Employers in Vietnam have been warned they are at risk of seeing their executives going to jail over contested sackings, following anticipated new national penal code sanctions.
Law firm Duane Morris Vietnam LLC is warning its corporate clients that the crime of illegal dismissal of employees can now earn their executives up to one year in prison.
Violations against occupational safety and hygiene law may also result in punishment that could range from a VND100 million (USD4,400) fine to up to 12 years’ imprisonment.
Duane Morris stated at the time of its client alert (17 March) that the amendment was under review in the ‘technical correction’ phase at the country’s National Assembly, and the final official version will take some weeks or even months to be passed. However, Duane Morris warned it is most likely that lawmakers do not have any intention to lighten the statutory penalties under consideration.
“Therefore, for avoidance of legal risks, all and every employers and/or their persons-in-charge are strongly recommended to stay cautious whenever conducting any behaviours (including but not limited to illegal dismissal acts) that may make the dismissed employees or their families fall into difficult situations or go on strike,” said Duane Morris Vietnam LLC.
Oliver Massmann, general director of Duane Morris Vietnam, said that organisations should update their internal labour rules with a fully Vietnam law-compliant dismissal procedure and keep their managing team informed of the new stipulations.
“The new amendments would make Vietnam’s approach stricter than those of its neighbours, including Cambodia, Indonesia, the Philippines and Thailand,” he added.
Another Hanoi-based lawyer, who declined to be named, believes the Vietnamese government has been under pressure to tighten regulations amid public outcry over alleged incidents involving foreign corporate executives abusing their position of power.
Law firm Rödl & Partner Vietnam also issued a client alert over the regulatory changes but warned of scaremongering – while tough punishments could be available to judges, they may not be used, it said.
According to Stefan Ewers, head of Rödl & Partner’s Ho Chi Minh City office, the underlying significance is Vietnam’s government declaring on 1 January that it would implement a principle of “piercing the corporate veil.” He believes this means management positions are – if not exculpated – liable for criminal actions of the organisation.
Western countries with similar regulations have developed a complex principle of exculpation. For example, criminal liability is not applicable if an executive was not able to prevent a breach of labour laws because lower-level staff colluded to breach formal regulations.
“Fortunately in Vietnam, piercing the corporate veil to indict a member of the management in a limited liability company is not that easily done,” said Ewers. “And there will only be very few cases where managerial activity is criminalised to begin with.”
Ewers explained that there would have to be a direct correlation between managerial activity and an extremely negative outcome for the employee, such as the sole wage earner in a family committing suicide after illegal dismissal, meaning the family falls into poverty.
That said, Rödl & Partner warned that Vietnam jurisprudence currently assumes that all an organisation’s actions are influenced by managerial decisions. The law firm therefore also advises organisations and their managers to prepare themselves for future changes to the criminal code.
“Such precautions are not impossible; they can be performed through a sustainable setup at the beginning, process reviews or compliance audits of relevant departments in the organisation,” Ewers said.
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