Vietnam

In Vietnam, labor law recognizes two main categories of employment agreements, which are differentiated by their duration and termination clauses. These categories cater to various employment scenarios.

Indefinite-Term Employment Contracts (Hợp đồng lao động vô thời hạn)

Indefinite-term employment contracts do not have a specific end date stipulated in the contract. Employment continues until terminated by either party following legal procedures. Termination requires following specific notice periods and potential severance payments as outlined in the Labor Code of Vietnam (2019). This type of contract offers greater job security for employees. It is often associated with more comprehensive benefits packages, including social insurance, health insurance, and paid leave.

Fixed-Term Employment Contracts (Hợp đồng lao động xác định thời hạn)

Fixed-term contracts are further divided into two subcategories based on their duration:

Fixed-Term Contracts Up to 36 Months (Hợp đồng lao động xác định thời hạn dưới 36 tháng)

These contracts have a predetermined period not exceeding 36 months from the effective date. They can be renewed once upon mutual agreement between employer and employee. If renewed a second time, the contract automatically converts to an indefinite-term contract upon its next expiration. Termination can be done by either party with shorter notice periods compared to indefinite-term contracts, depending on the contract details.

Fixed-Term Contracts for a Specific Job or Seasonal Work (Hợp đồng lao động theo mùa vụ hoặc làm một công việc nhất định)

These contracts apply to specific projects, tasks, or seasonal requirements with a duration of less than 12 months. They are typically not renewed. Termination can be done by either party with minimal notice periods as specified in the contract.

Employment agreements in Vietnam are the foundation of the relationship between an employer and employee. These contracts establish expectations, rights, and obligations for both parties. To ensure compliance with Vietnamese labor law and protect the interests of both employer and employee, several essential clauses should be included in every employment agreement.

Core Components

The core components of an employment agreement in Vietnam define the basic framework of the employment relationship. These elements are mandated by Article 13 of the 2019 Labor Law of Vietnam.

• Parties to the Agreement: This section identifies the employer and employee by name and address.
• Job Description: A clear and concise description of the employee's role, duties, and responsibilities should be outlined.
• Compensation and Benefits: Details regarding salary, allowances, bonuses, and any other forms of compensation should be specified. This section should also address social insurance and health insurance contributions.
• Working Hours and Rest Periods: The agreement should clearly define the standard workweek, daily working hours, overtime pay calculations, and rest break entitlements.
• Leave Entitlements: Details regarding annual leave, sick leave, and other forms of leave should be included.
• Termination Clauses: This section should address the grounds for termination by either party, notice periods, and severance pay calculations.

Additional Considerations

While not mandatory, several additional clauses can be incorporated into an employment agreement to further clarify expectations and protect both parties.

• Confidentiality: This clause can safeguard sensitive company information.
• Intellectual Property: Ownership of intellectual property created by the employee during their employment can be addressed.
• Conflict of Interest: A clause outlining expectations regarding conflicts of interest can be included.
• Dispute Resolution: The agreement can specify the process for resolving any disagreements that may arise during the employment relationship.

The Vietnamese Labor Code permits employers to establish a probationary period within employment agreements. This trial period serves a dual purpose: it allows employers to assess an employee's suitability for the role, and it gives employees a chance to determine if the position aligns with their expectations.

Key Points on Probation Periods

The key points regarding probationary periods in Vietnam, as outlined in the 2019 Labor Code (Article 27), include:

• Mutually Agreed Duration: The probation period is determined by mutual agreement between the employer and employee, considering the nature and complexity of the job.
• Maximum Limits: The law prescribes maximum durations:
  • 180 days: For enterprise executive positions.
  • 60 days: For positions requiring professional or technical qualifications at a college or higher level.
  • 30 days: For positions requiring qualifications from intermediate vocational or professional secondary schools, technical workers, and skilled employees.
  • 6 working days: For all other job types.
• Single Probation per Job: An employee can only undergo one probationary period for a specific job within the company.

Salary During Probation

The minimum salary during the probationary period cannot be less than 85% of the agreed-upon wage for the position.

Termination During Probation

Both the employer and employee have the right to terminate the probationary contract or employment contract without prior notice or compensation during this period.

Upon completion of the probationary period, the employer must inform the employee of the assessment. If satisfactory, the employer can either continue with the existing employment contract or sign a new one. If the performance is deemed unsatisfactory, the employer may terminate the employment relationship.

Vietnamese employment agreements often include confidentiality and non-compete clauses to safeguard an employer's legitimate business interests. However, the approach to these clauses in Vietnamese labor law differs from common law jurisdictions.

Confidentiality Clauses

Confidentiality clauses are designed to protect an employer's sensitive information, such as trade secrets, customer lists, or technical know-how. Vietnamese law acknowledges the need to protect trade secrets, as outlined in the Law on Intellectual Property (Article 103).

An employer can use a confidentiality clause to limit an employee's disclosure or unauthorized use of such confidential information during and after their employment. The clause should clearly define the scope of confidential information and the limitations placed on the employee.

Non-Compete Clauses

Non-compete clauses restrict an employee's ability to work for a competitor or establish a competing business after leaving the company. The legal enforceability of non-compete clauses in Vietnam is less clear-cut.

The Labor Code does not mention non-compete clauses. However, employers may argue for their enforceability based on the Civil Code (Article 359) regarding the protection of business secrets. This argument depends on demonstrating that the non-compete clause is necessary to protect the employer's legitimate business interests and does not unreasonably restrict the employee's right to work.

Key Considerations for Non-Compete Clauses:

• Reasonableness: Courts are more likely to uphold non-compete clauses that are reasonable in terms of geographic scope and duration of the restriction.
• Seniority and Access to Sensitive Information: These clauses are generally seen as more justifiable for senior employees with access to critical confidential information.
• Compensation: Some suggest that offering financial compensation during the restricted period can strengthen the enforceability of a non-compete clause.