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Is It Necessary to Build Democracy Regulation at Enterprise?

Is It Necessary to Build Democracy Regulation at Enterprise?

(Pham Thanh Truc & Nguyen Huu Phuoc Esq. – Phuoc & Partners)

“Democratic regulation at the grassroots level at workplaces” (“Democratic Regulation”) is a relatively new phrase for majority of enterprises in Vietnam. The Democratic Regulation according to the Labour Code means provisions on rights and responsibilities of employees, employers, organisation representing employees with contents that employer must  publicize; employees are allowed to know, give opinion on, decide, inspect and supervise and other forms of democratic implementation at workplaces. The concept of Democratic Regulation is first mentioned in the Labour Code 2012, detailed in Decree 60/2013/ND-CP which was replaced by Decree 149/2018/ND-CP with many progressive regulations such as: concretize the principle of implementing democracy, clearly stipulating responsibility of employer in issuance and implementation of the Democratic Regulation. That spirit is still inherited by the Labour Code 2019 and Decree 145/2020/ND-CP and it is promoted to ensure legitimate interest of employees, contribute to creating a healthy working environment, and avoid workplace negativity.

With participation of many enterprises with diverse industries, job market is increasingly bustling and highly competitive for both employees and employers. Recruiting high-quality human resources is always a expectation of enterprises, but after recruiting, retaining talent is another issue. In order to gain loyalty from employees, besides salary and labour welfare, a healthy and democratic working environment will be a key factor for employees to choose either to stay or join other enterprises. The Democratic Regulation is a necessary premise for employers to create a positive working environment for employees.

What are differences between Democratic Regulation, Internal Labour Regulation and Collective Employment Agreement?

Basically, Democratic Regulation, Internal Labour Regulation (“ILR”) and Collective Labour Agreement (“CLA”) are issued by employer and are applied within enterprises. The Democratic Regulation and ILR are issued, amended and supplemented by the employer after consulting with the organisation representing employees at the enterprise (if any), especially for the Democratic Regulation, employer needs to consult the representative group for completion and promulgation. In addition, unlike the Democratic Regulation and ILR, CLA is signed by representatives of the employees and the representatives of employer through collective bargaining (provided that more than 50% of the employees vote in favour). Furthermore, while ILR must be registered with a competent labour authority for validity, CLA just need to be notified in writing to the competent labour authority. As for the Democratic Regulation, it is only necessary to consult with the organisation representing employees at the enterprise and the representative group (if any).

Democratic Regulation, ILR and CLA all play different roles and support each other for the ultimate goal of creating a progressive, civilised and disciplined working environment at the workplace. Specifically, Democratic Regulation guarantees the right to know, give opinion on, decide, inspect and supervise a number of issues related to legitimate right and interest of employees in accordance with the provisions of the labour law. For example, employees have the right to give opinion through the organisation representing employees at the enterprise  on the ILR promulgation and CLA signing. Meanwhile, ILR helps standardise behaviour and relationship in the enterprise, and material responsibility for employees who violate labour discipline. A CLA is an agreement between employee collective and an employer on working conditions or/and labour welfare such as overtime salaries, bonuses, allowances, extra vacation days, etc. Currently, the law does not provide any specific provision for CLA but only requires that the CLA is not contrary to the provisions of the applicable law and at the same time encourage favourable terms for employees than the law.

Thus, Democratic Regulation plays a role of ensuring democratic rights of employees at the workplace; ILR stipulates the code of conduct that employees must comply with to ensure order at the workplace; and CLA is a bilateral agreement to improve welfares of employees. All three of these regulations are effective at enterprises, however, if ILR and CLA have overlapping scopes, employers are responsible for amending the ILR to be consistent with the CLA[1]. In addition, while the ILR and the Democratic Regulation are internal documents that must be obtained by enterprises with 10 employees or more, CLA is only an optional document in case both enterprise and employee collective consider it is necessary.

Is it mandatory to have Democratic Regulation at the workplace?

Decree 145/2020/ND-CP stipulates that any enterprise with 10 employees or more must promulgate a Democratic Regulation after consulting with organisation representing employees at the enterprise and the representative group[2]. Thus, similar to the registration requirement for ILR, qualified enterprises have to promulgate a Democratic Regulation that clearly stipulate content and sequence of dialogues at the workplace, issues that employers have to publicize to employees and let the employees give their opinion on. Please note, in case an enterprise meets the conditions but refuses to promulgate and implement the Democratic Regulation, it may be subject to an administrative fine of up to VND6,000,000 according to Decree 28/2020/ND-CP[3]. In addition, any employee who detects violations of Democratic Regulation compliance will fully have the right to complain to employer to protect his or her legitimate right and interest. If an employee disagrees with decision on settlement of the first-time complaint, or after 30 days from the date of receipt of complaint but the first-time complaint has not been resolved yet, he or she has the right to file a second-time complaint to the Chief Inspector of the Department of Labour – War Invalids and Social Affairs, where the enterprise is located in order to be settled[4].

Building Democratic Regulation plays an important role in creating a healthy working environment, helping employer and employees reach a unanimity on labour issues, helping the two parties deeply understand each other thereby agreeing to promote the common development of the enterprises. However, the promulgation and implementation of Democratic Regulation in most enterprises is still formalistic and often being “forgotten”, has not been appreciated by leaders and is often not considered to promulgate in accordance with the actual situation, nature and size of enterprises. Such reality leads to the spirit of democracy at the enterprises is just invisible only on paper, employees are absolutely not allowed to express their aspirations or present personal recommendations about difficulties or negatives that exist at the workplace, as well as useful contributions for enterprise growth. The undemocratic working environment also makes employees feel forced to obey orders, so the parties will not be able to understand each other and this is a main reason for labour disputes or even strikes. Therefore, it is necessary to build a Democratic Regulation in accordance with the unique characteristics of each enterprise to improve the quality of work, work spirit, and contribute to create a healthy working environment for both employees and enterprises.

How to build the effective Democratic Regulation as well as comply with the law?

The Democratic Regulation shall[5] be built base on the following three main principles: (i) Goodwill, cooperation, honesty, equality, publicity and transparency; (ii) Respecting the legitimate rights and interests of employees, employers and other relevant organisations and individuals; and (iii) Democratic Regulation implementation is not contrary to the provisions of law and social ethics.

In addition, Decree 145/2020/ND-CP also guides relatively clearly on the main contents to be followed by employers to promulgate the Democratic Regulation, including: (i) Contents that enterprises must publicised such as business performance, deduction, establishment and use of bonus and welfare funds contributed by employees… [6]; (ii) Issues and form for employees to give opinion and decide on inspection and supervision; (iii) Organisation of dialogue at the workplace; and (iv) Organisation  of employee conference to exchange and connect between employers and employees in promoting enterprise development. Besides the above content, enterprises can also supplement other forms of democracy at the workplace, depending on the needs and characteristics of each enterprise. Therefore, to ensure the effectiveness and efficiency of the Democratic Regulation, enterprises should note the following points while drafting and issuing the Democratic Regulation:

  • Firstly, ensuring the compliance with the core principles and main contents of the Democratic Regulation in accordance with the law;
  • Secondly, base on the business and production activities of the enterprise and the labour welfare regime, the internal regulations of each type of enterprises will be supplemented by the enterprise to suit the need of actual situation of the For example, if an enterprise has a charity fund or a fund for extra-curricular activities, the Democratic Regulation should stipulate that employees are allowed to give opinion on, decide, inspect and supervise the implementation of these issues;
  • Thirdly, although the law allows enterprises to choose many different forms to implement Democratic Regulation as long as it is not prohibited by law, it is necessary to clearly prescribe one or a number of certain forms to do for consistency, avoiding unnecessary confusion; and
  • Fourthly, as mentioned above, the Democratic Regulation is only issued after consulting the organisation representing employees at the enterprise and the representative group because the Democratic Regulation has a direct effect on the right and interest of employees. Once promulgated, the Democratic Regulation needs to be publicized at the workplace or through online forms, and employers shall ensure that employees can access the publicly available information. Enterprises should pay attention to this point to minimise risk that the Democratic Regulation could be considered by the Court or competent State authorities to be invalid and unenforceable.

Procedures for Democratic Regulation effectiveness

The Labour Law does not require enterprises to register Democratic Regulation with competent State authorities. To ensure the Democratic Regulation effectiveness, enterprise needs to consult with the organisation representing employees at the enterprise (if any) and the representative group (if any) during the drafting process and before promulgation. If the parties have different opinions and do not reach a unanimity on the terms of the Democratic Regulation, the enterprises have the right to decide for itself what will be mentioned in the Democratic Regulation but must clearly state reasons of disagreement with the opinion of the others. Finally, the Democratic Regulation, after being promulgated, must be publicized to employees. Enterprises need to fully implement the above steps to ensure the Democratic Regulation effectiveness and limit risks.

The role of grassroots trade unions and organisation representing employees in developing, promulgating and implementing Democratic Regulation

Recognising importance of the development and implementation of Democratic Regulation for the working environment as well as the quality of employees’ work, the Vietnam Ganeral Confederation of Labour has issued Guidance 1360/HD-TLD dated 28 August 2019 guide to build and implement Democratic Regulation at the enterprises. This is an advantageous document for grassroots trade unions and organisations representing employees to consult and advise, guide and propagate employees on the construction and implementation of Democratic Regulation at the enterprises. In addition, grassroots trade unions and organisations representing the employees are also responsible for inspecting and supervising the organisation, participants, and the time when the dialogue at workplaces and the employee conference has been conducted in accordance with the Democratic Regulation and the provisions of the law. Because the majority of employees do not clearly understand relevant legal provisions on their legitimate right and interest as well as are not experts in negotiating to CLA amendments and other internal regulations in a more favourable direction for them. Grassroots trade unions and organisations representing the employees will play an essential role as the representative of employees to negotiate for the purpose of improving labour welfare for employees.

The role of Democratic Regulation is to act as a bridge between employers and employees in exchanging information, expressing aspiration and thought of employees as well as proposing ways to resolve disagreements in the labour relationship. Since then, the effective development and implementation of Democratic Regulation also help strengthen the increasingly harmonious labour relationship, create a healthy and positive working environment, and promote the common development of enterprises so that increase labour welfare for employees. Although developing and promulgating a Democratic Regulation is a mandatory provision, the initiative from the employer will help maximise the benefits that Democratic Regulation can bring to both employees and employers. Therefore, employers need to consider to promulgate the most appropriate Democratic Regulation as possible.

[1] Article 79.1 of the Labour Code 2019

[2] Article 48 and Article 114.4 of Decree 145/2020/ND-CP

[3] Article 14 of Decree 28/2020/ND-CP

[4] Article 15 of Decree 24/2018/ND-CP

[5] Article 42 of Decree 145/2020/ND-CP

[6] Article 43 Decree 145/2020/ND-CP