Recruitment of foreign employees: What should be paid attention to on the term of labor contract

Pursuant to Article 171 of the 2012 Labor Code  (the “Labor Code”), foreign employees working in Vietnam must have work permits (the “WP”). The term of the issued WP will comply with the labor contract expected to be signed but not exceed two (02) years in accordance with Article 173 of the Labor Code and Article 11 of Decree 11/2016/ND-CP detailing a number of articles of the Labor Code (“Decree 11”). In addition, according to Article 170.2 of the Labor Code and Article 4 of Decree 11, the employer will be entitled to employ foreign employees only after completing procedures for explaining their need for recruitment of foreign employees and obtaining written approval by the competent authority, i.e. the Department of Labor, Invalid and Social Affairs of the local where such employees work.

Thus, it can be said that though two parties may freely agree on the term of the labor contract in line with one of three options, namely indefinite term, 12 to 36-month term and under-12-month term, yet to comply with the conditions on the term of the WP, the term of the labor contract signed between the employer and the foreign employee, to ensure its validity, should not exceed two (02) years and may be extended in compliance with the WP issued to the foreign employee after the employer is allowed by the competent authority to recruit the foreign emplyee.

However, in reality, in the course of assisting our clients, either foreign individuals or Vietnamese companies, in settlement of labor disputes involving foreign employee as a disputing party, we, DIMAC law firm (“DIMAC”) found that in many cases, the parties did not comply with the compulsory labor provisions on conditions and procedures for recruitment of foreign employees and that the term of the labor contract is not consistent with the WP. In particular, a lot of foreign employees are working in Vietnam without WPs or with WPs but the labor contract having the term exceeding two (02) years, even up to five (05) years. This results in many legal consequences and damages to both the foreign employee and the employer, especially when a dispute arises. Specifically:

i. Based on Articles 117 and 122 of the Civil Code[1], a signed labor contract may be declared invalid because its content is contrary to the law if the foreign employee working in Vietnam has no WP or the term of his labor contract does not comply with that in the WP. In this case, the labor relation between the parties are not be recognized and protected under the Vietnamese law; and

ii. The employer and the foreign employee may be administratively sanctioned due to their violation of the labor law. As for the foreign employee, he may be expelled from Vietnam when his WP expires without application for extension of the WP’s term although his labor contract might not expire.

In reality, as far as our experience is concerned, a foreign employee who works in Vietnam must have a WP but the term of the labor contract exceeds the one of WP, the court only recognizes the validity of the labor contract in the period in which the WP is valid. The remaining period in which the foreign employee works without the WP will be considered invalid by the court, accordingly, the employment in such time will be illegal. If a party requests the other party to perform the other party’s obligations or provide it with its benefits violated by the other party in the period the labor contract is considered being invalid, the court may not recognize such obligations or benefits.

Therefore, to avoid the legitimate rights and obligations of the foreign employee and the  employer from being advertly affected and/or suffering from any disadvantage as having analized above, the employer and the foreign employee working in Vietnam should pay attention to the following points:

1. Compliance with the procedures is a must for approval and issuance of the WP by the competent State authorities for the foreign employee to work for the employer in Vietnam;

2. The term of a labor contract should not exceed two (02) years to comply to the term of the WP fomerly issued. In case where the foreign employee  expects to work for the employer more than two (02) years, both parties should mutually cooperate for reissuance of the WP. Particularly, prior to the expiry of the WP’s term from 5 to 45 days, the parties must apply for reissuance of the WP under Articles 13, 14 and 15 of Decree 11 and after that, they should sign a labor contract in accordance with Article 15.3 of Decree 11[2]; and

3. The employer recruiting the foreign employee must report on the status of such employment in accordance with current laws.

The above is some experience that our DIMAC lawyers have got in the course of assisting our clients to resolve labor disputes and we have found it useful to both Vietnamese emloyers and foreign employees. This will help both parties avoid unnecessary disputes and/or protect their rights and interests when one of important grounds that must be complied and executed from the start, i.e. the term of the labor contract to sign must comply to the WP issued to the foreign employee. To sum up, the foreign employee must always ensure that his WP does not expire during the period of his working for the Vietnamese employer.

[1] Article 117. Conditions for effective civil transactions

1. A civil transaction shall be effective when it satisfies all of the following conditions:

c) The purpose and contents of the transaction are not contrary to the law and/or social ethics.

Article 122. Invalid civil transactions

Civil transactions which fail to satisfy any one of the conditions specified in Article 117 of this Code shall be invalid.

[2] Article 15. Order for reissuing the work permit

3. After the foreign employee mentioned in Point a Clause 1 Article 2 of this Decree is re-issued with the work permit, the employer and such foreign employee shall sign a written labor contract in accordance with the labor law of Vietnam before the day on which the foreign employee intends to continue the employment with the employer.

Within 05 working days from the day on which the labor contract is signed, the employer shall send a copy of the signed labor contract to the Department of Labor, War Invalids and Social Affairs that re-issued such work permit.