2012 25 March

Internal labor regulations in Vietnam

#Corporate and Commercial #Legal #Vietnam

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We discuss below the need for employers in Vietnam to adopt and register internal labor regulations (“ILRs”). ILRs are a regulatory platform governing, amongst other things, issues relating to disciplinary breaches in the workplace. The work rules and procedures contained in an employer’s ILRs form part of the contractual relationship between employer and employee if they are duly registered.

The labor regulations in Vietnam are likely to undergo changes as a result of the expected enactment of a New Labor Code in May 2012.  As part of the legislative process, the Vietnamese National Assembly released several successive drafts of the proposed New Labor Code.  However, a brief comparison between current labor laws and those of the most recent draft does not reveal significant changes in the way employers are able to address breaches and disciplinary actions in the workplace.

The conditions and procedures pertaining to this area of the law are regarded as inflexible and difficult to implement for employers as this area of Vietnamese law in undisputedly considered as leaning in favor of the employees.


Legal requirements in respect of Internal Labor Regulations

ILRs are mandatory in Vietnam for companies employing ten employees or more.  ILRs may be created by the employer in line with and to reflect the specificities of the business and industry of the employer but these cannot be contrary to the Vietnamese labor legislation.

The employer must discuss the proposed ILRs with the executive committee of the relevant trade union, if there is one. Once employer has adopted ILRs it must register them with the relevant Department of Labor War Invalid and Social Affairs or the board of management of the export processing or industrial zone (where the employer is located in such a zone) (such relevant authority, the “Labor Authority”) before the ILRs become effective.

Why does an employer need to have registered ILRs?

The adoption and registration of ILRs should not only be seen as a mere legal requirement.  These are also an opportunity for the employer to establish clear rules and procedures applicable to its employees in the workplace.  ILRs which are appropriately registered are regarded as one of the most important documents regulating certain labor matters including disputes, especially dismissal, discipline, compensation, responsibility for damage, and various others.  In case of dispute, the ILRs would not only provide established procedures to address such situations in a predictable manner, but would also provide a legal platform for the employer to enforce the procedures contained in the law.  For instance, dismissal of an employee is possible only for reasons provided both at law and under the employer’s registered ILRs.

Contents of the ILRs

ILRs typically include provisions relating to:

(i)    Working hours and rest breaks;

(ii)    Rules and regulations applicable in the workplace;

(iii)    Occupational safety and hygiene in the workplace;

(iv)    Protection of assets and confidentiality of the technology and business secrets of the employer;

(v)    Conducts which are in breach of the employee’s duties, as well as the penalties imposed for such breaches; and

(vi)    Liability in case of damage.

The process of registration and approval of ILRs is regarded as time consuming and challenging, especially in circumstances when the employer incorporates into the ILRs provisions or policies from a parent company, such as provisions relating to business ethics, non-entitlement of overtime payment for senior or managerial positions and immediate dismissal, etc.  The Labor Authority generally carefully reviews the provisions of the ILRs and requests clarifications and sometimes amendments if the Labor Authority is of the opinion that the provisions are contrary to the Vietnamese labor regulations. Hence the employer may need to compromise and negotiate the extent of some of its proposed policies in the event that these are to found incompatible with the Vietnamese labor regulations by the Labor Authority.

Once the ILRs are registered, the employer may amend the ILRs but the employer must first discuss the proposed changes with the trade union (if any) and then re-register the amended ILRs with the Labor Authority.

Conclusion

We strongly recommend that companies contemplating establishing operations in Vietnam customize ILRs which are compatible to the business activities in which the company is involved, including the inclusion of labor-related policies which form part of the company at an international level. Doing so at an early stage will protect the company from undesirable and unexpected outcomes in a labor dispute.


For any questions in respect of IRLs and other Vietnam labor matters, please contact:

Jerome Buzenet
Partner
Deputy Managing Director, Vietnam
Jerome.Buzenet@dfdl.com

Vivianne E. Infante
Senior Legal Adviser
Vivianne.Infante@dfdl.com

Tran Thanh Nguyen
Legal Advisor
tran.nguyen@dfdl.com