Can an Indefinite-term Labor Contract be Signed with a Foreign Employee?
From January 01, 2021, Article 151 of the 2019 Labor Code specifies that only a definite-term labor contract can be signed with a foreign employee with the term not exceeding the work permit term, and the parties may agree to enter into several definite-term labor contracts. The provision of signing an indefinite-term labor contract after two occasions of signing a definite-term labor contract does not apply to a foreign employee (Article 20 of the 2019 Labor Code).
Is a Work Permit Required for a Foreign Legal Representative of an Enterprise if He/She Works Outside of Vietnam?
The legal representative (LR) of an enterprise is classified as a 'manager' under the provisions of the labor law. Therefore, obtaining a work permit is required. The exceptions are for cases where the LR is also (i) an owner or a capital contributing member of a limited liability company owning a capital contribution valued at VND 3 billion or more; or (ii) a Chairperson or a member of the Board of Directors of a joint stock company owning a number of shares valued at VND 3 billion or more. In such cases, the LR is exempt from the work permit requirement.
In practice, there are many foreigners who work for foreign-owned enterprises holding the LR title, but (i) they do not fall into any work permit exemption categories and (ii) they are not present in Vietnam to work as the LRs. This is common in companies with foreign-investment or multinational corporations, where the LR is chosen and nominated by the Group solely to hold the LR title for the subsidiary in Vietnam in order to comply with the internal regulations of the Group. However, the selected person is either not regularly present in Vietnam or does not actually live and work in Vietnam to manage the business since having his/her name on the Enterprise Registration Certificate is a mere formality. This case leads to the question as to whether it is necessary to apply for a work permit for a foreigner in such circumstances?
To answer this question, both the enterprise law and the labor law must be taken into consideration. Article 12 of the 2020 Enterprise Law provides that enterprises must ensure that at least one LR resides in Vietnam; when the last LR residing in Vietnam is absent from Vietnam, such person shall execute a written authorization appointing another person residing in Vietnam to perform the LR's rights and obligations. Accordingly, if an enterprise has only one LR, it is compulsory to apply for a work permit for this LR, as the LR must always maintain a residence address in Vietnam to meet the requirements of the enterprise law. Under these circumstances, it will be the determination of the labor authority that this LR resides and works in Vietnam and the enterprise is therefore obliged to apply for a work permit.
The enterprise law allows businesses (including limited liability companies and joint stock companies) to have more than one LR. Therefore, enterprises having only one LR, as mentioned above, can register another LR, either a Vietnamese national or a foreigner frequently residing in Vietnam. As such, the enterprise does not have to replace the LR but still (i) is in compliance with the enterprise law by ensuring there is at least one LR residing in Vietnam and (ii) does not have to apply for a work permit for the first LR (i.e. the first LR still holds the LR title without violating the labor law). It follows, however, that because the purpose of registering the second LR is merely to comply with the enterprise law in terms of formality, as mentioned above, rather than grant real power to the second LR, business owners worry about the possibility of that said second LR may abuse power utilizing his/her LR title. This worry can be settled by specifying each LR's rights and obligations in the Charter of the enterprise in compliance with the law in Vietnam as well as the internal control requirements of the enterprise/Group. It should be noted that if the enterprise has more than one LR, but its Charter does not prescribe clearly the rights and obligations division among LRs, each LR may act as its fully competent representative before a third party (Article 12 of the 2020 Enterprise Law).
To illustrate this by an example, there is a limited liability company established in Vietnam which is a subsidiary of its Group in the United Kingdom. The company has registered for two LRs. The first LR is Dutch and works for the Group in the United Kingdom. He is not able to regularly reside in Vietnam. The second one is a Vietnamese national residing in Ho Chi Minh City. The Group wants the first LR to have greater powers as well as control over the activities of the second LR. Therefore, the Charter of the company provides that the second LR (the Vietnamese national) shall directly carry out management duties and sign any type of documents relating to the daily operation of the company. In addition, the Charter provides that the first LR (the foreigner), who does not directly operate the company, has the right to veto any decision/activity of the second LR at any time. Accordingly, although the first LR has not been in Vietnam from the date the company was established, such act still complies with the enterprise law because the second LR is residing in Vietnam. In fact, the Department of Labor – Invalids and Social Affairs, in an actual labor inspection at this company, agreed that the company was not obliged to apply for a work permit for the first LR.
For a second example, there is a joint stock company established in Vietnam having two foreign individual shareholders as its LRs. Neither of the LRs have resided in Vietnam from the date the company was established, but an address in Vietnam has been designated as theirs in order to meet the requirements of the enterprise law. In an actual inspection at this company, the Inspectorate of Department of Planning and Investment of Da Nang City requested the company present confirmation of residence for the two LRs. The company failed to provide the same and was given a compliance warning (without any administrative sanction) by the Inspectorate. Should the company have declared inaccurate residence information of the two LRs and this action was detected, the company could have been fined from VND 20,000,000 to VND 30,000,000 for the acts of "declaring inaccurate or false information in the application file for enterprise registration" and "failure to have a legal representative residing in Vietnam", and it would be forced to register a person residing in Vietnam as its LR and correct inaccurate or false information (Article 43 & 51 of Decree No. 122/2021/ND-CP).
If a Foreigner Receives a job Offer in Vietnam while Traveling, is He/She Allowed to Work in Vietnam?
In principle, the foreigner working in Vietnam shall obtain a work permit first (except for work permit exemption categories). Therefore, if a foreigner holding a tourist visa (DL) is traveling in Vietnam and receives a job offer to work in Vietnam, the foreigner is still obliged to obtain a work permit. The question is: can a foreigner holding a tourist visa be granted a work permit?
Currently, there is no provision about which type of visa is compulsory in the application file for granting a work permit to a foreigner. The licensing authorities in Ho Chi Minh City unofficially confirm that foreigners holding a tourist visa can be granted a work permit. However, there are some issues to consider:
Firstly, actually working will not be allowed even though a work permit has been granted: According to labor provisions, a foreigner who obtains a work permit is allowed to work in Vietnam. However, pursuant to the legal provisions for entry, exit and residence of foreigners in Vietnam, a foreigner holding a tourist visa is not allowed to stay in Vietnam for any activities other than visiting/tourism. Therefore, to legally stay in Vietnam for work, foreigners need to obtain a work visa.
Secondly, foreigners having no work permit are required to exit Vietnam to change the tourist visa into a work visa: Pursuant to the provisions of the 2014 Law on Entry, Exit, Transit and Residence of Foreigners in Vietnam, amended in 2019, from July 01, 2020, foreigners having a work permit (or a confirmation of work permit exemption in accordance with the labor law) are entitled to change their type of visa while they are still in Vietnam. This means that without the work permit, a foreigner holding a tourist visa who wishes to change to a work visa is required to exit Vietnam first before applying for a work visa.
Thirdly, foreigners will not be granted a temporary residence card if he/she is holding a tourist visa: Article 36.1 of the 2014 Law on Entry, Exit, Transit and Residence of Foreigners in Vietnam, amended in 2019, provides that "foreigners entering Vietnam by LV1, LV2, LS, DT1, DT2, DT3, NN1, NN2, DH, PV1, LD1, LD2 and TT visas" shall be granted temporary residence cards with categories similar to visa categories. Accordingly, a foreigner holding a tourist visa (DL) shall not be granted a temporary residence card.
Fourthly, foreigners can be subject to monetary penalties and/or expulsion from Vietnam if he/she works in Vietnam while holding a tourist visa: Foreigners working in Vietnam while holding a tourist visa can be fined from VND 15,000,000 to VND 20,000,000 and/or expelled from Vietnam due to act of "failure to use his/her visa for the stated purpose" (Article 18 of Decree No. 144/2021/ND-CP).
Why is there an Obligation to "Declare the Temporary Residence of Foreigners" when the Foreigner is already Obliged to Obtain a Visa/Temporary Residence Card?
When a foreigner enters Vietnam, he/she has to obtain a visa/temporary residence card to lawfully reside in Vietnam, as well as his/her temporary residence must be reported to a public security office of the commune, ward, or town where the foreigner resides. This includes (i) accommodation facilities for visitors, (ii) guest houses, (iii) housing areas for foreigners working and studying in Vietnam, (iv) medical facilities, (v) private houses, etc. – collectively referred to as the 'accommodation facility'. The report shall be made within 12 hours – 24 hours (depending on each area) from the time that the foreigner arrives at the accommodation facility.
The responsibility for reporting the foreigner's temporary residence belongs to the representative of the accommodation facility, authorized person, or any person in charge of directly managing or operating the accommodation facility. In the event that the accommodation facility is rented by a foreigner for long-term residence and the host does not reside there, or in case a private house is bought by the foreigner, the party to the long-term lease contract or purchase of house contract shall be responsible for reporting the temporary residence of the foreigner residing at such accommodation facility (hereinafter referred to as the 'host').
It is noteworthy that some important administrative procedures relating to the foreigner will be affected if his/her temporary residence is not declared. This is because a valid Declaration Form of temporary residence or Confirmation Letter of temporary residence of the foreigner is one of the required documents for several procedures. For example:
- The procedure for granting a visa/temporary residence card;
- The procedure for granting a Vietnamese Criminal Record to a foreigner in Vietnam; and
- The procedures for granting a work permit to the foreigner in the matter of obtaining a Vietnamese Criminal Record because no foreign Criminal Record is available.
Therefore, foreigners should address this issue with their host so that they can timely fulfill this declaration obligation in accordance with the Vietnam law. The host failing to declare the foreigners' temporary residence may be fined under Decree No. 144/2021/ND-CP.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
