Only Two Types of Labor Contracts Effective from January 1, 2021

Current labor legislation stipulates that depending on the needs and interests between employers and employees, both parties can choose to implement one of three types of labor contracts, including: indefinite-term labor contract, definite-term labor contract (from 12 months to 36 months), and seasonal labor contract (less than 12 months).

However, the Draft Labor Code (revised) has removed the content regarding seasonal contracts or contracts for a job with a duration of less than 12 months, instead, there are only 02 types of contracts remaining:

- An indefinite-term labor contract is a contract in which both parties do not specify the term or the time of termination of the contract.

- A definite-term labor contract is a contract in which both parties specify the term and time of termination of the contract, not exceeding 36 months (the current regulation is from 12 months to 36 months).

In the event that a definite-term labor contract has expired but the employee continues to work, within 30 days from the expiration date of the contract, both parties must sign a new labor contract. If a new labor contract has not been signed, the rights and responsibilities of both parties will be conducted according to the expired contract; if 30 days pass without signing a new labor contract, the definite-term contract will become an indefinite-term labor contract.

In the event that both parties sign a new definite-term labor contract, it can only be signed one additional time. After that, if the employee continues to work, they must sign an indefinite-term labor contract, except for the cases stipulated in Clause 4 Article 22, Clause 1 Article 151, Clause 3 Article 153, and Clause 4 Article 179 of this Code.

As such, the regulations on types of labor contracts in the Draft Labor Code do not change much compared to the current regulations in the Labor Code 2012. However, if this Draft is approved, from January 01, 2021, employers and employees will only be able to enter into one of the two types of contracts: definite-term labor contract and indefinite-term labor contract.

The aforementioned content is based on Article 21 of the Draft Labor Code (revised), expected to be effective from January 01, 2021.

Duy Thinh

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