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Asia employment law bulletin 2020


The year 2019 is viewed by many as a positively productive year for Vietnamese law-makers in the labour sector. Changes in 2019 included the introduction of a compulsory social insurance scheme applicable to foreign employees in Vietnam, the adoption of an increased regional minimum wage (increasing by roughly 5%) and the passing of a new Labour Code on 20 November 2019 (2019 Labour Code) which will come into effect on 1 January 2021.

In response to both employer and employee expectations for a more efficient legal framework to address issues with complying with the “old” law, certain salient changes were introduced by the 2019 Labour Code. We have set out some key changes below:

Strengthened statutory protection from discrimination and sexual harassment in the workplace

Consistent with the global focus on sexual harassment in the wake of the #MeToo movement, the 2019 Labour Code enshrines the definition of “discrimination”, as “an act of differentiation, exclusion or prioritisation on the basis of race, skin colour, nationality, social origin, ethnic group, gender, age, maternity status, marital status, religion, political beliefs, disability, HIV status or participation in a trade union that impacts equity with regard to occupation opportunities”, and the definition of “sexual harassment” “a sexual behaviour of any person towards another person at work that is not desirable or acceptable to the latter”.

In addition to the introduction of the above definitions, the 2019 Labour Code is also the first Labour Code of Vietnam which expressly permits an employer to impose disciplinary actions for sexual harassment, including dismissal. However, as the definition of sexual harassment remains generically descriptive without particular acts being specified as amounting to sexual harassment, it is likely that an employer, when drafting internal policies, will need to specify what behaviour will amount to sexual harassment for the purposes of handling violations and potential disciplinary proceedings.  

The 2019 Labour Code also allows the employee to unilaterally terminate his or her employment agreement without notice, if such employee suffers maltreatment or sexual harassment at work.

Fixed term contracts of foreign employees

In Vietnam, a fixed term contract may not have a term of more than 2 years and, upon the expiry of the second consecutive fixed term contract, the third contract between the parties must be an “indefinite” term, permanent contract. This rule applied to both local and foreign employees, despite a permanent contract often not being consistent with the employer’s commercial objectives when employing a foreign worker and unilateral termination of a labour contract by the employer being difficult in Vietnam.  

However, while its drafting on this point is not free from ambiguity, the 2019 Labour Code appears to recognise that an employer and a foreign employee may enter into any number of consecutive fixed term contracts without being required to move to a permanent contract.

Substance over form in employment contracts

As another “first” in Vietnam, any arrangement or contract regardless of its label can be re-characterised to be an employment contract if it substantially reflects the nature of an employment relationship. Despite its largely vague language, the 2019 Labour Code pinpoints two key indicators to scrutinise an employment relationship: (1) the payment of remuneration or salary; and (2) the management, control or supervision of one party over the other. 

In terms of what form employment contracts can take: electronic means are permissible; and verbal agreements are also permissible for contracts whose term is less than one month. 

Dang Hai Nguyen, Freshfields Hanoi