After much debate and consultation, Vietnam has adopted a new employment code in November 2019, which will come into full effect in January 2020. This will replace the current employment law which has been in place since 2012.
Vietnamese employment legislation has been relatively employee-friendly and highly regulated. However, the need to review these laws comes from the need to meet new standards as a result of commitments given from the adoption of new-generation trade deals. Such trade deals include the EU-Vietnam Free Trade Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
Conversely, the views of employers were canvassed during the law’s public consultation process, and as a result some aspects of the employment code have been shaped in a more employer-friendly manner.
New renewal rights for some employment contracts
Under the employment code, there are now only two types of employment contracts: definite term contracts (which must have a term of not more than 36 months) and indefinite term contracts. Previously, definite term contracts can only be renewed once, after which it much become an indefinite term contract. The new code allows for foreign employees, elderly employees, and officers of employee representative organisations to renew their definite term contracts multiple times.
Greater scrutiny of employment relationship
In an effort to circumvent termination restrictions and other employer obligations, some employers attempted to structure employee relationships as something other than “employment” (e.g. service providers). The new code seeks to address any attempted evasion of legal obligations by emphasising that an employment contract will be determined on the basis of its substance, rather than the label given to it.
Limited expansion of an employer’s right to terminate
One aspect of Vietnam’s employment legislation that is widely criticised is the limited ability for an employer to unilaterally terminate an employment contract , even for cause. While the new employment code did little to change this issue, it does introduce some new grounds to terminate a contract. These include when an employee reaches retirement age, or if they fail to turn up for work for five successive days without a legitimate reason.
Protection from discrimination
The new code has many improvements in employee protection in regards to discrimination. Employees are now provided with statutory protection from sexual harassment and discrimination on the basis of race, nationality, social origin, ethnic group, gender, age, pregnancy or maternity, marital status, family responsibilities, political views, disability, HIV status, or participation in a trade union. A key driver for this review was the need to meet the existing standards in developed countries and commitments under international treaties.
This was the topic of much debate among lawmakers. Despite efforts to reduce working hours and overtime, the government remained cautious due to concerns regarding the possible impact on productivity and the economy. The result was that working hours and overtime remains unchanged. Monthly overtime cap will be increasing from 30 to 40 hours, but this is balanced out by additional public holidays.
The employment code will now allow employees to join a representative organisation such as a worker’s union for employees outside state-run organisations. This will mean an overall improvement in the collective bargaining power of employees.
Arbitration as an option to settle employment disputes
Previously, a worker’s arbitration council was established to arbitrate only in collective bargaining disputes. The new code grants arbitration councils the authority to settle individual employment disputes as long as both parties agree to submit to its jurisdiction; and in certain cases, first go through a mandatory conciliation process.