2014 26 November

Lao PDR Labor Law: Important Update

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The National Assembly adopted an amended Labor Law (No. 43/NA, 24 December 2013) (“2013 Labor Law”) which was published in the Lao Gazette on 14 October 2014 and became effective on 29 October 2014. The 2013 Labor Law repeals the Labor Law (No. 06/NA, 27 December 2006) (“2006 Labor Law”) and applies to Lao and foreign employees working in the private sector or for international organizations, embassies and non-governmental organizations. The key changes are summarized below.

Quota of Foreign Employees.  The 2006 Labor Law allowed foreign employees in the workplace at a ratio of 10% for manual labor and 15% for skilled employees of the total workforce.  Per the 2013 Labor Law, the ratios have increased to 20% for manual labor workers and to 25% for skilled employees, however the calculation method has changed from total employees to the total number of Lao employees.  For large projects of the government lasting up to five years, the use of foreign labor is according to the agreement between the government and project owner.

Limitation on Foreign Employees in Lao PDR.  Foreign employees must meet several requirements to be employed in Lao PDR, including being over the age of 20 years, possessing skills and a professional level required for the position, no criminal record, and good health.  Foreign employees may work under a contract for 12 months which may be extended for 12 months up to a maximum of five years.  The 2013 Labor Law provides that extensions beyond 5 years for management level employees and specialists will be considered on a case-by-case basis.  Thus, exemptions from the limitation appear possible depending on the position and skills of the employee.  The Law further instructs that the basis for consideration of extension requests will be necessity, business operations, expansion of production, and the use of new technology.

Employment Contract Duration. Whereas the 2006 Labor Law did not set a time limit on fixed-term contracts or the consecutive renewal thereof, the 2013 Labor Law limits fixed-term employment contracts to a maximum term of three years.  Employees working according to fixed-term contracts, which are for a term of three years or which are consecutively renewed or extended for more than three years, will be considered as indefinite-term employees.  Parties to a fixed-term contract must provide at least 15 days advance notice of the intention to extend the fixed-term contract after its expiration and the new contract must be confirmed within 60 days of the expiration date of the first contract.  Non-compliance with these requirements will result in the contract being considered indefinite.

Working Hours, Shift Work, and Overtime. The prescribed maximum number of weekly working hours under the 2006 Labor Law, i.e., 48 hours per week (36 for employees working in dangerous sectors) did not change.  The amended law includes a new article for shift work in cases of production, business operations and services where continuous work is necessary.  Shifts, however, are limited to the same hours prescribed for working hours.  Further, overtime provisions are more precise with respect to the application of overtime to certain working hours, and an employee cannot be requested to work overtime for more than four consecutive days.  The overtime compensation amount applicable to an employee working on a weekly rest day or official holiday from 16:00 to 22:00 has increased to 300% of the employee’s hourly wage; and for working at night from 22:00 to 6:00 the next morning has increased to 350% of the employee’s hourly wage.

Termination of Contract.  The 2013 Labor Law did not change the reasons for which an employer is liable for a severance payment to an employee terminated by the employer (i.e., lack of skills, poor health, and redundancy). The amended law, however, provides additional grounds on which a resigning employee is entitled to resign with proper notice and claim severance pay, specifically:  inability to work due to poor health after receiving treatment (medical certificate required) even after being moved to another position; unresolved contractual issues raised to employer by the employee multiple times; workplace relocation causing inability to work (certification required); and molestation, harassment, or sexual harassment by employer or within the workplace which is ignored by employer. 

Severance Payment. The calculation of severance pay has been fixed to 10% of the previous month’s salary or wage multiplied by the number of years worked.  The calculation does not increase to 15% of monthly salary for employees having worked more than 3 years as under the 2006 Labor Law.

Health and Safety Measures.  Under the amended law, workplaces with 100 or less employees must appoint a person responsible for the safety and health of employees; workplaces with more than 100 employees must establish a health and safety unit or committee.  Remote workplaces with at least 50 employees must hire one medical staff; for less than 50 employees, the workplace must include a first aid kit and have a person trained in first aid on site.

Employees’ Representative. Pursuant to the 2006 Labor Law, employees’ representatives referred to a committee or group of persons representing employees rather than a single individual. The 2013 Labor Law defines an employees’ representative as an individual appointed by the employees.  Workplaces with 10 to 50 employees must have an employees’ representative; workplaces with 51 to 100 employees must appoint two representatives, and one additional representative for every further 100 employees.

Collective Bargaining.  The 2013 Labor Law includes a definition of collective bargaining and allows collective labor contracts which the 2006 Labor Law did not cover.   Collective labor agreements must be reviewed by the Labor Administration Agency and registered with the appropriate authority.

Above are several of the key changes provided in the 2013 Labor Law.  Additional new and revised conditions apply to employment relationships, including with respect to personal leave, maternity leave, payment of salary, probation periods, and employment termination.

For further information and advice on the 2013 Labor Law, employment matters, and revisions to your employment contracts and other human resources materials to incorporate necessary revisions based on the amended law, please contact our advisers: Danyel Thomson, Rupert Haw or Senesakoune Sihanouvong