2018 27 September

ASEAN Employment Legal Update 2018 Q.3

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DFDL’s Employment Practice Group is dedicated to advising clients on employment and labor issues and preparing human resources documentation that is compliant with local laws.  Our employment team’s in-depth knowledge of the law and practices in the countries where we operate allows us to provide specialized, tailored, and practical advice on issues that arise in employment relationships. Our Head of the Regional Employment Practice Group is Danyel Thomson, who is now based in Bangkok.  Danyel has been with DFDL for ten years and previously worked in our Laos and Myanmar offices. This legal update is to advise you on important legislative developments and employment issues in the region.

Cambodia

EMPLOYMENT SECTOR

Law on Amendments of Article 87(C), Articles 89, 90, 91, 94, 110,120 and 122 of the Cambodian Labor Law dated 13 March 1997, dated 26 June 2018 (“Amendment Law”)

The Amendment Law has introduced significant changes to the 1997 Labor Law, in particular to provisions relating to termination and compensation. These include:

1. New Article 87: Under this new provision, requirements on “damages” and “compensation in lieu of notice” are not applicable in the case of enterprise closure, which must be undertaken in accordance with the conditions to be determined by a forthcoming Prakas from the Ministry of Labor and Vocational Training (“MLVT”).

Under the old Article 87, the closure of an enterprise, except for reasons of force majeure, did not release an employer from its obligations under Section III of the 1997 Labor Law including, among others, prior notice of termination. It is not crystal clear whether the new Article 87 will entirely remove the requirement to provide prior notice to employees about termination due to closure of an enterprise; and

2. New Article 89: Indemnity for dismissal is amended as “seniority compensation”. The amount of seniority compensation is 15 days per year to be paid every six months to employees.

In the event that the employment contract is terminated by an employer in accordance with the Labor Law, the employee is entitled to the remaining amount of seniority compensation (from one month up to six months), which will be equal to seven days of wages and fringe benefits. If an employee commits serious misconduct, he or she will not be entitled to seniority compensation.

The MLVT issued Prakas 443 on the Payment of Seniority Compensation (“Prakas 443”) on 21 September 2018 to clarify the scope and enforcement of the relevant provisions in relation to the above seniority compensation. The most significant implications of Prakas 443 are as follows:

(a) for new seniority compensation from 2019 onwards, employers are required to pay seniority compensation equal to 7.5 days of wages and fringe benefits in June and December of each year;

(b) in addition, for the entitlement to seniority compensation prior to 2019, employers are required to back pay the seniority compensation equal to 15 days of total seniority compensation for employees of textile, garment and footwear manufacturing sectors and 7.5 days of total seniority compensation for employees of non-textile, garment and footwear manufacturing sectors in June and December of each year. The amount of back pay will not exceed six months of the average base wages for each of the relevant years.

However, employees who resign or are dismissed on the ground of serious misconduct will not be entitled to any back pay of remaining seniority compensations.

Given that the Amendment Law and Prakas 443 have been issued quite recently, the calculation and structure of payment of seniority compensation are currently the topic of on-going discussions among the private sector.

INDUSTRIAL RELATIONS SECTOR

Prakas No. 300 on Procedures for Payment of Union Contribution Fees and Service Agency Fees, dated 2 July 2018, issued by the Ministry of Labor and Vocational Training

Employers must deduct a union contribution fee from employees’ wages on the condition that there is consent from the relevant employees. The contribution fees must then be transferred to the relevant union duly registered with the MLVT.

Of note, employers are prohibited from paying union contribution fees on behalf of the employees.

As a procedure, unions must inform employers about the level of union contribution fees at least ten days beforehand, and enclosed with written agreements from the employees concerned.

Employees have the right to reject the deduction of union contribution fees from their wages and must file a rejection letter at least 15 days before payday. After receiving the rejection letter, the union must provide a copy of the same to the employer at least five days before payday.

Employers are required to retain certain information with respect to deductions of union contribution fees from employees’ wages: (1) employee agreement dates; (2) dates and amount of deductions; and (3) transfer dates of the union contribution fees to the unions.

Prakas No. 302 on the Shop Steward in Enterprises, dated 2 July 2018, issued by the Ministry of Labor and Vocational Training

Enterprises with a minimum of eight employees must have a shop steward and assistant shop steward, each with a term of two years. The election of the shop steward and assistant shop steward is considered valid when the number of voters is at least equal to half of the employees registered for the vote. In the event that the turnout rate of voters is less than half of those registered to vote, the employer must arrange a new election within 15 days after the first election.

Enterprises with branch offices must organize a separate election for shop stewards at branch offices with eight or more employees.

Of note, Prakas 302 permits employees to remove a shop steward before the expiry of his/her term if the shop steward fails to fulfill his/her duties. The removal must be undertaken via an election in the same manner as the election of the shop stewards. Prakas 302 does not specify whether employers must also be responsible for organizing an election to remove a shop steward in the same manner as the employer is  responsible for the election to appoint them.  

Finally, following the issuance of Prakas 302, Prakas 286 dated 5 November 2011 on Shop Stewards is hereby nullified.

Lao PDR

Ministry of Posts and Telecommunications Guidelines Shed Light and Clarity on the Lao PDR’s Data Protection Regime

In May 2017, the National Assembly of the Lao PDR enacted the Law on the Protection of Electronic Data (No. 25/NA, 12 May 2017) (the “E-Data Protection Law”). The E-Data Protection Law was officially published in the Official Gazette of the Ministry of Justice on 5 October 2017, bringing the provisions of the E-Data Protection Law into effect from the 20th of October 2017.

In August 2018, to clarify the requirements under the E-Data Protection Law, the Ministry of Posts and Telecommunications (the regulating authority under the E-Data Protection Law) issued the Guidelines on the Implementation of the Law on Electronic Data Protection (No. 2126/MoPTC, 8 August 2018) (the “E-Data Protection Guidelines“).

The E-Data Protection Guidelines provide greater clarity on the classification of electronic data, the compliance obligations of data managers, and rules associated with regulated data protection activities. These Guidelines cover: (i) data collection; (ii) electronic data inspection; (iii) saving/storing of electronic data; (iv) maintaining electronic data; (v) using and disseminating electronic data; (vi) transmission and transfer of electronic data; (vii) access to electronic data; (viii) amending and updating electronic data; and (ix) deletion of electronic data.

Articles 8 – 10 of the E-Data Protection Law classifies electronic data under two broad categories being: (i) General Data; and (ii) Specific Data. Subject to the classification of electronic data, different compliance obligations are imposed on the “data manager” with respect to such data. The E-Data Protection Guidelines seek to narrow the broad definitions by providing examples of types of electronic data that fall into each category.

Under an employer – employee relationship, the employer in collecting, storing, maintaining, using, transferring and deleting employee data, is subject to the obligations imposed on “data managers” under the E-Data Protection Law. With the digital revolution reaching the Lao PDR, and in the backdrop of the EU General Data Protection Regulation, it is crucial for companies, from a human resource compliance perspective, to be aware of the new rules and regulations now associated with electronic data.

Myanmar

Draft Settlement of Labor Disputes Law

In July 2018, the Myanmar Government issued a Draft Second Amendment Bill on the Settlement of Labor Disputes Law. Once finalized and passed, the Draft Amendment will update the Settlement of Labor Disputes Law (2012) which has been identified as one of the key labor laws to be featured in legislative reform efforts. 

While certain provisions can be seen as an improvement, the Draft Amendment contains concerning revisions with respect to the penalty provisions for breach of the law.  Of note is the possibility of imprisonment for breaches, and a lack of limitations on fines in the event of any breach. As criminal sanctions should be reserved for egregious failures to observe statutory obligations, their inclusion here in the context of penalizing non-compliance in a dispute resolution process is misplaced. Furthermore, these criminal sanctions under the Draft Amendment could be unfairly imposed on an individual person who should not be held liable within an entity, as opposed to more properly on the juristic person as the “employer”. Additional concerns which have been raised through the public consult process include a lack of clarity on appeal rights, as well as the absence of the crucial element of dispute resolution legislation whereby the parties must agree to mandatory and binding arbitration prior to such a process becoming enforceable.

We will continue to monitor the development of the Draft Amendment and eventual passing of an amended labor disputes settlement law in Myanmar.

Philippines – Ocampo and Suralvo Law Offices

The New Philippines Occupational Safety and Health Standards Law 

On 17 August 2018, the President of the Philippines signed Republic Act No. 11058 (“R.A. 11058”) which strengthens compliance with occupational safety and health (“OSH”) standards.

R.A. 11058 requires employers, contractors, subcontractors, or any person who manages, controls, and supervises work to provide a safe and hazard-free workplace, provide comprehensive work safety instructions, and comply with OSH standards such as the provision of protective equipment and safety devices. The law also penalizes certain acts that are in violation of OSH standards. Before the passing of this law, policies on OSH standards only came through periodic rules or orders issued by the Department of Labor and Employment (the “DOLE”) as the Labor Code did not penalize OSH standards violations.

The act covers all establishments, projects, sites (including those located within special economic zones), and all other places where work is performed across all branches of economic activity, apart from the public sector.

The law imposes heavy fines on violators. Below is a summary of prohibited acts under the law and the corresponding penalties.

 
Prohibited Acts Penalty
Willful failure or refusal by an employer, contractor, or subcontractor to comply with the required OSH standards or with a compliance order issued by the Secretary of Labor or an authorized representative. An administrative fine not exceeding PHP 100,000 (approximately USD 1,900) per day until the violation is corrected, counted from the date that the employer or contractor is notified of the violation or the date the compliance order is duly served on the employer.
Repeated obstruction, delay, or refusal to provide the Secretary of Labor access to the covered workplace or refusal to provide or allow access to relevant records and documents or obstruct the conduct of an investigation into any element necessary to determine compliance with OSH standards. A maximum PHP 100,000 (approximately USD 1,900) administrative fine separate from the daily fine imposed above.
Misrepresentation in relation to adherence to OSH standards.
Taking retaliatory measures against any worker who has given information related to the inspection being conducted.

The amount of the fine to be levied will depend on the frequency or gravity of the violation committed or the damage caused. The law prescribes that the maximum amount will be imposed only when the violation exposes the workers to a risk of death, serious injury, or serious illness. The fines collected will be used for the operation of OSH initiatives, including training and education programs. 

The law also provides that workers may file claims for compensation benefit arising from work-related disability or death. Such claims will be processed independently of the finding of fault, gross negligence, or bad faith by the employer in a proceeding instituted for the purpose.

R.A. 11058 is not solely about penalizing non-compliant employers. To balance the penalty provisions, the law requires the DOLE to establish a package of incentives to be given to qualified employers to recognize their efforts towards ensuring compliance with the OSHS and general labor standards such as OSH training packages, additional protective equipment, technical guidance, recognition awards, and other similar incentives.

The law recognizes that while OSH is mainly the obligation of the employer, workers are not without any responsibility.  Both employers and workers are required to comply with OSH standards, including training, use of PPEs, and observation of steps to be taken during emergencies.  Employers are required to allow workers to actively participate in the process of organizing and planning the safety and health program.  On the other hand, workers are required to participate in ensuring compliance with OSH standards in the workplace, such as reporting any work hazard.

The primary government agency tasked with enforcing the law is the DOLE.  It is required to institute a coordination mechanism with other government agencies. These government agencies are mandated to regularly convene in order to monitor the effective implementation of the law, and the related programs and projects established to prevent and eliminate incidences of injury, sickness, or death in all workplaces.

The law became effective on 6 September 2018.

Vietnam

Increases to Vietnam’s basic salary

Decree 72/2018/ND-CP (“Decree 72”) on the basic monthly salary (also known as the general minimum salary) for public officials, public employees, and armed forces personnel was passed by the Government of Vietnam on 15 May 2018 and took effect from 1 July 2018. Decree 72 replaced Decree 47/2017/ND-CP dated 24 April 2017 on the basic monthly salary for public officials, public employees and armed forces personnel ( “Public workers”). From 1 July 2018, the new basic monthly salary increased by approximately 6.92% (VND 90,000) from VND 1,300,000 to VND 1,390,000.

Please refer to the table below for the changes in the rate of basic monthly salary over the past years:

Applicable time

Basic monthly salary (VND)

Legal basis
From 01/10/2004 to the end of 9/2005 290,000 Decree No. 203/2004/ND-CP
From 01/10/2005 to the end of 9/2006 350,000 Decree No. 118/2005/ND-CP
From 01/10/2006 to the end of 12/2007 450,000 Decree No. 94/2006/ND-CP
From  01/01/2008 to the end of 4/2008 540,000 Decree No. 166/2007/ND-CP 
From  01/05/2009 to the end of 4/2009 650,000 Decree No. 33/2009/ND-CP
From  01/05/2010 to the end of 4/2011 730,000 Decree No. 28/2010/ND-CP
From  01/05/2011 to the end of 4/2012 830,000 Decree No. 22/2011/ND-CP
From  01/05/2012 to the end of 6/2013 1,050,000 Decree No. 31/2012/ND-CP
From  01/07/2013 to the end of 4/2016 1,150,000 Decree No. 66/2013/ND-CP
From  01/05/2016 to the end of 6/2017 1,210,000 Decree No. 47/2016/ND-CP
From 01/07/2017 to the end of 6/2018 1,300,000 Decree No. 47/2017/ND-CP
From 01/07/2018 1,390,000 Decree No. 72/2018/ND-CP

The basic monthly salary operates as the foundation to calculate levels of salaries and allowances, as well as other benefits and subsistence payments that are available to Public workers. It also determines the maximum contribution levels to the social insurance fund and social insurance benefits for all employees, even those in private entities. In terms of maximum contribution levels to the compulsory social insurance fund, under Vietnamese law, social insurance and health insurance contributions are capped at 20 times the basic monthly salary. Below is the maximum possible contribution for each type of compulsory insurance that is part of the social insurance fund:

 
Type of compulsory Insurances The maximum contribution over the years (VND million/month)
Applicable from 1 Jan 2018 to 30 June 2018 Applicable from 1 July 2018
Social insurance,  health and unemployment insurance = 20 x 1,3 = 2,6 = 20 x 1,39 = 27,8

 

In terms of social insurance benefits, the basic monthly salary is relevant to the allowance rates available for all employees. Below are several outstanding benefits available for employees under the Law on Insurance:

No. Benefits Allowance rate
1. Convalescence and health rehabilitation after sickness Equal to 30% of the basic monthly salary for each day
2. Lump-sum allowance upon childbirth or child adoption

Equal to 2 times the basic monthly salary for each child for female employees giving birth or employees adopting a child under six months of age

Equal to 2 times the basic monthly salary for each child in the month of childbirth for male employees with a wife giving birth or employees adopting a child under six months of age

3. Convalescence and health rehabilitation after the maternity leave period Equal to 30% of the basic monthly salary for each day
4. Lump-sum allowance upon death due to a labor accident or occupational diseases Equal to 36 times the basic monthly salary for employees’ relatives who die of a labor accident or an occupational disease while working, or die during the period of first-time medical treatment due to a labor accident or an occupational disease
5. Funeral allowance Equal to 10 times the basic monthly salary

DFDL Contact

Danyel Thomson

Head of Regional Employment Practice Group

Danyel.Thomson@dfdl.com


The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.


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