Legal gaps in Decree No. 05/2015/ND-CP relation to the Labor Code

Recently, one of the tendencies of legislative technique is minimizing the guidance documents under law with the desire that law will be applicable right after the effective date. However, the Labor Code which was issued on June 18, 2012 and took effect on May 01, 2013 still has many inapplicable provisions up to now although Government issued sixteen (16) guidance Decrees. In details, the Government issued eight (08) Decrees in 2013, seven (07) Decrees in 2014 and Decree 05/2015/ND-CP (“Decree 05”) on January 12, 2015. In details,

1. Decree 41/2013/ND-CP detailsthe implementation of Article 220 of the Labor Codeon the list of units using laborers which may not go on strike and the settlement of requests of labor collectives in such units;

2. Decree 44/2013/ND-CP details the implementation of some articles of the Labor Code regarding labor contracts;

3. Decree 45/2013/ND-CP details some articles of the Labor Code on hours of work, hours of rest, occupational safety and occupational hygiene;

4. Decree 46/2013/ND-CP details the implementation of some articles of the Labor Code regarding labor dispute;

5. Decree 49/2013/ND-CP details the implementation of some articles of the Labor Code on wages;

6. Decree 55/2013/ND-CP details the implementation of Clause 3 Article 54 of the Labor Code regarding the license for the labor leasing operation, payment of deposits and list of jobs entitled to implement labor leasing operation;

7. Decree 60/2013/ND-CP details Clause 3 Article 63 of the Labor Code on implementing the democracy regulation at grassroots at the working places;

8. Decree 102/2013/ND-CP details the implementation of some articles of the Labor Code regarding foreign laborers in Vietnam;

9. Decree 03/2014/ND-CP details the implementation of some articles of the Labor Code on employment;

10. Decree 27/2014/ND-CP details the implementation of some articles of the Labor Code on domestic servants;

11. Decree 52/2014/ND-CP provides conditions and procedures for licensing the employment service operation to employment service enterprises;

12. Decree 53/2014/ND-CP provides the consultation by State Management Agencies with organizations representing employees and employers in the formulation of labor policies and law and industrial relation issues;

13. Decree 73/2014/ND-CP amends and supplements Article 29 of Decree 55/2013/ND-CP dated May 22, 2013 of the Government detailing the implementation of Clause 3 Article 54 of the Labor Code on licensing labor leasing operation, deposit payment and list of jobs entitled to implement labor leasing operation;

14. Decree 75/2014/ND-CP details the implementation of some articles of the Labor Code on recruiting and managing Vietnamese employees working for foreign organizations and individuals in Vietnam;

15. Decree 119/2014/ND-CP details some articles of the Labor Code, Law on Vocational Training, Law on Vietnamese Guest Workers on complaints and denunciations;

16. Decree 05/2015/ND-CP details and guides the implementation of some contents of the Labor Code.

In which, it is said that Decree 05 is the most anticipated Decree which may fulfill all legal gaps of the Labor Code as well as supplement to the unclear contents of previous Decrees. For instance, (i) the regulation on labor contracts guided in Decree 44/2013/ND-CP is detailed in Article 3 to Article 15 of Decree 05; and (ii) the regulation on wages in Decree 49/2013/ND-CP is supplemented in Article 21 to Article 26 of Decree 05.

Despite being expected to supplement previous Decrees and detail the provisions of the Labor Code, Decree 05 itself still has numerous legal gaps which must be abrogated or adjusted. In details:

1. Regarding to the amendment of the term of Labor Contracts with the Appendix of the Labor Contract, Article 5 provides that: “The term of Labor Contract shall be amended only once in the Labor Contract Appendix and not be changed in the type of the signed contract”. Accordingly, in case a Labor Contract with the definite-term of thirty six (36) months is expired, we can extend the term of Labor Contract to thirty six (36) months by the Appendix. Whereas, Clause 2 Article 22 of the Labor Code provides: “In case two parties enter into a new Labor Contract with a definite term, only 01 additional definite-term Labor Contract can be signed; after that, if the employee continues working, an indefinite-term contract must be entered into”. This means that the employer just can enter into a definite-term Labor Contract with an employee with the maximum term of seventy two (72) months. 

The question is “Can an Appendix which extends the term of Labor Contract be considered as the second Labor Contract? If not, the employer may enter into the definite-term Labor Contracts with an employee with the total term of up to one hundred and eight (108) months (i.e. the employer shall enter into the first Labor Contract with the definite-term of 36 months with an employee, then they extend the term of Labor Contract to more 36 months; after that, they shall enter into the second Labor Contract with the definite-term of 36 months).

2. Regarding the Labor Contract with Elderly Employees, Article 6 provides that: “If the employers have no need or the elderly employees have insufficient health conditions, both parties shall terminate the Labor Contracts”. Accordingly, although either the employer or the employee shall have the right to unilaterally terminate the Labor Contract, Decree 05 does not provide the procedures or the time of advance notice as provided in Article 37 and Article 38 of the Labor Code. The question is how to terminate the Labor Contract in this case without violations? Should the law specify on the time of advance notice in this case?

3. Regarding the end of the probation period under Article 7,Decree 05 defines the employer’s obligation to notify the result of the probation to the employee within three (03) days before ending the probation and the employer must immediately enter into a Labor Contract with the employee if the result meet requirements. However, in case the employee continues working after the probation period and no Labor Contract is concluded, which type of Labor Contract shall determine the relationship between both parties? In practice, there are many situations as mentioned above; hence, it is necessary to provide the Offer Letter which is sent to the employee by the employer before the probation and clearly specifies the term of the probation, type of labor contract concluded after the satisfactory probation. Then, if the employer does not conclude the Labor Contract intentionally, as a result, the relationship of both parties shall be regulated by the type of Labor Contract as provided in the Offer Letter.

4. Regarding Guidance on Point c Clause 1 Article 37 and Clause 1 Article 44 of the Labor Contract,Clause 1 Article 11 of Decree 05 guides the implementation of Point c Clause 1 Article 37 of the Labor Code as follows: “He/she is maltreated, sexually harassed or is subject to forced labor”. This unclear guidance basically violates the defining principle in logic that we just can use the defined concepts for definition. It means that the concept used for definition must have been known or clarified before but Decree 05 clarifies the concept “sexually harassed” by citing such exact phrase only. Likewise, in order to defining the concept “economic reasons” – under Clause 1 Article 44 of the Labor Code, Decree 05 provides two concepts of “economic crisis or recession”. However, it is finally not clarified how is considered to be “sexually harassed”, “economic crisis or recession”

5. Regarding the period used for the calculation of severance allowance, job-loss allowance, Article 14 provides that, “The working period use for the calculation of severance allowance, job-loss allowance to employees shall be in year (full 12 months) and the period from 01 full month to under 06 months shall be rounded to a half of working year, the period from full 06 months or longer shall be rounded to 01 working year.”And “In case the employees who have actually worked for the employer for full 12 months or longer loses his/her job but working period use for the calculation of the job-loss allowance is less than 18 months, the employers shall be responsible to pay the job-loss allowance for the employees with at least 02 months’ wage”.

Combining with the provision in Clause 2 Article 48 and Clause 2 Article 49 of the Labor Code providing that The working period used for the calculation of severance allowance/job-loss allowance is the total time during which the employee actually works for the employer minus the time during which the employee benefits from unemployment insurance in accordance with the Law of Social Insurance, it is unreasonable that if an employee who works for full twelve (12) months including two (02) months of the probation and ten (10) months during which the employee benefits from unemployment insurance stops working, he/she shall be paid severance allowance or job-loss allowance with at least two months’ wage of job-loss allowance. The question now remains: Should it is provided that the employee shall be paid severance allowance or job-loss allowance only when the total time used for calculation of severance allowance or job-loss allowance must be full 12 months or longer, isn’t it?

6. Regarding the elaboration of a labor utilization plan, Article 15 provides that“In case of transfer of asset ownership or use rights of an enterprise, the preceding employer shall elaborate the labor utilization plans in accordance with Article 46 of the Labor Code”.

The provision on labor utilization plan has been raised into law from the provisions of Decree 44/2003/ND0CP. The labor utilization plan is elaborated in case of merger, consolidation, separation or split of enterprises, transfer of right to own, manage or to use property of enterprises where the existing number of laborers are not used up. The question is that why is it necessary to elaborate a labor utilization plan in case of transfer asset ownership or use right of an enterprise (e.g. Sale on a broken phone) without any changes on employment? It is clear that the drafter has copied old provision mechanically but incompletely.

7. The employee’s violations of the advance notice time when unilaterally terminating a labor contract.

Clause 2 Article 43 of the Labor Code provides that If violating the provision on the advance notice time in case of unilaterally termination of Labor Contract, the employee must compensate the employer an amount equivalent to the employee’s wage for working days without advance notice. Besides, Clause 3 Article 126 of the Labor Contract provides the case where the employee is applied the form of discipline dismissal if willingly absenting from work totally 05 days within 01 month or totally 20 days within 01 year without proper reasons.

In practice, the employee notifies to unilaterally terminate the Labor Contract with a proper reason and this falls in case the employee must notify the employer with an advance notice of 30 days. After two (02) days of sending the notice, the employee does not go to work without clear consent to keep working or not. As a result, the employer may notify the violations of the advance notice time of the employee basing on Clause 2, Article 43 of the Labor Code 2012. Nonetheless, after then, if the employee gets back to work (still in the period of 30 days advance notice), the employer cannot force the employee in compensation but only applies the form of disciplinary dismissal with the reason of absent from work willingly totally 05 days within 01 month.

Therefore, it is necessary to prescribe that in case (i) where the employee willingly absents from work from five (05) days or more and the employer notifies to request the employee to get back to work but he/she refuses; or (ii) where the employee notifies the employer the point of time to unilaterally terminate the labor contract but in the advance notice time, the employee willingly absents from work from five (05) or more, it is assumed that the employee unilaterally terminates the labor contract and violates the advance notice time; hence, the form of disciplinary dismissal is not applied.

8. The provision regarding dossier on registration of Labor Regulation (“LR”) according to Article 28 has not eliminated the gaps in Article 121 of the Labor Code when requiring full four types of dossiers including (i) Application for registration of Labor Regulation; (ii) Documents of the employer related to labor discipline and material responsibilities; (iii) Minutes of comments of the representative organization of the grassroots-level employees’ collective; and (iv) Labor Regulation.

When transforming the provisions of Circular 19/2003/TT-BLDTBXH regarding the dossier on registration of Labor Regulation, the scrivener has unintentionally removed the phrase “if any” in the provision “Documents of the employer related to labor discipline and material responsibilities (if any)”. This leads to the consequence that the Company cannot register the Labor Regulation in case of lacking “documents of the employer related to labor discipline and material responsibilities” that is specified as compulsory dossier for registration in law.

The Labor Regulation is one of the most important documents in a company due to that it is considered as the “standard” of human resource managing and is agree by both employer and employee. Is it necessary to require “documents of the employer related to labor discipline and material responsibilities” as compulsory condition in case the companies do not have such documents?

All things considered, it is clear that there are many legal gaps in Decree 05 that Department of Labor, Invalid and Social Affairs should make clear in the guidance Circular. The EMPLOYEES are considered as the most valuable assets in any company. Therefore, if there are no proper provisions to protect such assets, it does not only cause damages for the companies but also negatively affect to the National Economy.

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