Vietnam Introduces New Labor Code With Significant Employment Law Reforms

The National Assembly of Vietnam adopted a new Labor Code (No. 45/2019/QH14) on 20 November 2019 (the New Labor Code), which becomes effective 1 January 2021.

The New Labor Code is a part of Vietnam’s efforts to be in compliance with labor standards laid out in various new generation international free trade agreements signed recently. These agreements include the European Union-Vietnam Free Trade Agreement (EVFTA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

The New Labor Code will replace the current Labor Code of 2012 and introduce significant changes on a wide range of provisions, such as employees’ freedom of association, working hours, age of retirement, and termination of the employment relationship.

1. Definite and Indefinite-Term Labor Contracts

The New Labor Code acknowledges only two types of labor contracts: definite-term labor contracts, with terms of 36 months or less; and indefinite-term permanent labor contracts. The New Labor Code does not include a provision allowing seasonal labor contracts with a duration of fewer than 12 months. Also, foreign employees will have the right to sign definite-term labor contracts multiple times, which was not specified under the provisions of the current labor code.

2. One Additional Public Holiday

As of 1 January 2021, employees will be entitled to one additional national holiday, with full salary payment, on the day preceding or following Independence Day (2 September), bringing the total number of public holidays to 11 per year in Vietnam.

3. Retirement Age

The retirement age for men and women will be increased annually to reach 62 and 60 years of age respectively, under normal working conditions (by 2028 for men and 2035 for women).

4. Termination of Labor Contracts

The New Labor Code provides more rights to employers to unilaterally terminate labor contracts, such as when an employee provides untrue information that affected the recruitment decision (e.g., the employee falsified CV and/or qualifications at the time of recruitment). Employees, regardless of the term of their contract, will be entitled to unilaterally terminate the employment relationship without providing reasons, as long as they respect the required advance notice. Under some special circumstances, e.g., the employer’s failure to make salary payment in full or on time, abuse, sexual harassment, or coercive labor, employees will not be required to provide a compulsory prior notice.

5. Employee Representative Organizations

The New Labor Code allows employees to join or form an employee representative organization that is independent of the Vietnam General Confederation of Labor. As a result, if there is no employee trade union at the grassroots level, employers are no longer required to consult directly with a trade union before formulating internal regulations related to employees’ rights and benefits.

Written by Nguyen Thi Thanh Huyen and Blanche Henry Ecouellan of DFDL and Roger James of Ogletree Deakins

© 2020 DFDL and Ogletree, Deakins, Nash, Smoak and Stewart, P.C.