In official letter No. 1997/LDTBXH-LDTL issued on 22 June 2011 Vietnam's Ministry of Labour-Invalids and Social Affairs concluded that an employer erred when refusing to sign a new labor contract with an employee who worked 4 days past the expiration date of her labor contract. In coming to this conclusion, a rare concept in Vietnam, estoppel, is applied.

In Vietnam, a labor contract must be either (i) a definite term contract (ie. the employment term is limited and the expiration date is set out in the contract), or (ii) an indefinite term contract (the employment term is not for any fixed period, and termination is according to the parties).

For a definite term contract, the expiration date is set at the time the contract is signed and as such the employment relationship comes to an end. The question is whether there is an assumption that the contract renews automatically on the same terms.

The rule built under the laws is that the employee, by their continued working after the expiration date, acts in the place of offeror and that, by his silence, the employer accepts the offer.

Under Article 27 of the Labor Code, if, subsequent to the expiration date of a definite term contract, the employee continues to work but the employer does not stop the employee working, a new employment term is automatically extended and within 30 days from the expiration date of the (previous) contract, the employer must sign a new contract to formalize the employment.

Thus a new agreement is deemed to have been formed if, after the expiration date of a labor contract, the employer says nothing about the employee's continuing work. In this situation, the employee's continuing work is an offer (by way of act) for new employment; and silence acts as consent. This estoppel rule applies even though the employer may have been ignorant of the employee's presence in the company (for continued working) after the expiration date.

Employers must be careful, then, to take care when a definite term employment contract approaches expiration. First a signed acknowledgment of employment termination is best used to preserve any termination discussions. Second, ensure that the employee does not work beyond the date of the termination as one day is enough to trigger a new contract under the court's reasoning.

(*) Please contact the authors at xuan.dang@indochinecounsel.com or our partners if you wish to have more information or specific advice for the topic of this article.