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New aspects of the Labor Code 2019 on signing
labor contracts
he Labor Code 2019 will take effect as from 1 January 2021 (Labor Code),
introducing a range of revisions to overcome certain drawbacks of its predecessor,
the Labor Code 2012. Further to our previous update on the Labor Code 2019, we
will here focus on some of the most noteworthy revisions relating to the labor
contracts, especially the stage of contract signing.
1. Broader definition of the labor contract
While the current Code simply defines labor contract as an agreement between an
employee and an employer, the new Labor Code broadens this definition by providing
that any agreement between two parties under any name whatsoever, if satisfying all of
the following criteria, will be considered a labor contract:
On the basis of such agreement, one party (A) works for the other party (B);
The work of A is paid with salaries or wages; and
A is under the management, executive operation administration and supervision of
B.
This may, arguably, extend the governing scope of the Labor Code to other relationships
between individuals and companies, such as service contracts for temporary works or
for certain special managers/specialists. If this is confirmed by the competent
authorities, companies may face a greater burden as they may have to apply
employment benefits and obligations, which are being applied to their employees, to
these individuals as well.
2. Only 2 types of labor contracts
The new Labor Code eliminates seasonal or specific job labor contracts with duration of less than 12 months . Therefore, there are now only 2 types of labor contracts:
definite-term contract (with the effective term of no more than 36 months) or indefinite-
term contract.
The employer can sign definite-term contracts with an employee for maximum of 2
times, after which an indefinite-term contract must be entered into. However, unlike the
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current Code which has no exception, the new Labor Code introduces some exceptional
cases to this rule, including:
Labor contracts signed with senior workers and foreign employees: definite-term
contracts can be entered into more than 2 times;
The employee being a leadership member of an organization representing
employees: the effective labor contract must be extended until the end of the
office term; and
The person hired as directors in :
this is to be regulated by a to-be-issued guiding decree.
Of note, the new Labor Code no longer allows the employer to amend the effective term
by signing an appendix to the labor contract, so signing a new labor contract for
extension is compulsory.
3. Notable changes relating to probation
First, probation will not be applicable to the sole case of definite-term labor contract
with the term of under 1 month.
Second, the probationary term can last for up to 180 days (rather than a maximum of 60
days as currently regulated) for employees who are managers (as defined in the Law on
Enterprises and Law on Management and Use of State Capital Invested in Production
and Business in Enterprises).
Third, the new Labor Code now acknowledges two methods of agreements on
probation between parties, which are (i) signing a probationary contract or (ii) signing a
labor contract with provisions on probation. Accordingly, in case of satisfactory
probationary work, the parties will proceed to enter into a labor contract or continue to
perform the signed labor contract respectively. In the contrary case, any signed contract
between the parties will be terminated.
It should be noted that as from the effective date (i.e. 1 January 2021), any labor
contracts already signed should be reviewed and amended if necessary to ensure
compliance with the new Labor Code. Companies should be well aware of all notable
revisions in the new Labor Code for timely compliance and better protection.
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Corporate, M&A
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Banking & Finance
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Corporate, M&A
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