Question 24: Are Employers required to sign an indefinite LC with Employees after only a single extension of the LC in the form of an appendix?


As for the extension of an LC in form of an appendix, the labour law as well as the relevant guiding documents has been not yet specified. Instead, the law only regulates the amendment of the LC term in form of an appendix instead of signing a new LC. Therefore, in practice, in order to extend the LC term in accordance with the labour law, Employers often changes the LC term rather than extending (renewing) the LC term. For example, Employee A is engaged in a definite LC that starts on 01/01/2017 until end of 31/12/2017. In order to extend the LC term with Employee A for one more year (i.e. until end of 31/12/2018), Employers amend the LC term from 01/01/2017 until end of 31/12/2018 instead of extending the LC term following the expiry date, i.e. from 01/01/2018 until end of 31/12/2018. In addition, upon amendment and supplement of an LC related to its term, Employers and Employees should note that the LC is amended only once with its appendix and must not change the type of signed LC[1]. That is, if the LC is entered into as a seasonal LC, the LC term after amendment must not exceed 12 months and if the LC is entered into as a definite LC, its term must not exceed 36 months.

On the oher hand, considering the cases of compulsory conversion of the type of LC, the labour law stipulates that if an LC expires and the two parties wish to renew the LC as a definite LC, this case is allowed for one time only. After that, if Employees continue working, then the LC must be signed as an indefinite LC[2]. Accordingly, this regulation only applies when Employers and Employees sign a completely new LC. The signing of an LC appendix to amend the LC term as analysed above will not be considered a new LC serving a basis for conversion into the indefinite LC as prescribed.

In summary, upon entering into an indefinite LC, Employers and Employees are entitled to amend the LC term once in the form of an appendix provided that the amended term does not exceed 36 months. In cases where the two parties continue to maintain labour relationship after the first LC expiry, the two parties may sign another LC determining the new term, at the same time, have the right to amend its term by the same appendix as in the original LC. After the time limit for the second LC expires and Employees still continue working, Employers and Employees must enter into an indefinite LC. As such, Employers and Employees will have at most 2 times to sign definite LCs and appendixes before signing an indefinite LC.

[1]Article 5 Decree 05/2015/NĐ-CP dated 12/01/2015

[2]Article 22.2 Labor Code