure the employees’ benefits during this period.
Besides, a noteworthy point of the Labor Code 2019 is the back-to-back execution of definite-term employment contracts with term under 36 months with foreign employees. Accordingly, employers may execute definite-term employment contracts with foreign employees for more than two (02) times as long as the term of employment does not exceed the validity duration of such employee’s work permit.
4. Recoginization of electronic employment contracts
As a matter of actual practice, with the development of science and technology, execution of employment contracts is not only done in writing, the Labor Code 2019 has recognized the execution of employment contracts via electronic means, which will have the same validity as that of a physical contract. Verbal employment contracts are solely applicable to employment contracts with a term of less than 01 month.
5. Appendices to employment contract
Appendices are for providing details to, amending and supplementing a number of articles and clauses of employment contract. Pursuant to the Labor Code 2012, employers may amend and supplement any provisions of employment contract with an appendix. However, pursuant to the Labor Code 2019, employers will not be able to modify the term of employment contract with an appendix. This would mean that it could take more time for enterprises to renew and re-execute a definite-term employment contract which has already expired.
In practice, several enterprises incorporate provisions on probation into their employment contracts but the Labor Code 2012 did not regulate on such matter. This ultimately leads to the question that, if the employer does not meet the requirements of the employer, what should the employer do? Is it possible to terminate the employment contract without any legal risks? Which will be applied to disputes arising during the probation period, the provisions on probation or the regulations on employment contracts? These are questions that the Labor Code 2012 has no answer to. Realizing this, the Labor Code 2019 has completely solved the abovementioned issues.
Firstly, employers and employees may agree on recording provisions on probation in the employment contract or signing a separate probation contract.
Secondly, if the probation is satisfactory, employers shall continue to implement the executed employment contract in case provisions on probation is written in the employment contract or execute an employment contract in case the parties previously executed a probation contract.
Thirdly, during the probationary period, each party has the right to terminate the probation contract or employment contract without prior notice and free of any liability to compensate for damages.
In addition, the Labor Code 2019 supplements the case of probation for the position of enterprise executive in accordance with the Law on Enterprises, the Law on Management and use of state investment in enterprises, which will not exceed 180 days.
7. Termination of Employment contract
Compared to the Labor Code 2012, the Labor Code 2019 has supplemented 3 more cases for termination of employment contract as follows:
(i) Foreign employees working in Vietnam being expelled by an effective verdict or judgment of the court or a decision of a competent authority;
(ii) Expiration of work permit of foreign employees pursuant to Article 156 of the Labor Code 2019.
(iii) Probation is unsatisfactory or one party terminates the agreement on probation, in case probation is agreed upon by the parties and recorded in the employment contract.
8. The right to unilaterally terminate employment contracts
The right to unilaterally terminate employment contract of the employee and the employer is the most noticeable change of the Labor Code 2019. Accordingly, the Labor Code 2019 allows employees to unilaterally terminate the contract without cause, provided that notice is given at least 45 days prior to termination in case of an indefinite-term employment contract; 30 days in case of an employment contract with a fixed term of 12 – 36 months; 03 working days in the case of an employment contract with a fixed term of less than 12 months. In some cases, employees may unilaterally terminate the contract without prior notice, such as: (i) not being assigned the appropriate job or workplace or not provided with the working conditions as agreed in the employment contract; (ii) not being paid adequately or on schedule; (iii) being maltreated, assaulted, physically or verbally insulted by the employer in a manner that affects the employee’s health, dignity or honor; is forced to work against his/her will; (iv) sexual harassment at work; (v) pregnant female employees having to stop working; (vi) reaching the retirement age; (vii) employer failing to provide truthful information.
Instead of finding a reason and complying strictly with the regulations on prioir notice, from now on, employees can resign from work in a much simpler manner. Such regulation aims to provide employees with better and more suitable job opportunities as well as to give businesses time to arrange personnel replacement.
In addition, the Labor Code 2019 also grants the right to unilaterally terminate employment contract in the following cases: (i) employee reaching retirement age; (ii) employee failing to truthfully provide personal information, education and other relevant information upon execution of contract. Particularly, in some cases, employers do not need to provide prior notice to employees when unilaterally terminating employment contract such as: (i) employee being absent from workplace after a period of suspension of contract; (ii) employee failing to go to work without legitimate cause for at least 05 consecutive working days.
9. Protecting the rights of employers upon unilaterally terminating employment contract illegally and reinstating employees to work
In case employers unilaterally terminate employment contract illegally and then reinstate their employees, after the reinstatement, employees must return the severance allowance or redundancy allowance (if any) to the employers. This is completely new in comparison to the Labor Code 2012 and seems to be in favor of the employers.
10. Invalid contract
The Labor Code 2019 is still based on the Labor Code 2012 in terms of invalid employment contracts. However, the Labor Code 2019 has abolished the case where the content of the employment contract restricts or bars the right to establish, join and participate in trade union activities of employees and the case where part or the entirety of the employment contract set forths the employee’s benefits which are lower than those provided by the labor law, the internal labor rules, the collective labor agreement that are currently effective or the contents of the employment contract limit other rights of the employee, such part or the entirety of the employment contract shall be invalid. In addition, the Labor Code 2019 also supplements one more case the employment contract is considered invalid: “Violating the principle of voluntariness, fairness, good faith, cooperation and honesty”.
The Labor Code 2019 also narrows the authority to declare employment contract to be invalid. From 01 January 2021, only the People’s Court is competent to declare an employment contract to be invalid, instead of having Labor Inspectorate sharing such competence as stipulated by the Labor Code 2012. This is completely in compliance with the Code of Civil Procedure 2015, whereby, only the Court is competent to declare an employment contract invalid.
11. Upon payment of salaries, companies must send a detailed list to the employees
In order to transparentize employees’ wages, the Labor Code 2019 requires that every time salary is paid, the employer shall provide the employee with a detailed list specifying the salary, overtime pay, night shift pay and deductions (if any). This regulation has significant meanings to employees who get paid by product, by day, or by shift. In addition, the Labor Code 2019 also allows employees to authorize others to receive their salaries, which was not prescribed in the Labor Code 2012. This provision appears to be practical for employees, especially those not able to directly receive salaries due to sickness or accident; when salary is paid via bank transfer, the employer shall bear the costs for opening account and transferring salary instead of being agreed upon by the parties as per current regulations. Employers can pay foreign employees working in Vietnam in foreign currency. This was prescribed in Decree 05/2015/ND-CP and is now codified.
12. Employees can be rewarded not only by money
The Labor Code 2019 stipulates the concept of “bonuses” instead of “monetary rewards” pursuant to current regulations. Accordingly, the concept of rewarding employees has also been broadened, which can be an amount of money or property or in other forms based on business results or the employees’ performance. This means that, in the near future, employees would be rewarded through various forms such as money, property or other forms decided by the employers.
13. Salaries in case of work suspension
According to the Labor Code 2012, if for reasons of power or water malfunctions not due to the employer’s or employee’s fault or for other objective causes such as natural disaster, fire, dangerous epidemic, enemy sabotage, relocation of business location upon request of competent state agency, or for economic reasons, the suspension pay must be agreed upon by the two parties but shall not be less than the regional minimum wages stipulated by the Government. Thus, in practice, the employer shall pay the employee in an amount equal to the regional minimum wages stipulated by the Government.
However, according to the Labor Code 2019, for the above case, the suspension pay is still based on the agreement between the parties, however, the requirement on ensuring that such suspension pay is not less than the regional minimum wage only has effect within the first 14 days of suspension. In other words, if the suspension is longer than 14 working days, the employee has the right to negotiate a salary higher than the regional minimum wage.
14. Overtime work
The Labor Code 2019 has increased the total hours of overtime work in 01 month to 40 hours, compared to 30 hours as stipulated by the Labor Code 2012.
In addition, the Labor Code 2019 also specifies several cases where a maximum of 300 hours of overtime work is permitted, including:
- Manufacture, processing of textile, garment, footwear, electric, electronic products, processing of agricultural, forestry, aquaculture products, salt production;
- Generation and supply of electricity, telecommunications, refinery operation; water supply and drainage;
- Works that require highly skilled workers that are not available on the labor market at the time;
- Urgent works that cannot be delayed due to seasonal reasons or availability of materials or products, or due to unexpected causes, bad weather, natural disasters, fire, hostility, shortage of power or raw materials, or technical issue of the production line;
- Other cases prescribed by the Government.
15. Employees are entitled to 02 days off for National Day
Employees are entitled to one extra day off (which may be the preceding or the following day, as the case may be for each year) for National Day on September 2nd, thereby increasing the total number of holidays to 11 days because according to the lawmakers, the number of holidays for Vietnamese workers are quite low compared to other countries in the region and the world. Minister Dao Ngoc Dung remarks that adding another public holiday before or after the National Day is a brilliant decision by the National Assembly “to help employees and their families have more free time to take care of their children and their family”. In addition, the Code has also supplemented cases where employees are entitled to take a fully paid leave for personal matters. Accordingly, when their adoptive father or adoptive mother dies, the employee is entitled to three days off.
16. Internal labor rules
According to the Labor Code 2012, enterprises with at least 10 employees are required to stipulate internal labor rules in writing. Therefore, enterprises with less than 10 employees are not required to have internal labor rules. In cases where there are no internal labor rules, when an employee commits an act of violation which results in labor disciplinary actions, it is difficult for the employer to fully handle such matter. This issue is more properly addressed by the Labor Code 2019, whereby, in all cases, employers must issue their internal labor rules, however, for enterprises having 10 or more employees, it is mandatory to have written internal labor rules. For the remaining cases, oral and or internally-circulated labor rules (not registered with competent state authorities) are still considered valid. This allows employers to have the legal basis to conduct disciplinary measures if their employees commit any act of violation.
Regarding the contents of internal labor rules, the Labor Code 2019 has supplemented 3 new contents compared to those specified by the Labor Code 2012, as follows:
- Actions against sexual harassment in the workplace; procedures for handling of sexual harassment in the workplace;
- Cases of temporary reassignment of employees to perform works other than those prescribed in the employment contract;
- The person having the competence to take disciplinary measures.
Regarding the authority to register the internal labor regulations, the Labor Code 2019 permits labor agency of district-level People’s Committee to register the internal labor rules upon satisfaction of specific requirements and being authorized by the labor agency of provincial-level People’s Committee instead of only the labor agency of provincial-level People’s Committee as stipulated by the Labor Code 2012.
17. Disciplinary measures
Regarding the disciplinary measures, in general, the Labor Code 2019 still maintains the disciplinary measures stipulated by the Labor Code 2012. However, the Labor Code 2019 has separated the two measures “Deferment of pay rise for up to 6 months” and “Demotion” into different forms of disciplinary measures. Therefore, the 2019 Labor Code provides for 4 forms of labor disciplinary measure: (i) reprimand; (ii) deferment of pay rise for up to 6 months; (iii) demotion; and (iv) dismissal.
Regarding the time limit for taking disciplinary measures, according to the Labor Code 2012, when taking disciplinary measures in special cases such as sick leave, detention, custody, pregnancy, raising a child under 12 months of age, etc. upon the expiration of the time-limit prescribed for each of these cases, if the time limit has not yet expired, the employer must immediately handle the case, and if the time limit has expired, it may be extended but for no more than 60 days from the expiry date mentioned above. This, in general, makes it difficult for employers when the time limit for handling remains but there is not enough time for disciplinary action. Therefore, the Labor Code 2019 has been amended to address this issue, whereby, if the time limit remains but less than 60 days, the employer may extend the time limit for a maximum of 60 days from the expiry of the above period.
For dismissal, in addition to the violation acts that are subject to this form of disciplinary measure as prescribed in the Labor Code 2012, the Labor Code 2019 has supplemented the behavior of “sexual harassment in the workplace”. In particular, sexual harassment at the workplace is any sexual behavior of any person towards other people at the workplace without being desired or accepted by that person. Workplace is any place where the employee actually works as agreed upon or assigned by the employer. By this, the work, as well as the rights of employees, will be more secured as anyone who commits sexual harassment will be fired. This can be seen as a remarkable development of the new Labor Code to create a healthy and professional working environment for employees.
Regarding writing off disciplinary remark, according to the Labor Code 2012, after 3 months since the date the employee is reprimanded or after 6 months since the date of being subject to deferment of pay rise, if the employee does not recidivate, their disciplinary remark is automatically written off. Recidivism is explained by the Labor Code 2012 as a repeat of a violation that had been disciplined but has not yet been written off. In fact, there are many cases where employees did not recidivate the acts which were disciplined but committed other acts of violation, their disciplinary remarks were still written off. In general, this provision reduces deterrence nature of disciplinary measures. Therefore, the Labor Code 2019 has been amended in the manner that if the employee commits any act of violation whatsoever, their disciplinary remark would not be automatically written off.
In addition, according to the Labor Code 2012, the employer must not take disciplinary measures against employees who committed act of violation not prescribed by the internal labor rules. This makes it very difficult for employers to discipline the employees in case they committed serious violations but such violations are not specified in the internal labor rules. The Labor Code 2019 has resolved this issue, whereby the employer is entitled to apply labor disciplinary measures on employees who violate internal labor rules, agreements in employment contracts or labor laws.
18. Increase the retirement ages to 62 for males and 60 for females
According to the Labor Code 2019, the retirement ages for employees in normal working conditions shall be adjusted according to the roadmap: (i) 62 years old in 2028 for male workers; (ii) 60 years old by 2035 for female workers. Thus, since 2021, the retirement age for males is 60 years and 3 months and for females is 55 years and 4 months. Thereafter, for every year the retirement age will be increased by 3 months for male workers and 4 months for female workers.
The gradual adjustment of the retirement ages is a regulation to meet the challenge of population aging; addressing the goals of ensuring economic growth, social growth, and balancing to ensure jobs, preserve and sustainably develop insurance funds, resolving matters of equality and aiming to gradually reduce the gender gap.
19. Representative organization of employees
According to the Labor Code 2012, representative organization of employees means (i) the executive committee of the grassroots-level trade union or (ii) the executive committee of the immediate higher-level trade union in a non-unionized enterprise.
However, according to the Labor Code 2019, besides the grassroots-level trade unions, the new law has supplemented ” internal employee organization” which is the representative organization of employees. These two (02) organizations are equal in their rights and obligations in protecting the legitimate rights and interests of employees in labor relations. The internal employee organization is established and operates independently of the grassroots-level trade unions. This provision contributes to promoting and improving the efficiency of representation, protecting the rights and interests of employees in labor relations, in accordance with ILO Conventions, creating favorable conditions for international integration process.
Also according to the Labor Code 2019, the immediate higher-level trade union will no longer be the representative organization of employees as of 01 January 2021.
However, there is one issue that, if an enterprise has formed a grassroots-level trade union pursuant to the Labor Code 2012, would the employees in these enterprises have the right to establish “the internal employee organization”? If there are conflicts between the two labor representative organizations, how would such conflicts be resolved? These are issues that need to be specified in order to be applied in practice to maximize the benefits of employees.
20. Female employees who are pregnant or raising children shall be given priority to execute new employment contract
In addition to the previous forms of maternity protection for female employees, such as not working at night, overtime, going on a long-distance working trips when they are in the seventh month of pregnancy or raising children under 12 months of age, etc., pursuant to the Labor Code 2019, female employees are also entitled to an additional benefit, which is the priority to execute new employment contract in case their current employment contract expires during their pregnancy or the period of raising children under 12 months of age. With this, it can be seen that the rights of female employees are much more guaranteed.
21. Settlement of labor disputes
The Labor Code 2019 has supplement labor arbitration council as a competent body to settle individual labor disputes, in addition to the labor mediator and the people’s court as previously prescribed.
For collective labor disputes, the Labor Code 2019 has removed the competence of the chairpersons of district-level People’s Committees and the People’s Court, whereby only the labor mediator and the labor arbitration council have competence to settle such dispute.
From the above fundamental analysis, it can be seen that the Labor Code 2019 marked a great development step in bringing our country’s labor laws, step by step, closer to the international standards; basically harmonizing the rights of both employees and employers; partly addressing the inadequacies and problems in the labor relations that the current labor law has yet to achieve; thereby contributing to building a solid legal foundation to promote future socio-economic development.