Issue 130326 - Regulations on Wage Payment through Labor Foreman

Dear Valued Clients,

In practice, in certain sectors such as construction, project-based manufacturing, or installation works, employees do not receive their wages directly from the enterprise but through a “Labor Foreman” who gathers, manages, and coordinates a group of workers to perform specific tasks. Although payment through such an intermediary is relatively common and flexible in practice, current laws do not provide comprehensive and specific regulations governing the legal relationship among the parties involved. This may give rise to various potential risks relating to wage payment obligations, social insurance contributions, tax liabilities, and the protection of employees’ lawful rights and interests. What, then, is the legal nature of this arrangement, and what issues should enterprises pay attention to in order to mitigate risks? Please refer to our article below for further details.

Definition of Labor Foreman

Current Vietnamese labor law does not provide a clear definition of the term “labor foreman”, which has resulted in inconsistent application in practice. From a linguistic perspective, a labor foreman is understood as an intermediary who receives work from a principal contractor and organizes workers to perform such work, for example, a construction foreman.

Based on the above interpretation in combination with actual labor market practices, a labor foreman typically arises in circumstances where a task requires the participation of multiple workers to be completed. However, the employer (“Employer”) does not wish to directly enter into individual labor contracts (“Labor Contracts”) with each employee (“Employee”) due to increased administrative burden, management complexity, and time required for work allocation. Accordingly, the Employer engages a labor foreman to organize and manage the workforce, and as a result, the Employer only enters into a lump-sum or service contract with a single intermediary.

In summary, although the law does not provide an official definition of a labor foreman, in substance this is an intermediary arrangement whereby labor is organized and managed on behalf of the employer. The use of a labor foreman helps the employer reduce administrative burdens and management costs. However, this intermediary nature does not alter the employer’s fundamental legal responsibilities in the employment relationship.

Responsibilities for Managing Labor Foreman

Pursuant to Article 100 of the 2019 Labor Code, where the Employer makes wage payments through a labor foreman or another similar intermediary, the Employer remains the principal party bearing primary legal responsibility for labor management and for ensuring the lawful rights and interests of Employees. Accordingly, at any workplace where a labor foreman or intermediary is engaged, the Employer must prepare, maintain, and manage a complete list of such persons, including their identification and addresses, together with a list of Employees working under their management.

In addition, the Employer is obligated to supervise and ensure that the labor foreman or intermediary fully complies with labor law regulations, in particular those relating to wages, working hours, rest periods, occupational safety and health, and other lawful rights and interests of Employees. The engagement of work through a labor foreman does not exempt or release the Employer from its statutory responsibilities under labor law.

In the event that the labor foreman breaches wage payment obligations, fails to pay wages in full, or otherwise infringes upon the lawful rights and interests of Employees, the Employer is required to directly resolve the matter, remedy the consequences, and ensure the Employees’ rights in accordance with applicable laws. At the same time, the Employer is entitled to claim reimbursement or compensation from the labor foreman for any costs or damages incurred, or to coordinate with competent state authorities to handle such violations in accordance with law.

Accordingly, engaging a labor foreman does not create a substitute entity that fully assumes the employer’s legal obligations. The employer remains the party ultimately responsible for labor management and for safeguarding the lawful rights and interests of employees. Therefore, the employer should establish appropriate supervision and control mechanisms over the labor foreman to minimize potential legal risks.

Responsibility for Ensuring Wages and Employees’ Rights

Where a labor foreman or a similar intermediary fails to pay wages, pays wages incompletely, or fails to ensure other lawful rights of Employees, the Employer, as the principal employer, bears ultimate responsibility for paying wages and safeguarding Employees’ rights. In such cases, the Employer is entitled to seek indemnification from the labor foreman or intermediary, or to request competent state authorities to resolve the dispute in accordance with law. Employees may pursue one of the following three dispute resolution mechanisms:

First, settlement through direct negotiation.

Labor relations are established on the basis of voluntariness and mutual agreement; therefore, disputes arising therefrom should, in principle, be prioritized for resolution through direct discussion and negotiation between Employees and the company’s management. This approach helps save time and costs while preserving labor relations. However, where the employer deliberately fails to pay wages, negotiation may be difficult and ineffective.

Second, filing a complaint with the Department of Home Affairs.

Pursuant to Article 15 of Decree No. 24/2018/ND-CP providing for the settlement of complaints and denunciations in the field of labor detailed that Employees are required to first lodge a complaint with the Employer. If the complaint is not resolved or is resolved unsatisfactorily, Employees are entitled to submit a second-level complaint to the Department of Home Affairs. The complaint handling authority must accept a valid complaint within seven (07) working days from receipt. The time limit for resolution is no more than forty-five (45) days (or no more than sixty (60) days for complicated cases). In remote or disadvantaged areas, the resolution period may be extended in accordance with law. If the Employee disagrees with the resolution decision or if the complaint is not resolved within the statutory time limit, the Employee has the right to initiate legal proceedings before the court.

Third, initiating a wage dispute lawsuit before the Court.

Under the 2019 Labor Code, wage disputes are generally required to undergo conciliation by a labor conciliator prior to being brought before the court, except for cases exempted from mandatory conciliation under the law. The statute of limitations for initiating a lawsuit is one (01) year from the date on which the Employee becomes aware that his or her lawful rights and interests have been infringed. The lawsuit shall be filed with the People’s Court of of the respective region/area where the Employer’s head office is located or where the defendant resides, and court proceedings shall be conducted in accordance with applicable procedural laws.

It can be seen that, in all circumstances, employees’ rights and interests are given priority protection under the law. Where the labor foreman fails to fulfill its obligations, the employer must still directly ensure payment of wages and other lawful entitlements to employees. At the same time, employees are entitled to rely on various legal mechanisms to protect their legitimate rights in accordance with applicable regulations.

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

Sincerelly,