Vietnam’s Labor Laws: Understanding the Risks and Opportunities for Foreign Investors

As Vietnam continues to attract foreign investment, it is essential for companies to understand the country’s labor laws and regulations. In this article, we will explore the complexities of labor laws in Vietnam, including the importance of filing internal labor rules (ILRs), the risks associated with wrongful dismissal, and the implications of corporate criminal liability.

Filing Internal Labor Rules

Why Filing ILRs is Crucial

In Vietnam, companies or entities with 10 or more employees are required to file their ILRs with local labor authorities. The primary purpose of ILRs is to set out a company’s disciplinary and dismissal policies. Failure to file ILRs will prohibit a company from disciplining or dismissing its employees.

Risks of Not Filing ILRs

However, the filing process is complicated, and many foreign entities neglect to file their ILRs, exposing themselves to the risk of not being able to fire an employee who has embezzled money from them.

Wrongful Dismissal

The Consequences of Wrongful Dismissal

The courts in Vietnam have been known to sometimes have transparency issues as well as having a generally pro-labor stance. The penalty for wrongful dismissal of an employee is very serious, further increasing the risk of wrongfully dismissing an employee and complicating the power dynamic between employers and employees.

Employees’ Rights

Employees who are dismissed without just cause have the right to sue their employer in court, which can lead to significant financial penalties and damage to a company’s reputation.

Corporate Criminal Liability

Understanding Corporate Criminal Liability

The new Penal Code prescribes corporate criminal liability for wrongdoings such as smuggling, dealing in banned and counterfeit goods, insider trading, tax evasion, money laundering, terrorism financing, failure to pay insurance to workers, insurance fraud, antitrust, and environmental crimes.

Conditions for Corporate Criminal Liability

Corporate entities are criminally liable when certain conditions are met. These include:

• The crime must have been committed in the corporation’s name.
• The crime must have been done to further the company’s interests.
• The company must have approved the offence.

Conclusion

For foreign investors operating in Vietnam, it is essential to prioritize compliance with labor laws and regulations. Failure to do so can result in significant financial penalties, damage to reputation, and legal liabilities.

Recommendations

To minimize exposure to legal liabilities and ensure a successful operation in Vietnam, we recommend:

• Prioritizing compliance with labor laws and regulations.
• Filing internal labor rules (ILRs) with local labor authorities.
• Being aware of the risks associated with wrongful dismissal.
• Taking steps to prevent corporate criminal liability, such as implementing effective internal controls and auditing processes.
• Conducting regular training for employees on compliance issues and risk management.

By following these recommendations, foreign investors can minimize their exposure to legal liabilities and ensure a successful operation in Vietnam.