INSIGHTS

Q&A Labor Law

September 25, 2018 Labor & Employment

Q:The company has an employee who is considered to be ineffective and the company wishes to transfer this employee to another job in another department. According to the job description and salary after transferred, the employee is transferred to a job with a lower salary. The company and the employee have agreed to the terms of changes with each other. What additional procedures does the company need to do to prove that the employee consents to this agreement, as in many cases, labor inspectors will be able to argue that the employee was compelled by the company to accept a position at a lower salary?
In addition, the company would like to place the employee in a probationary period for the new position for a period of two months and the employee has agreed. Is the company in compliance with the law? After the probationary period expires, what actions should the company take between the below options:
(1) The employee applies to terminate his current labor contract and then apply for a new recruitment vacancy? Or
(2) Amending his existing labor contract by making appendix for changes in job description and salary?

A:

1.“Probation” applies only if the employee has not signed a labor contract with the company before; the maximum term for a probationary period is only 60 days (Article 27, the 2012 Labor Code).

2.Under a company-employee labor contract, when the employee and the company agree to allow the employee to do another job in another department, it may be considered a temporary assignment. As such, the employee will perform a job which is not stated in the labor contract due to business and production needs as prescribed in Article 31 of the 2012 Labor Code. It is noteworthy that the company must specify in its internal regulations the criteria that would allow, due to business and production needs, the company to temporarily assign an employee to perform a job which is not stated in the labor contract (Article 8, Decree No.05/2015/ND-CP).

3.Should the company wish to alter the jobs and/or salary for an employee, it is advisable that the company should create an appendix amending the current labor contract (Article 35, the 2012 Labor Code) instead of terminating the current labor contract and entering into a new labor contract (although it is possible for the company to apply either of these two options, and in both cases there must be a consent from the employee). The option of signing an appendix amending the contents of the labor contract will help to limit issues such as providing notification for increase or decrease of labor (if any), payment of salary and allowance, payment of severance allowance (if any) and so on.

It is worth noting that in the event the company chooses to terminate the current labor contract and sign a new labor contract, the company still has to comply with the regulations on the number of times for the signing of definite-term labor contracts. For example, if currently the company has twice entered into a definite-term labor contract with the employee, upon signing a new labor contract for a new job position, the company is required to sign an indefinite-term labor contract.

4.If the State inspectorate agency conducts an inspection and concludes that the company has coerced the employee, the inspectorate agency must produce evidence and legal grounds to prove their claim. Otherwise, if the inspectorate agency does not have enough evidence and legal grounds to prove such claims, they are deemed baseless or unconfirmed allegations, and the company shall have the right to protest and make a complaint or file a lawsuit. The reason behind this is that, as mentioned above, regardless of which one of the two options the company chooses to apply, there must be the consent from the employee. Therefore, the company should keep all agreements signed with employees and, where necessary, invite representatives from the grassroot trade unions to attend meetings and witness the signing of the agreements between the company and the employee.

Q:In essence, is a “collaboration contract” a seasonal contract or different from a seasonal contract? Some people claim that collaboration contracts can be freely signed as many times as needed.  If so, what is the legal basis for performing multiple signings?  What is the appropriate procedure for signing a collaboration contract to ensure its compliance with the laws?

A:

1.Pursuant to the provisions of the labor law, there is no definition of “collaboration contract”. Article 22 of the 2012 Labor Code only prescribes 03 types of labor contracts as follows:
Type 1: Indefinite-term labor contract;
Type 2: Definite-term labor contract (from 12 months to 36 months); and
Type 3: A seasonal or job-specific labor contract that has a term of under 12 months (this is the official name designation for a “seasonal contract”).
Accordingly, for jobs that can be completed within a period of less than 12 months or jobs that are only provisional, the parties may enter into the third type of labor contract defined as a “seasonal or job-specific labor contract that has a term of under 12 months”. However, under the labor law, it is prohibited to enter into a seasonal contract or job-specific labor contract that has a term of under 12 months for the performance of permanent jobs which can last for 12 months or more, except in cases of temporary replacement of employees who take leave for military duty, maternity, sickness, occupational accidents or other temporary leave. Therefore, the nature of the collaboration for each specific job will determine the appropriate type of labor contract applied.

2.The criteria on determining whether a job is “permanent and having a term of 12 months or more” has not yet been clearly defined. Referring to a previous regulation (expired in validity) in Circular No.21/LDTBXH-TT dated October 12, 1996 on guiding labor contracts, “it is understood that a permanent and stable job of over 1 year means a job that has to be performed day by day uninterruptedly for one year or longer”. Therefore, according to this previous regulation, jobs such as road-digging, or item-selling on short-term holidays such as Mid-Autumn Festival, may qualify for designation as “a seasonal or job-specific labor contract that has a term of under 12 months”. However, accounting jobs or permanent jobs associated with the continuous operation of a company would not comply with the said definition and “a seasonal or job-specific labor contract that has a term of under 12 months” cound not be applied (except for cases of temporary replacement of employees who take leave for military duty, maternity, sickness, occupational accidents or other temporary leaves).

3.When a seasonal or job-specific labor contract that has a term shorter than 12 months has expired, and the parties wish an employee to continue his/her work, the two parties must sign a new labor contract. There is no limit to the number of times this labor contract is signed, provided that such signings are not very frequent, and there must be conditions or events that give rise to the occurrence of non-permanent jobs. For example: when the Mid-Autumn season is over, it will be considered the expiration of the labor contract and the labor contract shall be renewed when the next Mid-Autumn season arrives.

4.If an enterprise recruits an employee in the form of a “collaboration contract”, then in the event of a dispute, regardless of the wording of the contract, the court focuses on the nature of the actual job and the actual working relationship between the two parties to determine whether the parties are in compliance with the regulations and fulfilling the conditions under the terms of the contract (or the parties abuse signing this “collaboration contract” for permanent jobs). In practice, collaboration contracts are often abused by companies in the labor relationship (which is the social relationship that arises from hiring, employing, and paying salaries between the employee and company). This is a form of inappropriate implementation of the laws by some enterprises. Upon being detected, fines may be imposed on the enterprise for violations of regulations of signing labor contract (the fines are from VND2,000,000 up to VND40,000,000 depending on the number of employees affected – Article 5 and Article 3, Decree 95/2013/ND-CP as amended and supplemented by Decree No.88/2015/ND-CP). In addition, fines may be imposed on the enterprise for violations of the regulations on paying premiums for the social insurance for employees (maximum fine is VND150,000,000 – Article 26 and Article 3, Decree 95/2013/ND-CP as amended and supplemented by Decree No.88/2015/ND-CP).

5.Also, it is worth taking note that it is not possible to interpret a “collaboration contract” signed with an individual as a type of “service contract”, as individuals who wish to sign a service contract must first register as a business under provisions of the law.

– Written by LE & TRAN | Vietnam’s Premier Boutique Litigation Firm


This insight is quoted from the Vietnam Labor Law Review (August – September 2018), you can download and read the full file on PDF file at here.