Proposed Amendments To The Labor Code: The Remaining Issues
By Vu Xuan Tien (*)
The amended draft Labor Code has gone through a lot of debates and consultation at various levels, agencies and organizations over a long period of time before it will be submitted to the National Assembly for adoption in the upcoming third session. Still, there are issues that need to take into consideration.
In the amended draft Labor Code (the draft code), regulations on the rights and obligations of workers (Article 5) do not mention professional ethics. Reality shows that professional ethics play an important role in the evaluation of an employee’s working performance. An employee with higher qualifications but without ethics will cause serious consequences to the employer and society. Therefore, the demand of professional ethics is not only something of “social morality” but also a mandatory requirement and a part of the labor contract.
In Vietnam, State agencies have enacted their own ethics, for example “professional ethics for accounting and auditing in Vietnam” by the Ministry of Finance. Thus, a clause should be added to Article 5 as follows: “Professional ethics must be observed.”
Article 15 of the draft code states that a labor contract is “an agreement between an employer and an employee.” This definition is correct if the employer is an individual or a private business owner. However, it is not sufficient if the employer is an organization or a corporation that has a legal entity. For this reason, Article 15 should be revised as follows: “For an organization or a corporaton with a legal entity, the legal representatives of that legal entity can sign the labor contracts. They can also authorize another person to sign the labor contracts under the law of authorization.”
Clause 1 of Article 16 regulates that “Labor contracts must be in writing; for temporary work that lasts less than three months, labor contracts can be verbal.” Labor contracts are legal grounds to solve disputes between an employer and an employee. Moreover, the agreed terms and conditons in a labor contract for wage and salary, allowances and bonuses will help to determine the corporate income tax. If labor contracts are verbal, there will be no evidence to protect the rights of an employee. Also, it will make the corporate accounting difficult. Therefore, the provision on verbal contracts should be omitted from the draft code.
Article 21 says: “If an employee signs a labor contract with many employers, his/her social insurance, health insurance and unemployment insurance will be paid by the employers in accordance with the governing law.” Nevertheless, under the current law, if an employee enters into a labor contract with many employers, the payment of his/her insurance premiums will be made by only one employer appointed by that employee. Accordingly, Article 21 should be amended as follows: “If an employee enters into a labor contract with many employers, the payment of his/her social insurance, health insurance and unemployment insurance will be made by an employer chosen by that employee.”
Article 23 specifies that “The employment contract of a director of a State-owned enterprise will be regulated by the Government.” This provision is only applied to State-run enterprises while the employment of staff for management levels in other companies has been increasingly popular. As a result, it should be adjusted as “labor contracts for management staff.”
Re-employment following termination
Clause 2 of Article 32 in the draft code regulates that an employer has to rehire an employee who has been charged with a crime and decided to be not guilty by the authorities afterwards.
This provision reflects the humanity of Vietnam. However, it is necessary to set up a time limit for rehiring because if the convicted employee is detained for a prolonged period of time, the employer has no choice but to hire another person to fill the vacancy and so cannot rehire him/her. In that case, the employee who suffers the wrongful conviction will be compensated under the State compensation liability law.
Severance payment fund
Clause 1 of Article 50 in the draft regulates that employers have to set up a reserve fund for severance payments to the terminated employees, as prescribed by articles 44 and 45 of the current Labor Code. This fund is unnecessary and should be omitted from the law because there is unemployment insurance, and thus it is unreasonable for an employer to pay for unemployment insurance and establish the fund at the same time.
Labor transfer within a consortium
Business groups are a popular form of corporation in Vietnam, both in the public and private sectors. However, the current Labor Code does not regconize the transfer of labor within a group. Therefore, if a highly professional employee is transferred from the parent company to a subsidiary to carry out an investment project (or vice versa), the parent company will have to terminate his or her employment and pay termination allowance, which is a very mechanical practice and financially damaging to the employer. In order to avoid such a situation, there should be provisions in the Labor Code that allow the transfer of employees in consortia, provided that: i) the transferred employee agrees; ii) new employment benefits are not worse than those of the previous employment; iii) the new employer will immediately sign a labor contract with the employee, and the new contract is of the same type of the previous one.
(*) Board chairman of VFAM Vietnam Consulting Co., Ltd.