Presentation on Labour Laws by dwq67540

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       An Overview

               Trung Tran, Associate
                Mayer Brown JSM
                                                         An Overview
I.     Introduction
II.    Overview of New Changes
       1.   Recruiting of Vietnam/Expatriate Employees
       2.   Labour Contracts:
            a. Wages
            b. Overtime
            c. Bonus
            d. Severance
            e. Labour Discipline
            f. Unilateral Termination & Procedures
       3.   Dispute Resolution
       4.   Social Insurance
III.   Work Permit
            1. Application File
            2. Exception                                          2
                                      An Overview
IV.   Strike and Resolution
         1.   Definition
         2.   Conditions
         3.   Procedures
         4.   Rights of Employees
         5.   Stay or Suspend
         6.   Unlawful Strikes
         7.   Compensation for Loss
V.    Practical Steps

                                                   I. Introduction

Amended Labour Laws
•   Passed on 2 April 2002 and 29 November 2006 (effective as of 1 July
•   Contained many changes: collective labour agreements, highly skilled
    workers, workers’ compensation, trade unions, unemployment insurance
•   Applies to local & foreign employees/companies in VN

                                                      I. Introduction

Related Legislations:

Hiring:                 Decree 39/2003/ND-CP (18/4/03)
                        Circular 20/2003/TT-BLDTBXH (22/9/03)
                        Decree 34/2008/ND-CP (35/3/08) (hiring of
Labour Contracts:       Decree 39/2003/ND-CP (18/4/03)
                        Decree 44/2003/ND-CP (9/5/03)
                        Circular 21/2003/TT-BLDTBXH (9/5/03)
Salaries:               Decree 114/2002/ND-CP (13/12/02)
                        Circular 14/2003/TT-BLDTBXH (30/5/03)
Work Hours:             Decree 195/CP (31/12/94)
                        Decree 109/2002/ND-CP (27/12/02)
                        Circular 15/2003/TT-BLDTBXH (3/6/03)
                        Circular 16/2003/TT-LDTBXH (3/6/03)
                        (applicable to employees in companies that
                        process goods for export)
                                                       I. Introduction

Labour Discipline:   Decree 41/CP (6/7/95)
                     Decree 33/2003/ND-CP (2/4/03)
                     Circular 19/2002/TT-BLDTBXH (22/9/03)
Compensation:        Decree 06/CP (20/01/95)
                     Decree 33/2003/ND-CP (02/4/03)
                     Circular 19/2003/TT-BLDTBXH (22/9/03)
Social Insurance:    Law No.71/2006/QH-11
                     Decree No. 152/2006/ND-CP (22/12/2006)

Work Permit:         Decree 34/2008/ND-CP (25/03/2008)
                     Inter-Circular 08/2008/TT-BLDTBXH (10/06/2008)

Strike:              Law No.74/2006/QH-11
                     Decree 11/2008/ND-CP (30/01/2008)
                     Decree 12/2008/ND-CP (30/01/2008)
                     Inter-Circular 07/2008/TTLT-BLDTBXH-BTC (30/5/2008)

                                1. Recruiting of VN Employees

Old Law: through Gov’t-sponsored employment agencies

New Law: direct recruitment, but a list of staff hired should be submitted to the
local Department of Labour (“DOLISA”) in 7 days after hiring

Procedures for Recruiting VN Employees
 1.   Advertisement in print, radio or TV or post at company's premises with
      specific details, such as number of employees hired, positions, salaries,
      work conditions, etc...
 2.   Employment application must follow forms set out in Circular 20.

                                  1. Recruiting of VN Employees

“Forced Localisation”
Old Law:
•   3% cap of expatriates was imposed on foreign-invested enterprises, not applicable
    to representative offices and branches but approval of Provincial People’s
    Committee required
•   work permit is needed

New Law
•   3% cap is abolished
•   Work permit is still compulsory (procedures to be discussed)

                                                 2. Labour Contracts

New Law:
•   New provisions on form of labour contracts & execution
    i.     Form as set out in Circular 21 (in respect of indefinite, definite term
           contracts and contracts with term from 3-12 months) must be used
    ii.    Even with an expatriate contract, Vietnamese version must be used and
           the English version can be appended
    iii. Authorised person must sign employment contract
•   New provisions on amendments of labour contracts
    A party can request the other party to amend the contract. The other party
    must respond within 3 days. If no agreement is reached, both parties must still
    carry out current contract or agree to terminate (no unilateral termination).

                                                                     a. Wages
Old Law: Salary scales required but no specific guiding provisions
New Law: Circular 14
•   Salary scales based on:
     –    job descriptions
     –    evaluation of importance of each job
•   Salary scales must be registered with DOLISA and publicly announced to
•   Minimum wage (simple job in ordinary working conditions: 1 Jan. 08):
     −    State sectors: VND 540,000
     −    Foreign invested companies:
          + HN & HCM: VND 1 million
          + Suburbs of HN & HCM & major cities: VND 900,000
          + Other areas: VND 800,000                                       10
                                                               b. Overtime
Old Law:
•   Overtime paid as follows:
     –     150% for weekdays;
     –     200% for weekends.
•   Overtime may not exceed 200 hours/year
New Law:
•   Adds 300% for holidays
•   If the employee is allowed to take time off equivalent to overtime worked,
    employer only needs to pay for the difference between regular and overtime
•   300 hours/year overtime for “special cases” (such as garment, footwear) as
    determined by the Government

                                                                    c. Bonus

Old Law: Bonus is mandatory if employer is profitable

New Law:
•   Employer may but is not required to pay bonus
•   Bonus regime/policy must be issued and announced to employees

                                                           d. Severance

Old Law:
Employees entitled to severance (½ month for every year of service) (unclear
whether or not employee must work a full year)

New Law:
(½ month for every year of service)
Employee must work for at least 12 months or more

                                                   e. Labour Discipline

New Law: 3 types disciplinary measures:
 1.   warning (may be oral; used for first time breaches that are not serious);
 2.   transfer to another job with lower pay for a maximum period of 6 months; or
          a. delay giving a salary increase for a maximum period of 6 months; or
          b. take away the employee’s job title/position
 3.   dismissal under Article 85(1) of the Labour Code and as detailed in the internal
      rules and regulations.

                                                    e. Labour Discipline

Side Note: New Law Sets Out Details on Termination Under Article 85(1) (in
An employee can be dismissed pursuant to Article 85(1) of the Labour Code for:
 a.   stealing, embezzling, disclosing of confidential technical, business secrets
      or taking other actions causing “material” damage to the properties, rights of
      the employer.
      (Note: should detail the circumstances in the internal rules and regulations
      (i.e. amount of damage or to property or actions considered as “material”)).

                                                     e. Labour Discipline

Consequences of Wrongful Termination
 •   If employer wrongfully terminates: reinstatement + 2 months salary +
     compensation for days employee has not worked due to termination
 •   If employer does not wish the employee to return + the employee agrees,
     employer must pay the above + additional amount to be agreed
 •   If employee wrongfully terminates: loses severance allowance + must pay
     employee ½ month’s salary

               f. Unilateral Termination and Procedures

Additional Right of Employee to Unilaterally Terminate (Illness)
•   Employee may unilaterally terminate a contract if he/she is ill for:
      –     3 consecutive months (definite term contract); or
      –     one quarter of the term (seasonal contract)
•   3 days’ advance notice to employer is required

                   f. Unilateral Termination and Procedures

Additional Right of Employer to Unilaterally Terminate (Illness)
Employer may terminate a contract if employee has been ill for:
    –    12 consecutive months (indefinite term contract); or
    –    6 consecutive months (definite term contract); or
    –    ½ of the term (seasonal contract).
If employee recovers, employer must consider rehiring employee.

(Please check with your lawyer/legal officer for termination procedures)

                                                   3. Dispute Resolution

Old Law: Unclear provisions
New Law: Provides clarification on how individual labour disputes are to be
resolved and limitation periods for resolving such labour disputes
 •    Labour disputes may be resolved:
      informally either by (i) a Dispute Resolution Committee (established in
      enterprises with trade unions and consisting of equal number of employers
      and employees) or (ii) a labour conciliator from DOLISA (in enterprises with
      no trade unions) or
      formally by a court
 •    Generally, it must go through informal dispute resolution first (i.e. Dispute
      Resolution Committee or labour conciliator)

                                                          4. Social Insurance

Old law:
•   An amount equal to 20% of wages: 15% employer and 5% employee

New Law:
•   From 2010, every 2 years employer must pay additional 1% to the pension and
    employees survivor's fund until the contribution ratio reaches 14% (i.e. the total
    contribution from the employers to the social insurance will be 18%).
•   From 1 January 2009, employers having 10 employees under indefinite and
    definite term contracts between 12 to 36 months must pay 1% of employee’s
    wages to the unemployment insurance fund.

                                            III - WORK PERMIT
                                                 1. Application File

•   Letter from the Employer
•   Curriculum Vitae (CV)
•   Legal Record (Record of Good Conducts/No Criminal Record)
•   Health Certificate
•   Copies of Professional Degree or 5-year’ Experience Certificate
•   3 colour photos; and
•   PLUS


Direct recruitment in Vietnam   - An application form for the position
                                - Evidence of recruitment advertisement

Internal transfer               - Appointment Letter

Representative of foreign NGO   - Operation Certificate of the NGO in Vietnam

Performing Contract             - Contract signed between Vietnamese party and
                                    foreign party

                                                            2. Exception

No working permit required:

•   Less than 3 months working;

•   Member or Owner of a Limited Liability Company (LLC);

•   Member of the BOM of a Joint Stock Company (JSC);

•   Offering/promoting services;

•   Solving emergency situation; and

•   Foreign Lawyers.

                        III - STRIKES AND RESOLUTION

1.   Definition:
     A strike means a temporary and voluntary cessation of work organized by the
     labour collective in order to resolve a collective labour dispute
     Cases: 387 (in 2006) – 541 (in 2007) – about 300 (3 early months of 2008)

2.   Conditions
        −    Objecting to Decision of the Labour Arbitration Council (“LAC”)
        −    Organized and led by the Executive Committee of the trade union or a
             registered Representative Group (“Organizer”)
        −    More than 50% (less than 300 employees) or 75% (more than 300
             employees) agree to labour strike

                           III - STRIKES AND RESOLUTION

3. Procedures
Organizer shall take opinion:

•   directly from employees (company with less than 300)
•   via their union group leader and deputy group leader (an Enterprise with 300 or
•   Organizer shall nominate (at least 5 days prior to the date of strike) a max. of 3
    people to present the decision on the strike to the employer

                         III - STRIKES AND RESOLUTION

4. Rights of employees

  a.   Any employee not participating in the strike shall be paid salary for
       cessation of work;

  a.   Employees participating in the strike shall not be paid salary

  b.   Trade union officals shall be entitle to 3 days off at least and be paid
       salary in order to participate in the work of resolving a collective labour

                        III - STRIKES AND RESOLUTION

5. Stay or Suspend

     The Prime Minister has the right to stay or suspend a strike in the following
     a. on a national holiday or in a place where an international conference is
        being held;
     b. at a company providing public utility products and services;
     c. at important national projects/works which are currently under
     d. at a time when an emergency situation has arisen due to a natural
        disaster or epidemic; and
     e. a strike which deviates from the objectives of the labour dispute.

                          III - STRIKES AND RESOLUTION

6. Unlawful Strikes

    a. Not coming from a collective labour dispute;
    b. not organising by employees working within the same company;
    c. held when a collective labour dispute remains unresolved or is currently
       being resolved;
    d. without collecting employees’ opinions or breach of procedures
    e. non-compliance with provisions of labour strike;
    f.   held at a company which strikes are prohibited; and
    g. there is a decision staying or suspending the strike.

                       III - STRIKES AND RESOLUTION

7. Compensation for loss
    a. Liability:
            Trade Union or
            Representative Group and employees participating
   b.   Time-limit: one year from date declared illegal by the court
   c.   Liability to determine loss to be compensated: employer
   d.   Amount of the Demand: not more than 3 months salary
   e.   Payment:
            from assets of the Trade Union or
            deduction of monthly salary (max. 30% a month)

                             V. Practical Steps To Be Taken

Internal Rules and Regulations
 •   Should ensure that any necessary changes are made to employee handbooks,
     internal rules and regulations and labour contracts to reflect the new Law

Dealing with Definite Term Contracts
 •   Internal procedures will also need to be reviewed to ensure fixed term contracts
     are not forgotten at term end and automatically converted into indefinite term

                        V. Practical Steps To Be Taken

Penalties for Non-Compliance with Labour Law

(Decree 113/2004/ND-CP (16/4/04))
 •   Ranging from VND 500,000 - 20,0000,000
 •   Leading to criminal prosecution and/or payment of compensation

      Mayer Brown JSM contacts in Vietnam

                             Fourteen years in Vietnam
                         Advising in Asia since 1863

          Ho Chi Minh City                   Hanoi

Contact   Dao Nguyen                         Hoang Anh Nguyen

Tel       848 822 8860                       844 825 9775

Fax       848 822 8864                       844 825 9776



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