INVALID COLLECTIVE LABOR AGREEMENT 2025
Topic 22:
INVALID COLLECTIVE LABOR AGREEMENT
MSc. Hoàng Thị Minh Tâm
SUMMARY OF THE CASE AND COURT DECISION
[Decision No. 01/2018/QĐDS-ST dated January 5, 2018, “On declaring a collective labor agreement invalid” by the People’s Court of Tân Thành District, Bà Rịa – Vũng Tàu Province]
Summary of the Case:
The Management Board of Industrial Zones of Bà Rịa – Vũng Tàu Province requested the declaration of the collective labor agreement signed between G Energy Service LLC (abbreviated as G Company) and the collective of employees as invalid, citing that certain agreed-upon provisions contravened legal regulations. Specifically, these provisions included:
– Clause 2, Article 9 of the agreement states: “In cases where the aforementioned holidays coincide with weekly rest days, employees shall be entitled to compensatory rest on the next working day or as arranged by the Company.”
– Point c, Clause 2, Article 10 of the agreement states: “Employees may choose compensatory rest time equivalent to the allowance instead of receiving the allowance.”
– Clauses 3 and 5, Article 11 of the agreement state: “Any remaining unused leave days must be utilized by December 31 of the year, otherwise they will be automatically forfeited,” and “The Company shall not compensate for unused leave days except in cases of termination of the employment contract.”
– Clause 9, Article 15 of the agreement states: “Female employees giving birth must have contributed to social insurance for six months or more within the twelve months prior to childbirth. Otherwise, such employees shall not be entitled to social insurance benefits.”
– Clause 7, Article 17 of the agreement addresses cases of leave deemed justified, such as natural disasters or fires, requiring “confirmation from the People’s Committee of the ward or commune,” which aligns with legal provisions.
Court Decision:
[…] The court granted the request of the Management Board of Industrial Zones of Bà Rịa – Vũng Tàu Province and declared the collective labor agreement partially invalid. […]
COMMENTARY
I. Introduction
A collective labor agreement is an agreement reached through collective bargaining and formalized in writing by the signing parties [Article 75 of the 2019 Labor Code]. The formation of a collective labor agreement stems from the voluntary and mutual consent of the parties involved in the employment relationship. Its content represents the concretization of legal provisions on labor regimes into agreements concerning working conditions, labor utilization, and the rights and obligations of the parties within the employment relationship, tailored to the production and business conditions of the enterprise.
In other words, the content of a collective labor agreement embodies the legal provisions governing employment relationships, closely tied to the employees’ benefits. To some extent, it serves as a measure of the level of employee protection, the capacity of the employees’ representative organization, and the employer’s sense of responsibility. Although established through negotiation and mutual agreement, to ensure its validity, the parties must adhere to the required procedures, formalities, and authority for signing the agreement, while ensuring that its content does not contravene legal regulations.
II. Legal Issues
- Content of the Collective Labor Agreement Must Not Contravene Legal Provisions
In principle, all agreements between parties in an employment relationship must not contradict legal provisions. On this basis, with respect to the content of a collective labor agreement, labor law encourages agreements that provide employees with more favorable conditions than those mandated by labor legislation. Conversely, any provisions negotiated and included in the agreement that grant employees fewer rights than those prescribed by law, or that are inconsistent with legal requirements, are not permissible. Depending on the extent of the violation, a collective labor agreement may be declared entirely invalid or partially invalid. A collective labor agreement is deemed partially invalid when one or more of its provisions violate the law [Article 86 of the 2019 Labor Code].
Accordingly, the collective labor agreement between G Company and the collective of employees was found to contain certain provisions inconsistent with labor law, offering employees fewer rights than those guaranteed by legal standards. As a result, the court upheld the request of the Management Board of Industrial Zones of Bà Rịa – Vũng Tàu Province. Upon comparing the specific provisions of the agreement with current labor law regulations, the author observes the following:
First, Clause 2, Article 9 of the agreement states: “In cases where the aforementioned holidays coincide with weekly rest days, employees shall be entitled to compensatory rest on the next working day or as arranged by the Company.” This provision is compared to Clause 3, Article 111 of the 2019 Labor Code, which stipulates: “If a weekly rest day coincides with a public holiday or Tet holiday as prescribed in Clause 1, Article 112 of this Code, employees shall be entitled to compensatory rest for the weekly rest day on the next working day.”
Thus, labor law explicitly designates the “next working day” as the specific time for compensatory rest and does not permit employers to arbitrarily schedule this compensatory rest for a different day. Consequently, the provision in the collective labor agreement contravenes Clause 3, Article 111 of the 2019 Labor Code [A similar provision is also found in Article 115 of the 2012 Labor Code].
Second, Point c, Clause 2, Article 10 of the agreement states: “Employees may choose compensatory rest time equivalent to the allowance instead of receiving the allowance.” This provision implies that when employees work overtime, they will not receive overtime pay; instead, they will be granted compensatory rest corresponding to the overtime hours worked.
However, in principle, when employees work overtime, employers are required to pay overtime wages at the rates prescribed by Article 98 of the 2019 Labor Code [A similar provision exists in Article 97 of the 2012 Labor Code]. Furthermore, neither Article 98 of the 2019 Labor Code nor Article 97 of the 2012 Labor Code contains any provision allowing employers to substitute compensatory rest for overtime pay without compensating employees for the additional hours worked.
Clearly, this provision in the collective labor agreement diminishes employees’ rights compared to those guaranteed by labor law. Therefore, the court’s determination that this provision is invalid is entirely appropriate.
Third, Clauses 3 and 5, Article 11 of the collective labor agreement state: “Any remaining unused annual leave days must be utilized by December 31 of the year, otherwise they will be automatically forfeited,” and “The Company shall not compensate for unused leave days except in cases of termination of the employment contract.” When compared to the corresponding provision in Article 113 of the 2019 Labor Code, the author notes that the scheduling of annual leave is determined by the employer. Thus, requiring employees to take their annual leave before December 31 of the year is not considered contrary to the law.
However, the issue of compensating employees for unused annual leave days or days not fully taken arises only in cases where the employee resigns or loses their job [This differs from the 2012 Labor Code. Under Article 114 of the 2012 Labor Code, employees who resign, lose their jobs, or for other reasons do not take or fully utilize their annual leave are entitled to payment for the unused days; for employees with less than 12 months of service, annual leave is calculated proportionally to their working time, and if not taken, it is compensated in cash].
Therefore, the provision stating that no payment is made for unused annual leave except upon termination of the employment contract is, in ordinary circumstances, consistent with Article 113 of the 2019 Labor Code.
Nevertheless, in another scenario—where employees work overtime at the employer’s request and are unable to take their annual leave as scheduled—the failure to compensate for unused annual leave days is inconsistent with Articles 98 and 113 of the 2019 Labor Code.
Fourth, Clause 9, Article 15 of the collective labor agreement states: “Female employees giving birth must have contributed to social insurance for six months or more within the twelve months prior to childbirth. Otherwise, such employees shall not be entitled to social insurance benefits.” In contrast, the 2014 Law on Social Insurance stipulates that female employees giving birth who have contributed to social insurance for at least 12 months and, during pregnancy, must take leave to rest as prescribed by an authorized medical facility, need only have contributed for at least 3 months within the 12 months prior to childbirth [Clause 3, Article 31 of the 2014 Law on Social Insurance].
It is evident that the scope of eligibility for maternity benefits under Article 31 of the 2014 Law on Social Insurance is broader than the provision in the collective labor agreement. In other words, the agreement’s provision regarding employees’ benefits is inconsistent with the 2014 Law on Social Insurance.
Fifth, Clause 7, Article 17 of the collective labor agreement addresses justified absences, such as those due to natural disasters or fires, requiring “confirmation from the People’s Committee of the ward or commune.” When compared to the corresponding provision in Article 125 of the 2019 Labor Code, it is clear that the Labor Code does not mandate confirmation from the ward or commune People’s Committee for absences to be deemed justified. Thus, this requirement in the collective labor agreement is inconsistent with labor law regulations [The provisions of the 2012 Labor Code, as detailed in Decree No. 05/2015/NĐ-CP and Circular No. 47/2015/TT-BLĐTBXH, align similarly with the current provisions in Article 125 of the 2019 Labor Code].
Based on the analysis of these provisions, the author fully agrees with the court’s decision to declare the aforementioned provisions of the collective labor agreement invalid. These provisions restrict employees’ rights beyond what is permitted by labor law and are inconsistent with legal standards.
- Invalid Collective Labor Agreement and Handling of an Invalid Collective Labor Agreement
A collective labor agreement must be executed in accordance with legal provisions. If it fails to comply, it may be deemed invalid, thereby not giving rise to legal rights and obligations between the collective of employees and the employer. In essence, the invalidity of a collective labor agreement serves as a sanction for violations of legal requirements concerning the negotiation and execution of such agreements.
There are two scenarios regarding the invalidity of a collective labor agreement: partial invalidity and complete invalidity. A collective labor agreement is partially invalid when one or more of its provisions violate the law. It is entirely invalid when its entire content contravenes the law, when it is signed by an individual lacking proper authority, or when the negotiation and execution process does not adhere to legal requirements [Article 86 of the 2019 Labor Code].
In the case under discussion, the court determined that the authority to sign the collective labor agreement complied with legal provisions. Other provisions of the agreement were also found to be consistent with labor law. However, the specific provisions analyzed earlier were deemed inconsistent with legal requirements. As a result, these provisions were declared invalid, but this did not affect the remaining parts of the agreement. The provisions that aligned with legal standards retained their normal legal effect.
Additionally, the court ruled that the rights, obligations, and benefits of the parties as stipulated in the collective labor agreement, corresponding to the invalidated portions, would be resolved in accordance with legal provisions and other lawful agreements within the employment contract. The author finds this conclusion by the court to be entirely persuasive and consistent with Articles 86 and 88 of the 2019 Labor Code (corresponding to Articles 78 and 80 of the 2012 Labor Code) [The court adjudicated the case based on the 2012 Labor Code, but applying the current provisions of the 2019 Labor Code would fundamentally yield the same outcome].
III. Conclusion
The 2019 Labor Code and its implementing regulations have provided the parties with guidance on the content, procedures, and steps for negotiating, executing, and implementing a collective labor agreement. However, in practice, there remain instances where collective labor agreements are signed with provisions that fail to safeguard employees’ rights or are deemed inconsistent with legal requirements, resulting in partial or complete invalidity of the agreement.
Therefore, it is imperative to review the negotiated content, ensure that the negotiation and execution processes comply with labor law, and protect the rights and interests of the parties within the employment relationship.
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