6 New Features of the 2019 Labor Code

Introduction

The following 6 new features of the 2019 Labor Code are expected to positively influence the development and improvement of labor and employment relationships in a more harmonious direction.

In fact, after 7-years of anticipation, the birth of the 2019 Labor Code and its effective date of January 1, 2021, has brought forth many positive changes, transparency, and updates to accommodate practical issues. Such as:

• Employment contracts
• Salaries, bonuses and benefits of employees”
• Work and break times
• Workplace Discipline
• Employment contract termination
• Dispute Resolution

6 new points of the 2019 Labor Code

Starting here, CNC analyzes the 6 new features of Labor Code 2019, sequentially, to ensure that businesses (employers), employees, and state management agencies have specific, timely, and accurate information.

First, about the Employment contract

Labor Code 2019 includes 5 new features related to employment contracts, including[1]:

• The state’s approval and recognition of labor relations in practice does not depend on the form of expression
• The approval of the forms of employment contracts is based on electronic data
• Elimination of seasonal labor contracts
• Probation is not applicable to short-term employment contracts (less than 1 month)
• Allowing the parties to suspend the employment contract

5 important changes in employment contracts

For labor relations

In Article 13, the 2019 Labor Code stipulates “An agreement between two parties under a different title but with content reflecting remunerated work, wages, and management, direction and supervision by one party is considered to be an employment contract.”

Thus, any relationship satisfies three elements – First, the agreement on employment; Second, the payment of salary, and third, the supervision of work – that constitute an employment relationship.

3 elements constituting labor and employment relations

Therefore, the 2019 Labor Code practically:

• Admits and expands the scope of application to encompass all practical labor relations to protect the rights and interests of the parties.
• Restrains other relationships of similar natures (such as service relationships) between service users and service providers.

Form of contracts

With the development of science and technology, “An employment contract concluded through electronic means in the form of a data message in accordance with the law on electronic transactions carries the same validity as a written employment contract.”[2]

Effective January 1, 2021, confirmation of employment terms by email is considered as valid as a written document (signed by each party – the employer and the employee).

Exclusion of seasonal labor contracts

According to Article 20 of Labor Code 2019 from January 1, 2021, onward, there are only two types of labor contracts: Permanent employment contracts and fixed employment contracts. (The maximum duration shall not exceed 36 months).

Therefore, the 2019 Labor Code no longer uses the nature of the work (fixed, temporary, or seasonal work) as a criterion for classifying labor contracts. The classification of employment contracts according to the 2019 Labor Code is solely based on the “time” criterion. This is a significant difference in mindset between Labor Code 2019 and Labor Code 2012.

In fact, the simplification of the types of labor contracts under Labor Code 2019 will make it easier for employers and employees to determine the contract type and ascertain the rights and obligations of both parties, as well as for state management agencies, including tax and insurance responsibilities, etc.

Types of employment contracts according to the Labor Code 2019

Temporary suspension of employment contracts

To comply with the provisions of law, the 2019 Labor Code has added 3 instances in which an employment contract might be temporarily suspended, including[3]:

• The employee is appointed as the manager of a single-member limited liability company in which the State owns 100-percent (100-%) of the charter capital.
• The employee is authorized to exercise the rights and responsibilities of the state-owned representative with respect to the state-owned capital in the enterprise.
• The employee is authorized to exercise the rights and responsibilities of the enterprise with respect to the capital invested by the enterprise in another enterprise.

3 cases of temporary suspension of employment contracts

Probation

One of the notable points of the 2019 Labor Code is the regulations on probation. Accordingly, in Article 25, the 2019 Labor Code stipulates:

• Probation shall not be applied to fixed employment contracts with a duration of less than 1 month.
• Duration of the probation might be extended up to 180 days for enterprise executives.
• Permission for parties to negotiate the content of the probation agreement within the employment contract or to sign a probation contract

3 new points regarding probation

Among the three fundamental changes in probation of the 2019 Labor Code, the issue of allowing employers to extend the probationary period to 180 days for enterprise executives is the issue of greatest concern.

Accordingly, the 2019 Labor Code continues to maintain the viewpoint that only one probationary period shall be applied in the probation contract and an extension shall not be made. This is due in fact that extending the probationary period to 180 days (for managerial positions of enterprises) significantly affect the rights and benefits of employees, because it is almost a common practice that the salary during the probationary period will be lower than the salary when signing an official contract for the same job.

In addition, the fact that the 2019 Labor Code stipulates the extension of the probation period up to 180 days is applied only to employees of managerial positions and could result in certain degree of discrimination in the treatment of employees of different positions.

For instance, there is a distinction between managerial positions of enterprises and technical positions that participate in important transportation and infrastructure projects such as nuclear energy, renewable energy, underground construction specialists, and experts in areas like finance, securities, banking, etc.

The aforementioned positions also require meticulous and thorough consideration prior to the engagement of an official employment relationship. However, the 180-day probationary period could not be applied to these cases similar to how it is applied to managerial positions of enterprises.

Different in probation period between management positions and other positions

Furthermore, the management of small and micro businesses (for example, a business with less than 10 people) differs significantly from the management of medium and large businesses (for example, 100 or more people). Therefore, without a clear basis for determination, the rigid application of the 180-day probationary period for managerial positions of enterprises might result in certain inequities.

Finally, insurance and bonus regimes (joining bonus, 13th month bonus or other types of bonuses) of employees shall also be affected to a certain extent upon the probationary period being extended.

Second, regarding salaries, bonuses and benefits of employees

With the perfection and protection of employees’ legitimate benefits in mind, the 2019 Labor Code has included many regulations to clarify salaries, bonuses, and welfare regimes for employees.

Such as:

• Employers shall not force employees to spend their earnings on the goods and/or services affiliated with the employers (See Article 94.2, Labor Code 2019)
• Employers shall give Salary Statements to employees for each Salary payment (See Article 95.3, Labor Code 2019)
• Employers shall bear the cost of opening the bank accounts and transaction fees associated with bank transfer salary payments (See Article 96.2, Labor Code 2019)
• Employers shall pay interest for late salary payments (See Article 97.4, Labor Code 2019)
• Payment of Salary in the event of work stoppages due to electricity or water issues in which the employer is not at fault, or due to a natural disaster, fire, major epidemic, hostility, relocation requested by a competent authority, or for economic reasons (See Article 99.3, Labor Code 2019)
• Full payment of salary for the two days off on the National Holiday of September 2nd (Article 112.1(đ), Labor Code 2019)
• Female employees for arduous jobs while pregnant could have their daily work hours decreased by 1 hour while continuing to receive full salary until the end of the child-rearing period for children under 12 months of age (Article 137.2, Labor Code 2019).

Improve social benefits for workers

Third, Work and Break Times

The 2019 Labor Code also has 8 new points related to working hours and rest hours of employees, focusing on the following groups of issues:

• Work hours
• Protecting expectant female workers, and
• Overtime
• Holiday on September 2nd
• Personal leave with full salary
• Annual leave

As detailed below, the 8 new points pertaining to working and rest hours of the 2019 Labor Code focus on the update and clarification of practical requirements. With the aim of ensuring both the employers’ flexibility and the legitimate rights and interests of employees, particularly in terms of health and life.

To be specific:

Employers are responsible for determining work hours, however, employees must be notified of the work hours.

The 2019 Labor Code has also added stipulations that entitle employers to determine the working hours based on a daily or a weekly basis. However, the employee must be notified of the work hours so that work can be performed
(See Article 105.2 of the 2019 Labor Code).

Employers are also given the flexibility to determine the work hours for especially arduous, hazardous, and dangerous jobs.

Instead of the previous rigid regulations on the maximum number of work hours (6 hours a day) for especially arduous, hazardous, and dangerous jobs, the 2019 Labor Code now stipulates that employers are responsible for ensuring limits on work time and exposure to dangerous and harmful factors in accordance with national technical regulations and relevant laws.
(Refer to Article 105.3 of the 2019 Labor Code)

Additionally, there are 5 situations included in which employers are allowed to request employees to work overtime, provided that the total overtime work hours do not exceed 300 hours per year.

(See Article 107.3, 2019 Labor Code)

5 cases where employees are allowed to work overtime

In some exceptional instances, employees also have the right to refuse to work overtime.

For instance, in the situation of the two newly added cases of the 2019 Labor Code that allow employers to require employees to work overtime, including cases of (1) implementing mobilization and mobilization orders to ensure national defense and security obligations; or (2) to ensure human life and property of agencies, organizations and individuals in the prevention and rectification of the consequences of natural disasters, fires, dangerous epidemics, and other disasters.
(See Article 108, Labor Code 2019). The employees still have the right to refuse to comply with overtime requests if the above jobs pose a direct conflict of interest affecting the employee’s life or health.

Addition of situations in which employees could be required to work overtime

Employees will have 2 days off for the National Holiday on September 2nd

Two instances in which employees are allowed to take personal leave and receive full salary

From January 1, 2019, employees are entitled to personal leave with full salary when:

In 2 instances, employees were allowed personal leave and received full salary

Better protection for female workers performing arduous jobs while pregnant

Previously, to be transferred to light duty or reduce daily work hours by one hour while continuing to receive full salary, female employees needed to meet two conditions:

First, they had already be performing strenuous jobs.

Second, they had to be pregnant for at least seven months.

Now, Article 137.1 of the 2019 Labor Code has eliminated the latter condition, thereby better accommodating female employees during pregnancy and protecting the woman’s motherhood, as well as avoiding adverse effects to the unborn child.

This means that at any time during pregnancy, a female worker may request to be transferred to light duty or have a one-hour reduction of daily work hours and continue to receive full salary – this arrangement is to be maintained until the child reaches 12 months of age.

The 2019 Labor Code better protects female employees during pregnancy

 

A new provision in the 2019 Labor Code allows employers and employees to agree on taking annual leave multiple times a year or group them into once every 3 years.

New ideas about the annual leave agreement of the 2019 Labor Code

Fourth, Workplace discipline

Workplace discipline has a significant impact on the benefits of employees, and poor administration of workplace discipline can lead to complicated legal issues.

Therefore, the 2019 Labor Code has made positive, clear, and detailed changes to ensure the legitimate benefits of employees throughout the process of administering workplace discipline.

Specifically, the 2019 Labor Code focuses on solving 3 core issues, directly and thoroughly related to the employee disciplinary process, including:

• Firstly, defining the foundation and basis to evaluate whether a violation of workplace discipline has occurred or not.
• Secondly, specifying the foundational regulations for application.
• Thirdly, determining the form, content, process, and penalties of workplace discipline

Changes of the Labor Code 2019 on Labor Discipline

Specifically, the 2019 Labor Code has:

Changes to the Definition of “Workplace discipline”

According to the 2019 Labor Code, Article 117, “Workplace discipline comprises provisions in the internal labor regulations on the compliance in respect of time, technology, production, and business management that are imposed by the employer and prescribed by law.” The addition of the phrase “and prescribed by law” in the concept of “workplace discipline” leads to two different interpretations:

First, the scope of Workplace Discipline has been expanded, and is not only limited to the regulations of the Internal Labor Regulations but also extends to the provisions of law.

Second, the Internal Labor Regulations must be consistent with the provision of law to ensure that an Internal Labor Regulation exists and that the execution of workplace discipline does not cause unfair difficulties and advantages to employees.

These two interpretations are not contradictory but complementary, supplementing for and explaining each other, in alignment with the diversity and richness of reality.

Definition of Labor Discipline according to the 2019 Labor Code

Specify requirements on labor regulations

In Chapter VIII of the 2019 Labor Code, explicit stipulations are made with respect to internal labor regulations regarding (1) obligations of enterprises in issuing internal labor regulations, (2) requirement to be in writing in case of enterprises with 10 or more employees and (3) mandatory compliance with the registration procedures. Accordingly:

Regulations on labor regulations according to the Labor Code 2019

Additional provisions regarding key content in labor regulations

Labor regulations issued by the employer must not contravene the law and must ensure the availability of the key content as prescribed by the Labor Code.

Compared with the 2012 Labor Code, the 2019 Labor Code includes 4 new features that must be included in the labor regulations, namely:

• Prevention and confrontation of sexual harassment in the workplace; order and procedures for addressing acts of sexual harassment in the workplace;
• Managing temporary transfers of employees to other positions/work not specified in the employment contract.
• Person with authority to manage workplace discipline.
• Labor regulations violation by employees and categories of workplace discipline

4 key contents in the Labor Regulations have been supplemented

Under the current regulations, employees ought to have more clarity and details in their regulations, ensuring the spirit of openness, transparency, respect, and equality in employment. Prominent is the regulation on issues related to sexual harassment, which is also one of the many instances in which employers could potentially terminate employees.

Clarifying regulations on labor discipline

The 2019 Labor Code also clarifies regulations on labor discipline in two primary parts, which are: (1) prohibited acts upon the administration of workplace discipline and (2) principles and procedures for administering workplace discipline. Accordingly:

Prohibited acts upon administration of workplace discipline:

Although provisions prohibiting violations of health, honor, life, reputation, and dignity of employees have been recognized and guaranteed by the Civil Code 2015.  The 2019 Labor Code further supplements and clarifies this issue to ensure employees’ basic rights.

For example, the behavior of imposing fines or sanctioning salaries rather than conducting disciplinary action against employees is now listed as a prohibited act. At the same time, employers are not allowed to impose labor discipline when the employee’s violation is not specified, agreed upon, or regulated by labor laws.

Prohibited acts when handling labor discipline

Prohibited acts when handling workplace discipline

1. Harming the employee’s health, life, honor or dignity.
2. Applying monetary fines or deducting the employee’s salary.
3. Imposing a disciplinary measure against an employee for a violation which is not stipulated in the internal labor regulations or employment contract or labor laws.

Regarding workplace discipline for individuals under 15 years old:

Currently, disciplinary measures for individuals under 15 years old must involve a legal representative[4]. This regulation replaces the previous regulation that required disciplinary measures for individuals under 18 years old, which necessitated the involvement of the father, mother, or legal representative.

Disciplinary measures for minors

Fifth, unilateral termination of the Employment Contract without prior notice

Under the 2012 Labor Code, the termination of an employment contract must comply with the legal order and procedures, appropriate to each type of employment contract, and comply with the obligations to give advance notice[5].

The 2019 Labor Code allows employees to terminate labor contracts without prior notice in 7 instances, including[6]:

• Not being assigned to the agreed work;
• Not being paid in full or not paid on time;
• Being abused by the employer or forced labor;
• Being sexually harassed at work;
• Inability to continue working due to pregnancy
• Reaching Retirement age according to regulations;
• The employer provides dishonest information.

7 cases where employees were allowed to terminate labor contracts without prior notice

Some opinions suggest that allowing employees to terminate contracts without prior notice, as stipulated, may lead to social instability and fail to provide necessary stability for businesses, impeding productivity and operations. Not only that, allowing termination of labor contracts without prior notice will lead to views supporting breaking commitments and agreements, creating conditions for employees to change jobs without any sanctions.

CNC argues that such views are not reasonable and lack clear foundations. In fact, in market relations, labor is a service, and employees are given freedom of choice. It is ultimately the will of the employee that decides to whom they should render their service, for how long, and under what conditions.

Meanwhile, the above-mentioned acts would likely have either detrimental effects on employees or threaten the health and dignity of employees. Hence, employees need to be granted the right to escape from the undertaken commitments.

Sixth, labor dispute resolution

Finally, the provisions regarding the resolution of labor disputes. The 2019 Labor Code introduced several positive and groundbreaking aspects for resolving labor disputes, specifically in the following six characteristics:

Clarifying the concept of Labor Disputes

For the first time, the elements constituting labor disputes and the fundamental characteristics of a labor dispute were generalized.

Specifically, Article 179 of the 2019 Labor Code stipulates: “A labor dispute is defined as a dispute over rights, obligations and interests among the parties during the establishment, execution or termination of employment relations; a dispute between the representative organizations of employees; a dispute over a relationship that is directly relevant to the employment relationship”

Content of labor disputes

With this definition, the scope of labor disputes is nearly expanded to the utmost to include all issues related to labor and employment under the regulation of a single legal document, thereby ensuring uniformity in the application of law.

Further, the types of labor disputes are divided and discussed in more detail, depending on the role of the participant (employees and employee representatives), they could be divided into: (1) Individual labor disputes and (2) Collective labor disputes.

Accordingly, disputes involving employees may be classified as an individual labor dispute. To be specific:

Types of individual labor disputes

* Note: CNC uses the term “employee” to refer collectively to various contexts.

Similarly, any disputes related to labor representatives can be considered collective labor disputes. Specifically:

Collective labor dispute

The Labor Code 2019’s classification of labor disputes also affords the parties and management agencies to have a basis for determining the authority to resolve disputes.

However, the criteria for classifying labor disputes are not clearly defined, which might pose challenges in practice to the identification of the nature of disputes, the competent authority, and the applicable legal sources/resources.

Expanding the Jurisdiction of the Labor Arbitral Tribunal

Previously only Labor Conciliators and People’s Courts possessed the authority to resolve individual labor disputes, however, this jurisdiction has now been extended to the Labor Arbitral Tribunal.

Accordingly, the disputing parties have the right to request the Labor Arbitral Tribunal to resolve disputes as prescribed by law. This is considered a big step forward in resolving disputes between the parties.

Jurisdiction over individual labor disputes of the Labor Arbitral Tribunal

The Labor Arbitral Tribunal is added as a method for resolving individual labor disputes, providing parties with more opportunities to choose an effective dispute resolution body for their issues.

Quantity, operating methods, and jurisdiction of the Labor Arbitral Tribunal

In terms of quantity, the 2019 Labor Code stipulates that the number of Arbitrators of the Labor Arbitral Tribunal increases significantly, from a maximum of 7 people – according to the 2012 Labor Code – to at least 15 people.

Labor Arbitral Tribunals is composed of 3 equally nominated bodies, including (1) a Labor agency under the provincial People’s Committee; (2) a Provincial Labor Union; (3) a Representative organization of employers within the province.

Additional instances in which conciliation procedures are not required

By allowing labor disputes between “leased employees and employers” without having to go through conciliation procedures, the 2019 Labor Code recognizes 6 instances of labor dispute resolution, without mediation, including:

Labor disputes which do not require conciliations

Additional Limitations on Strike Action

Currently, workers are only allowed to strike in two instances:

Cases where workers are allowed to strike

Not only that, strikes only apply in cases of labor disputes pertaining to benefits[7]. This might not be a new regulation, but the 2019 Labor Code clarifies the mechanism, subjects, conditions, and circumstances for which workers may strike. Accordingly:

Regulations on strikes according to the 2019 Labor Code

With this regulation, the probability of strikes occurring declines, and if any strike fails to comply with the prescribed order and procedures, it will be considered illegal.

Contact

CNC is eager to receive and respond to any comments or opinions from our readers to further perfect the information contained in the article entitled: “6 New Points of the 2019 Labor Code” as well as any other CNC articles.

Contact us via email or phone number as listed below:

 

Nguyen Thi Kim Ngan | Partner

T: (+84-28) 6276 9900

E: ngan.nguyen@cnccounsel.com

 

CNC| A Boutique Property Law Firm

The Sun Avenue, 28 Mai Chi Tho, An Phu Ward, District 2, Ho Chi Minh City, Vietnam

T: (+84-28) 6276 9900 | Hotline: (+84) 916 545 618

cnccounsel.com | contact@cnccounsel.com

 

[1] See Article 13, Article 14, Article 20, Article 24, Labor Code 2019

[2] Article 14, Labor Code 2019.

[3] See Article 30.1of Labor Code 2019.

[4] Article 122, Labor Code 2019.

[5] See Article 37, Labor Code 2012.

[6] See Article 35.2, Labor Code 2019.

[7] Article 195.2, Labor Code 2019.