LABOR DISPUTE SETTLEMENT SYSTEM IN VIETNAM - LEGAL FRAMEWORK AND CHALLENGES

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1 Regional Conference for Judges and Arbitrators on Employment Dispute Resolution Systems in Asia and the Pacific Melbourne, June 2012 COUNTRY PAPER LABOR DISPUTE SETTLEMENT SYSTEM IN VIETNAM - LEGAL FRAMEWORK AND CHALLENGES Presented by: Mr Ho Xuan Dung, Deputy Manager, Labour and Remuneration Service, Department of Labour, Invalids and Social Affairs, Ho Chi Minh City, Vietnam

2 Table of Contents 1. Introduction Labour disputes settlement system stipulated in the labour code 1994: The recent amendments to the labour code 1994 concerning the labour dispute settlement : Surprise result from the expected amendments Biographical Information Labor Dispute Settlement System in Vietnam

3 LABOUR DISPUTE SETTLEMENT SYSTEM IN VIETNAM - LEGAL FRAMEWORK AND CHALLENGES 1. Introduction 1.1 In the face of the domestic economic crisis in the late of 1980, Vietnam initiated a major economic reform in the early 1990s, often referred to as Doi Moi (Renovation), to shift away from a command economy to a socialist market economy. A pillar of the economic reform was the government s decision to pursue an export-oriented industrialisation strategy based on Vietnam s competitive advantages of rich natural resources and an abundant, low-cost labour force. The labour-intensive manufacturing industries played a substantial role in Vietnam s economic growth. Manufacturing industries such as garment and textile, electronics, footwear and food processing account for over 20% of the total GDP, 50% of total export value, and contribute over 80% of the total production value of the industrial sector. Doi Moi has also shifted from the centrally-planned economy in which private businesses were outlawed, into a multi- sector market economy, where the private sector has become the engine for growth. 1.2 Key to the competitiveness of Vietnam is an abundant and young labour force. Vietnam has attracted a lot of investment from the labour-intensive manufacturing industries. Since 2004, employers have found it more difficult to recruit even unskilled labour as the concentration of industrialisation in a few provinces has exhausted the local labour supply. Consequently, employers have to rely increasingly on migrant labour from agricultural provinces of the country. 1.3 The country s transition from command to market has entailed the need to revise the legislative framework for employment relations. Between 1990 and 1994 a new legal and institutional framework was put in place for the regulation of employment relations in the new conditions of a market economy. Since then, the state-owned sector has diminished, while a booming private sector has become a hotbed for disputes, with the conflict of interest between employers and workers becoming ever more pronounced. 2. Labour disputes settlement system stipulated in the labour code 1994: 2.1 Appearing the first time in labour code, the labour disputes are recognised as disputes on rights and interests relating to employment, wages, earnings, and other conditions of work; to the implementation of employment contracts and collective agreements; and to issues arising from vocational training or apprenticeship. Labour disputes include individual labour disputes between individual workers and the employer, and collective labour disputes between the workers' collective and the employer 1. In spite of absence of definition of labour collective, the practice recognise it as all the employees working together within any one enterprise or any one section of an enterprise. 1 Article 157 Labour Code 1994 Labor Dispute Settlement System in Vietnam 3

4 2.2 Legal framework for labour dispute settlement: The labour code 1994 distinguishes the different procedures and machineries for the individual disputes and collective disputes. However, it seems that there is confusion between the right based collective dispute and the interest based collective dispute. (a) For the individual disputes: (i) The competent bodies to examine and settle individual labour disputes are the enterprise conciliation council, the district labour conciliator and the court. (ii) All enterprises employing ten or more workers and having a trade union are required to set up a conciliation council with an equal number of representatives of employer and employees. The Council shall be comprised of an equal number of representatives of the workers and of representatives of the employer. The number of council members shall be agreed upon by both sides. The term of office of representatives on the enterprise conciliation council is two years. The chairman and secretary of the council are appointed by rotation among the representatives of each party. The council works on the basis of the principle of agreement and unanimity. The employer is required to provide all necessary facilities for the work of the enterprise conciliation council. (iii) The enterprise conciliation council has the competence to examine and settle the individual and collective labour dispute by the method of conciliation. This first step is compulsory. According to the labour code 1994, the enterprise conciliation council was required to proceed with conciliation within seven days of the date of receipt of the application for conciliation. The enterprise Conciliation Council set forth conciliatory proposals for consideration by the disputing parties. If the conciliatory proposals are accepted by the disputing parties, the Council shall establish a conciliation record, which must bear the signatures of the parties to the dispute and those of the chairman and the secretary of the council. Both parties shall be duty bound to implement the agreement set out in the conciliation record. If the conciliation fails, the enterprise conciliation council establish a record of non-conciliation, indicating the views of the parties and those of the council and bearing the signatures of the parties to the dispute, and those of the chairman and secretary of the council. Copies of the record of non-conciliation are sent to the parties to the dispute within three days of the date when the conciliation is declared unsuccessful. Each party to the dispute shall have the right to request to the next competent bodies. (iv) In case there is no conciliation council in the enterprise, the labour dispute can be referred to the district conciliator, who is selected from the officials of the labour office of the district. (v) In case of the unsuccessful conciliation, each party to the dispute has right to request the people s court to settle the dispute. The file submitted to the people's court must be accompanied by the record of non-conciliation. For some limited cases, the workers can request the 4 Labor Dispute Settlement System in Vietnam

5 (b) people s court without having gone through the conciliation procedure 2. For the collective disputes: (i) The competent bodies to examine and settle collective labour disputes are the enterprise conciliation council, the district labour conciliator; provincial arbitration council and the court. (ii) Like the individual dispute, the collective dispute must be first settled by the enterprise conciliation council or district conciliator if there is no enterprise conciliation council. However, if the conciliation failed, each party have right to request the provincial arbitration council to settle the dispute. Once again, this step is compulsory. (iii) The provincial arbitration council consists of full-time and part-time members who are representatives of the labour office, the trade union, the employers and a number of lawyers, administrators and social workers in the locality. The arbitration council has an odd number of members, which shall not exceed nine, and shall be chaired by the representative of the provincial labour office. The term of office of the labour arbitration council is three years. The labour arbitration council takes its decisions by majority and secret ballot. The provincial labour office shall be required to provide all necessary facilities for the work of the labour arbitration council 3. (iv) The labour arbitration council was required to proceed with the conciliation and settlement of the collective labour dispute within ten days of the date of receipt of the application for dispute settlement. If the conciliation fails, the arbitration council issues its award in settlement of the dispute and notifies immediately both disputing parties of the award. If there is no objection from either party, the award automatically becomes enforceable. In case of objection, the labour collective have right to request the people s court to settle the dispute or to go on strike supported by the trade union. However, employees in certain essential industries and enterprises are prohibited from striking and the Prime Minister can suspend or end a strike if it is considered to be detrimental to the national economy or public safety 4. (v) In legal context, the first labour Code adopted in 1994 provides a complete system for the resolution of individual and collective labour disputes through conciliation and arbitration and gives employees the right to strike in the case of a collective labour dispute once these procedures have been exhausted, provided the strike decision is made by the trade union and endorsed by a majority of employees. 2 Those are the disputes concerning labour, disciplinary measures consisting of dismissal or unilateral termination of an employment contract; concerning material liability of workers to compensate for damages; between domestic helps and their employers, concerning the social insurance and the disputes concerning the oversea employment. 3 Article 171 Labour Code Article 175 labour code 1994 Labor Dispute Settlement System in Vietnam 5

6 2.3 The ineffectiveness of the labour disputes settlement system stipulated in the labour code 1994 and the solutions proposed by local authorities: (a) In practice, these procedures and machineries are considered as remained primarily influenced by the principles of a command economy. The procedures are not flexible, but too complex for a legal resolution. From 1995 to 2006, all collective disputes are settled outside the dispositions of the law. No cases proceed through the conciliation and arbitration structures established to handle industrial disputes. The reasons for the failure of the system stipulated in the labour code 1994 are as follows: (i) (ii) The conciliation is a bi-partite body and the first line to resolve the collective dispute. In theory, the collective dispute must have been arisen due to the eventual failure of the both parties reaching an agreement on the new terms and conditions of work. Under this circumstance, it would be hard to expect that the disputing parties could produce agreement through the bi-partite process of the enterprise conciliation council without a third party intervention when the very same parties failed to reach the agreement through bi-partite process of collective bargaining. It is clear that the collective bargaining itself is a bipartite negotiation process, through which both parties try to reconcile their conflict interest 5. In practice, workers do not have confidence in the neutrality of the conciliation council employee representatives are often managers and are unlikely to rule against the employer so very few cases are referred to enterprise conciliation councils and many enterprises have not even bothered to set them up 6. Even if workers would like to request the district conciliator, a third party competence can help two parties negotiating on the disputing interest, they couldn t do it. That s because the conciliator have right to settle the dispute only in case that the dispute occurs in the enterprise where there is no the enterprise conciliation council. The gap between the real situation (ECC does not function at all as a dispute settlement body) and the legal dispositions create the serious problem. Because the conciliation council does not work almost no disputes go to arbitration. Totally, there are only 5 reported cases of collective disputes which were resolved by the provincial arbitration council in Vietnam (the Hanoi Arbitration Council has had two cases since it was set up in 1997 and The HCMC Arbitration Council, three cases since it was set up in 1998). (iii) The existing system for the resolution of industrial disputes does not work, since the dominant way through which workers pursue their grievances is through wildcat strikes. Strikes continues to be provoked increasingly by the aspiration of workers to achieve improvements in their wages and working conditions that are not embodied in the existing laws, labour contracts and collective agreements, especially in the wave of strikes at the end of 2005 and in early Facing to this situation, the local authorities has had the solution. For example, 5 Chang Hee Lee, Industrial relations and dispute settlement in Vietnam, ILO discussion paper, June 2006, p.9 6 Simon Clarke, Chang Hee Lee and Do Quynh Chi, From rights to interests : The challenge of industrial relations in Vietnam, Journal of Industrial Relations, Spring 2007, p15 6 Labor Dispute Settlement System in Vietnam

7 (b) (c) on 7 March 2006, the People s Committee of HCMC issued Decision 35 to provide a guideline for resolving unconstitutional strikes in the city. Decision 35 allowed for the formation of a strike task force composed of representatives from provincial departments and agencies such as the labour administration, Federation of Labour, department of planning and investment, industrial zone administration and the representative of district people s committee. This task force is under the direction of the chairman of district people committee. When the dispute occurs, the task force, usually accompanied by a trade union official and the representative from the local labour office comes to the enterprise to investigate the dispute. The priority of the task force is to get the workers back to work to preserve social peace and public order and to prevent the strike from spreading to neighbouring enterprises. To this end they hold a meeting with the strikers to hear their grievances and put together a list of demands which they can then take to the management. It is rare for the strikers themselves to play any part in the resolution of the dispute: negotiations take place behind closed doors between the employers and labour department officials and it is the officials who present the demands and achieve a resolution of the dispute 7. Indeed, Decision 35 also prescribed two separate procedures to settle rightsand interests-disputes. It required the strike taskforce to resolve rightsbased disputes by requesting the authorities to sanction the law violator, while guiding workers and management to negotiate upon interest-based issues (Decision 35, Article 5). Although this strike settlement procedure had not been stipulated in the national legislation by that time, it seems to be effective to settle the dispute. The same situations are found in the provinces having the industrial zones. But from the other view, this solution continues encouraging the workers to go on strike without passing through conciliation and arbitration stipulated by law. In 2005, the incidence of labour strikes doubled. In 2006, the labour dispute chapter of the Labour Code was revised in order to stop the wildcat strikes. 3. The recent amendments to the labour code 1994 concerning the labour dispute settlement : 3.1 The key revisions of Chapter 14 Labour Code reflected the need of the national government to provide a swift and workable procedure to settle strikes. On 1 July 2007, the amendments of labour code took effect. Among many matters addressed and revamped, the amendments stipulate new forms of resolution of labour disputes. The new dispute resolution provisions are intended to add clarity and transparency for both employers and workers regarding the available recourse and remedies in varying labour dispute scenarios. 3.2 Under the amendment, the labour collective disputes are classified under two categories: (a) Right-based collective dispute is a dispute about implementation of provisions of the law, of a collective l abour agreement or of internal labour 7 Simon Clarke, The changing character of strikes in Vietnam, Post-Communist economies, Vol.18, September 2006, p.350 Labor Dispute Settlement System in Vietnam 7

8 (b) rules which have been registered with the competent State body or other lawful rules or agreements at the enterprise about which the labour collective claims that the employer is in breach. Interest-based collective dispute is a dispute about a request of the labour collective to establish new labour conditions as compared with provisions of the law on labour, of a collective labour agreement or of internal labour rules which have been registered with the competent State body or other lawful rules or agreements at the enterprise, during the process of negotiation between the labour collective with the employer The revised law laid in effect a clear distinction between rights-based and interestsbased disputes. It provided separate settlement procedures for each type of dispute, and as such, simplified the legal requirements for calling a legal strike. 3.4 For the right based collective dispute, it may be resolved by the enterprise conciliation council or labour conciliator; chairman of people committee at district level and the court. Resolution of right based collective dispute must be carried out in the above order. Both parties must exhaust remedies at one level before proceeding to the next. Also, if the resolution by chairman of people committee at district level fails, the employees have the right to either refer the dispute to the relevant court for resolution or go on strike. 3.5 For the interest based collective dispute, it may be resolved by the enterprise conciliation council or labour conciliator; provincial arbitration council. Resolution of right based collective dispute must be carried out in accordance with the above priority. In case of resolution by the Provincial arbitration council fails, the employees have the right to go on strike. 3.6 In comparison with the labour dispute settlement system stipulated by the labour code 1994, the amendments in this time extend the competence of labour dispute settlement bodies. (a) (b) Firstly, according to the amendments, the labour dispute conciliation is still first compulsory step. The individual and collective dispute must first be resolved by the enterprise conciliation council or labour conciliator at district level. If such conciliation fails, the party have right to go to the next step. However, for the neutrality and effectiveness of conciliation, the revised labour code allows the parties to choose the conciliation by the enterprise conciliation council or by district conciliator. With this possibility, the law allows both parties to seek the conciliator as they want and believe in. In the same time, the conciliator is recognised as professional. According to the Decret 133/2007/NĐ-CP of Government, the district conciliators must have good moral quality, knowledge about labour law, conciliation skills and experience in conciliation and must be recognised by the chairman of people s committee of the district. In practice, with this recognition, the conciliator plays an important role in labour dispute settlement. However, this role is only effective for the individual rights dispute 9. The most conciliation efforts are in effect directly towards resolving legal disputes disputes that in many cases might be 8 Article 157 labour code revised in ,4% individual disputes are settled through successful conciliation by the district conciliator in Ho Chi Minh city; report of Department of Labour, Invalids and Social Affairs HCMC. 8 Labor Dispute Settlement System in Vietnam

9 better settled by other means, particularly through arbitration. For the collective dispute, nothing has changed. (c) (d) Secondly, according to the revised labour code, the provincial arbitration council has the competence to settle the interest based collective disputes and is supposed to carry out conciliation and arbitration. For some experts, this implies that the dual steps of compulsory conciliation and compulsory arbitration may be seen so complex and slow that the lawful strike becomes impossible in practice 10. However, if we read carefully the revised labour code, the provincial arbitration council has only the competence of conciliation of a collective labour dispute about benefits 11. Only for the collective labour disputes at labour strike forbidden enterprises, the provincial arbitration council follows the arbitration procedure. That implies in normal cases, the benefits based collective dispute must be settled by double conciliation (at the enterprise conciliation council or district conciliator and at the provincial arbitration council) and therefore that is likely to prolong the settlement process without distinctive effects which can be expected from each stage. Thirdly, for the right based collective dispute, the chairman of people committee of district is competent after the failure of conciliation by the enterprise conciliation council or district conciliator. In fact, the chairman of a district people's committee shall rely on the law on labour, the collective labour agreement and internal labour rules which have been registered and on other legal regulations and agreements in order to consider and deal with conduct in breach of the law by the parties. If deeming that the collective labour disputes are prompted by violation of law, the collective agreement and labour contract, the chairman of people committee of district issue the decisions to administratively sanction such violations in accordance with the law on administration sanctions. The role of chairman of people committee is to secure the application of the law. With this orientation, the courts are better because they are specialist for this issue while the chairman of people s committee is the chef of the local general administrative bodies and has no opportunity to study deeply the legal labour dispositions. 10 Chang Hee Lee, Industrial relations and dispute settlement in Vietnam, ILO discussion paper, June 2006, p The labour arbitration council shall put forward a settlement proposal for consideration by the two parties. If the two parties agree to the settlement proposal, the labour arbitration council shall prepare minutes of settlement which shall be signed by the two disputing parties and also by the chairman and secretary of the labour arbitration council. Both parties shall be obliged to comply with the agreements recorded in the minutes of settlement. If the two parties do not agree to the settlement proposal or if one of the disputing parties is not present for the second time without proper reason after being validly summonsed, then the labour arbitration council shall prepare minutes of unsuccessful conciliation which shall be signed by the party who is present and also by the chairman and secretary of the labour arbitration council. In the event that conciliation by the labour arbitration council is unsuccessful or in the event that the labour arbitration council has not conducted a conciliation on expiry of the time-limit stipulated the labour collective shall have the right to conduct procedures in order to strike. Article 171 the labour code revised in 2006 Labor Dispute Settlement System in Vietnam 9

10 4. Surprise result from the expected amendments 4.1 Despite the efforts of Government on labour dispute settlement renovation, the wildcat strikes continue exploding increasingly. No case of collective dispute is settled by procedures stipulated by labour code. The explosion of the second strike wave in the first quarter of 2007, right after the promulgation of the amendment to the Labour Code Chapter 14, urged the government to change their approach. 4.2 Indeed, the legal procedures do not work as that the wildcat strike has proved to be the most effective means for workers to redress their grievances. This has been a result of the tolerance, and even support, shown by the authorities for workers who strike to achieve what are regarded as their legitimate interests. Workers are used to the intervention of the task force and this intervention is clearly very effective, they don t want to follow the new procedures for their disputes settlement. When workers want something, they stop working and demand the intervention of task force. It is comprehensive that they are interested in securing what they regard as their legitimate interests by the most effective means at their disposal, and the most effective means has proved to be the wildcat strike. By the time, the intervention of the task force is necessary for stabilisation of the situation of strike (peace of strike and social order), but not resolve them. This method can deny, even make disappeared the negotiation between workers and employers before the labour dispute arise. Although some officials and experts recognize the harmful consequences of the strike task force intervention in long term, it is difficult to stop immediately the activity of the strike task force because his intervention becomes the habitude for workers who go on strike. The immediate stoppage of task force may provoke the instability of the social order in case of strike. In the political context, that may lead the conflict between workers and the worker-based State. 4.3 In the near future, it is necessary to change the method of activity of task force as the HCMC authorities did. The task force is only to facilitate the negotiation of both parties employers and employees by giving the instruction on settlement procedure and keeping the security during strike. Both parties must be aware of conciliation as first and essential way to sort out the dispute. Even in case both parties don t want to activate the conciliation procedure, if necessary, the local labour department may appoint the conciliator to this dispute. In this aspect, it may be possible that the conciliation is not successful but this is the base step for the party to go so far legally and puts both parties on the route prescribed by law. For this propose, the conciliator must be specialist whom the employers and employees can believe in. 4.4 The weakness of the system is the lack of an effective mechanism through the inevitable conflict of interest between the employers and workers can be reconciled through the negotiation and the resulting compromise embodied in collective agreement negotiation between two parties provokes the strike, not vice versa (the strike provoking the negotiation). 4.5 Another question is that in Vietnam disputes tend to take place as a combined dispute over both rights and interests, meaning that it involves application or interpretation of existing law or collective agreement and the conflicts over the new terms and conditions of work. In fact, the workers mix their demand for better working conditions /their wages with their claims of employers violation of law so that employers could be cornered to accept their demands for better working conditions where they are under the pressure of the local authorities to correct their non-compliance with the law. In this aspect, labour code needs to differentiate the 10 Labor Dispute Settlement System in Vietnam

11 right based request from the interest based one and determine the competent bodies for this type of dispute. 4.6 And now, the draft of new labour code is going to be submitted to be approved by National Assembly. Hoping that the new code bring the innovations for labour dispute settlement. Labor Dispute Settlement System in Vietnam 11

12 Labor Dispute Settlement System in Vietnam - Legal Framework and Challenges presented by: Mr Ho Xuan Dung, Deputy Manager, Labour and Remuneration Service, Department of Labour, Invalids and Social Affairs, Ho Chi Minh City, Vietnam 5. Biographical Information 12 Labor Dispute Settlement System in Vietnam

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