2011 16 October

Change in Employment Contract

#Cambodia #Corporate and Commercial #Legal


A labor contract is a contract which establishes working relations in which a person (the “Employee”) performs work in return for remuneration, under the direction and authority of another person (the “Employer”). It may be made in writing or verbally, subject to whether it is an unfixed duration contract (“UDC”) or a fixed duration contract (“FDC”). The following may be considered by the employer to ascertain if this change in circumstances is applicable:

Change of Legal Status of the Employer

Assuming that an enterprise (“Enterprise”) employs a substantial number of employees under FDCs and/or UDCs, what happens to the current employment contract if ownership of the Enterprise is transferred by:

  • succession or inheritance;
  • sale;
  • merger;
  • transfer of funds; or
  • capital contribution.

What are the liabilities of the former employer (transferor) and new employer (transferee)? The employment contracts between the former employer and employees are transferred along with the rights to the Enterprise to the new employer. Legally the new employer must continue to implement the employment contracts.

The above statement is defined in Article 87 of the Labor Law and clarified by the Arbitration Council (“AC”) under its Arbitral Award № 03/11 dated 14 February 2011. Any termination of an employment contract by the former employer or new employer due to any of the above circumstances, constitutes termination of an employment contract without valid reason and entitles an employee to, among other things, compensation for termination and damages.

Change of Working Place of Employee

What happens if an employee is required to work in a location other than their current location? Is the employer entitled to do that?

An employment contract, as is the case with other contracts, is subject to the general rules of the contract law. Working conditions and remuneration are the main terms and conditions of the employment contract. Reference to the place of work is one of the main conditions in the employment contract, and the change of a workplace generally constitutes an amendment to the employment contract. In principle, the employer is not entitled to change the workplace without the consent of the employee.

However, as the employer has authority over an employee, the employer is entitled to transfer employees from one workplace to another provided that there is no:

(i)    deduction in the wages of employee;
(ii)    substantial change in the working time of the employee, for example, from day to night shifts or vice versa;
(iii)    requirement for the employee to exercise substantially different skills; and
(iv)    requirement for the employee to commute to a workplace that is located far from their current workplace.

The requirements above are adopted by the Arbitration Counsel in its award № 153 dated 21 January 2009. In the event that any of the above requirements are not met, the change of the workplace constitutes an amendment to the employment contract. In this case, the employee concerned may opt to accept or refuse this new workplace. The termination of this employment contract, due to the employee’s refusal to accept working at a new location constitutes a termination of employment contract without valid reason which entitles the employee to, among other things, compensation for termination and damages.

FDC becoming a UDC

As an FDC offers less protection to the employee than a UDC, the FDC is allowed to be executed with specific requirements.  What happens if any of the requirements of the FDC are not satisfied? The following FDC must be re-classified as a UDC:

–    FDC executed for more than 2 years;
–    Verbally executed FDC;
–    Total duration of the first FDC and its renewals or extensions exceed two years;
–    FDC is tacitly renewed without objection from either party; or
–    FDC without expiry date.

All rules applied to the UDC must be applied to the purported FDC above, particularly in terms of the procedures and benefits that are to be provided to employees upon termination.

Please note that the above is for your information only and may not be relied upon as legal advice. Please contact us for further clarification and advice should you have any specific questions: cambodia@dfdl.com

17 October 2011