The current Labor Code 2012 does not make it clear on whether a foreigner could be entitled to an indefinite term employment contract (ITEC) although the foreigner only has a work permit with limited term (two years at the maximum). In theory, the foreigner can demand for an ITEC with the employer based on the following legal basis and arguments:

Article 22.2 of the Labor Code 2012 generally suggests that any employees will be entitled to an ITEC after two consecutive definite term employment contracts. Technically, a foreign employee can also enjoy this treatment;
Under Article 15.3 of Decree 11/2016, upon the renewal of work permit, the employer and its foreign employee must enter into a written labor contract “in accordance with Vietnamese labor law”. The wording of this provision also suggests that the execution of new employment contract should comply with the principle set out under Article 22.2 of the Labor Code 2012; and
The limited term of work permit could not impact the validity of the relevant ITEC given that: (a) the current labor law does not contemplate a scenario where an employment contract is terminated due to the cancellation/expiry of work permit (Article 36 of Labor Code 2012); (b) obtaining work permit is not a required condition for the validity of an employment contract (Article 50.1 of the Labor Code 2012); and (c) an issued work permit only sets out a “period of work” (thời hạn làm việc) (Work Permit Form under Circular 40/2016), but not “period of work under employment contract” or “term of employment contract”. Arguably, the term of work permit should not necessarily be consistent with the term of relevant employment contract. There are also various provisions of Decree 11/2016 supporting this view (Article 11 and 16.2 of Decree 11/2016).

That said, the employer may find it reluctant to sign an ITEC with a foreigner for the following reasons:

the current labor law also implies that the foreign employees should be excluded from the favorable treatment under Article 22.2 of the Labor Code 2012. In particular, Article 174.3 of the Labor Code 2012 states that an issued work permit will be nullified if the contents of relevant employment contract are inconsistent with the contents of such work permit. Accordingly, one may take the view that since both employment contract and work permit contain contents of employment term of relevant foreigner, the term of employment contract could not be longer than the term work permit. Otherwise, the issued work permit will be cancelled.
It seems that the foregoing interpretation is also adopted by Labor Authorities in practice. However, as discussed above, it is arguable that: (a) the difference between the terms of ITEC and work permit should not be regarded as a wrongful inconsistency, which results in the cancellation of relevant work permit; (b) even if the work permit is cancelled due to the wrongful inconsistency, such cancellation should not technically be a ground for the termination of relevant ITEC. In this case, the executed ITEC may give the foreigner a good position to negotiate with the employer on favorable conditions for new employment or termination of his/her ITEC given that the employer is legally responsible for obtaining work permit for its foreign employees (Article 12 and 15 of Decree 11/2016); and
The new Labor Code 2019, which takes effect as from 1 January 2021, now expressly provides that a foreign employee can only enter into an employment contract with term of no more than two years with his employer (Article 20.2(c), 151.2, and 155 of the Labor Code 2019).

The Labor Code 2019 does not introduce a clear transitional provision to deal with issue regarding foreign employees’ ITECs which are executed before its effective date. Article 220.2 of the Labor Code 2019 generally provides that an employment contract which (a) do not have contrary contents to the provisions of the Labor Code 2019, or (b) guarantees more favorable rights and conditions for employees than those stipulated in the Labor Code 2019 will continue to be implemented. In light of this provision, the foreigner may argue that an ITEC entered into before 1 January 2021 will provide more favorable rights to the foreigner and will remain effective after 1 January 2021 under (b). However, it is not clear how such ITEC can comply with the limitation on employment term under the Labor Code 2019.

Perhaps, for the time being, the foreigner may still consider entering into an ITEC with the employer based on the legal ground discussed at the beginning of this post. In term of the term restriction under the Labor Code 2019, the issue should not be material if:

the labor authority accepts the submitted ITEC after the employer completes the renewal of the foreigner’s work permit; and
the new guidance of the Labor Code 2019 does not expressly cancel all ITECs executed before 1 January 2021.

This post is written by Nguyen Hoang Duong and edited by Nguyen Quang Vu.

Vietnam Business Law