Issue 130326 – Collective labour agreements under Vietnamese law – key issues for enterprises

Dear Valued Clients,

In human resource management practice, enterprises are generally accustomed to regulating employment relationships through individual employment contracts and internal labour regulations. However, Vietnamese labour law also establishes other mechanism to govern these matters, which is through a Collective Labour Agreement (“CLA”). A CLA is formed through collective bargaining and mutual agreement between the employees’ representative organisation and the employer, with the objective of standardising working conditions and setting a common baseline of rights and benefits within the enterprise.

Under the Labour Code 2019, a CLA not merely an ordinary contractual document. It is the formal product of a collective bargaining process and is legally binding on all employees and the employer within its scope of application. Properly drafting and implementing a CLA in compliance with statutory requirements is therefore crucial to stabilising labour relations and controlling legal risk.

1. Definition and legal nature of CLA

Pursuant to Article 75 of the Labour Code 2019, CLA is a written agreement reached through collective bargaining between, on the one hand, the employees’ representative organisation and, on the other hand, the employer (or the employers’ representative organisation), for the purpose of establishing working conditions mutually agreed upon by both parties for application.

Compared with individual employment contracts, which regulate the relationship between a single employee and the employer, and internal labour regulations, which are unilaterally issued by the employer for workplace application, a CLA is a document reflecting the outcome of collective bargaining. It reflects mutual consensus between the parties, standardises working conditions within the enterprise, and directly shapes the overall level of rights and benefits granted to employees as a group.

Although based on mutual agreement, CLA must comply with the mandatory requirements of labour law. It may not reduce employees’ minimum statutory rights; however, its provisions may grant more favourable terms for the employees than those prescribed by law.

2. Types of CLAs

Pursuant to Clause 1 of Article 75 and Article 76 of the Labour Code 2019, there are three types of CLAs:

• Enterprise-level CLA: This is the most common form, with provisions typically focus on wages, bonuses, allowances, working hours, rest periods, occupational safety and hygiene conditions, employee welfare, and mechanisms for handling labour relations.
• Industry-level CLA: This type is concluded for a specific industry, usually between the industry-level employees’ representative organisation and the industry-level employers’ representative organisation.
• Multi-enterprise CLA: This is a CLA signed for application to multiple enterprises (for example, enterprises operating within the same industrial zone or belonging to the same corporate group).

In case an enterprise is subject to multiple CLAs containing different provisions on employees’ rights, obligations, and benefits, the provision most favourable to employees shall prevail.

Furthermore, an enterprise that is bound by an industry-level CLA or a multi-enterprise CLA but does not yet have an enterprise-level CLA, such enterprise may conclude its own enterprise-level, with provisions more favorable to employees than the industry-level or multi-enterprise CLAs.

3. Process for soliciting employee opinions, signing, and amending CLAs

3.1. Soliciting opinions and signing CLAs

Prior to execution, the draft CLA agreed upon through collective bargaining must be submitted for voting in accordance with the legally prescribed subjects and approval rate. The procedure for soliciting opinions and signing a CLA is provided in Article 76 of the Labour Code 2019 as follows:

3.2. Amendment and supplementation of a CLA

Pursuant to Clause 1 of Article 82 of the Labour Code 2019, a CLA may only be amended or supplemented on the basis of voluntary agreement between the parties through collective bargaining. The amendment and supplementation of a CLA must follow the same procedure applicable to the negotiation and execution of a CLA. Accordingly, the enterprise is required to conduct bargaining and execute the amended or supplemented CLA in accordance with Articles 70 and 76 of the Labour Code 2019.

Where changes in the law render part or all of a CLA inconsistent with statutory provisions or invalid, the parties must amend or supplement the CLA to ensure compliance with the law. During the period in which such amendment or supplementation is being undertaken, employees’ rights and benefits shall be governed by the applicable legal provisions.

4. Validity and duration of CLAs

Article 78 Labour Code 2019 prescribing the validity and duration of CLAs as follows:

• The effective date of a CLA shall be agreed upon by the parties and specified in the agreement. In the absence of such agreement, the CLA shall take effect from the date of execution.
• The scope of application varies depending on the type of CLA. An enterprise-level CLA applies to the employer and all employees of the enterprise. An industry-level CLA and a multi-enterprise CLA apply to all employers and employees of the enterprises participating in the agreement.
• A CLA shall have a term ranging from one to three years. The specific duration shall be agreed upon by the parties and stated in the CLA. The parties may agree on different terms for different provisions of the CLA.

5. Implementation of a CLA in enterprises

Pursuant to Article 79 of the Labour Code 2019, once a CLA takes effect, the employer and all employees of the enterprise are obliged to fully comply with its provisions. This obligation applies not only to employees working at the time the CLA becomes effective but also to those who commence employment thereafter.

With respect to the employer’s internal regulations (such as salary and bonus policies, welfare policies, working hours and rest time regulations, or other human resource management rules), where any provision is inconsistent with the CLA, the enterprise is required to amend such regulations to ensure consistency. Pending such amendment, the relevant provisions must be implemented in accordance with the CLA.

Where one party considers that the other has failed to properly implement or has breached the CLA, it has the right to request compliance. The parties are responsible for jointly reviewing and resolving the matter. If the dispute cannot be resolved, either party may initiate collective labour dispute resolution procedures in accordance with the process and procedures prescribed by law.

6. Accession to and withdrawal from an industry-level CLA or a multi-enterprise CLA

Article 85 of the Labour Code 2019 permits an enterprise to accede to an industry-level CLA or a multi-enterprise CLA upon obtaining the consent of all employers and employees’ representative organisations at the enterprises that are already parties to the agreement. This requirement does not apply where the scope of application of the relevant industry-level CLA or multi-enterprise CLA covers more than 75% of the employees or more than 75% of the enterprises operating in the same industry, sector, or field within an industrial zone, economic zone, export processing zone, or high-tech zone.

Similarly, an enterprise that is a party to an industry-level CLA or a multi-enterprise CLA may only withdraw from the agreement with the consent of all employers and employees’ representative organisations at the enterprises that are parties to the agreement, except in cases of special difficulties in production and business operations.

7. Invalidity of a CLA

Pursuant to Article 86 of the Labour Code 2019, a CLA may be declared invalid in the following circumstances:

(i)       Partial invalidity, where one or several provisions of the CLA are in breach of the law.

(ii)       Total invalidity, where:

• The entire content of the CLA violates the law
• The agreement is signed by a person lacking proper authority; or
• The statutory procedures for collective bargaining and execution of the CLA are not duly complied with.

The People’s Court has the authority to declare a CLA invalid. Where a CLA is declared wholly or partially invalid, the rights, obligations, and interests of the parties corresponding to the invalidated part or the entire agreement shall be resolved in accordance with applicable law and lawful agreements set out in the employment contracts.

A CLA is not merely a matter of statutory compliance; when properly structured, it serves as an effective labour relations governance tool. In practice, however, the most significant risks typically arise from procedural deficiencies in the voting process, incorrect identification of voting subjects, inadequate documentation evidencing the validity of the bargaining process, or provisions that conflict with statutory requirements oẻ internal regulations.

Accordingly, enterprises should develop a structured bargaining plan, closely control the voting process while maintain complete records, and conduct a legal review of the CLA’s contents through qualified legal counsel prior to execution.

As always, we hope our clients find this article informative and look forward to working with you in the future.

Kind regards,

ENT Law LLC