1. Recruiting or appointing the Employee working for the Employer as managerial position in the enterprise.
According to the Law on Enterprises, apart from the case where the board of management may appoint one of the board of management’s members to be general director, the board of management may also choose the form of hiring a general director – but not a member of the board of management. Thus, the selection of the Employee to hold management positions, including the position of general director is not contrary to the Law on Enterprises.
For the term of management positions in the enterprise, the term of the general director must not exceed 5 years. For other managerial positions, the Law on Enterprise does not have any regulations in terms of the term, but the enterprise may include a similar term for other management positions as in the case of the general director’s term. Therefore, the corporate decision to appoint a particular position for these individuals is only meaningful in terms of enterprise governance, concurrently ensuring compliance with the Law on Enterprises. In this case, the relationship between the enterprise and those as aforesaid should be defined as the employment relationship i.e. the labour relationship governed by the labour law and the LC must serve as the basis for the parties to apply and comply with.
2. Which type of LC signed with the Employee as recruits or current workers will allow them to be appointed to the managerial positions in the enterprise
2.1 The Enterprise recruits the Employee to hold managerial positions in the enterprise.
Under the Law on Enterprise, the term of the general director/director does not exceed 5 years. Thus, if an enterprise recruits an Employee to work as general director/director, the enterprise will not be able to sign an indefinite-term LC but only a definite-term LC with a term of 36 months (3 years), and after the expiry of the first LC term, the second definite-term LC may be renewed for a definite-term of 24 months (02 years) or vice versa for consistency with the term of 5 years of the title of general director/director.
2.2 If the Employees is working under an indefinite-term LC then is appointed to enterprise managerial positions
For compliance with the Law on Enterprise regarding the term of the general director as well as other managerial positions, the best solution for the enterprise is to change the form of LC signed with the Employee into the definite-term LC in order to ensure the consistency between the LC and the appointment decision. Changing the form of LC requires the enterprise to terminate the indefinite-term LC with the Employee. In order to do so, the enterprise should explain and persuade the Employee to agree to terminate the current LC and sign a new definite-term LC. It should be noted that, for a term of 5 years as per the appointment decision of the management position, the enterprise has the choice to sign the first definite-term LC with the Employee for a period of 36 months (3 years), and after the expiry of the first LC, will sign the definite-term LC with a term of 24 months (2 years) or vice versa.
However, not all of the Employees are easily willing to agree to change from an indefinite-term LC to a definite-term LC according to the above solution because the Employee may worry about risks from the fact that his or her LC is not renewed when it expires. Therefore, upon changing the type of LC, the Employer should consider the following alternatives (as the case may be) to apply:
- Terminating indefinite-term LC with the Employee to sign a new indefinite-term LC which specifies the title of the Employee as general director/managing director/other functional director.
At that time, a new indefinite-term LC will serve as the basis for the parties to comply with the payment of employment benefits to the Employee in accordance with the labour law, but the appointment decision in accordance with the Law on Enterprises will serve as the basis for calculating the term of the said titles held by the Employee. At the end of the terms, if the Employer does not need to re-appoint, they may sign the LC appendix to amend the Employee’ job title and pay rate.
However, it should be noted that this solution will entail some risks for the Employer, such as if the Employer no longer has demand to re-appoint the Employee to continue holding such positions and propose the Employee to sign the LC appendix to amend the Employee’ job title and pay rate (which is usually lower than as stated in LC), the Employee in case of disagreement will then argue based on new indefinite-term LC specifying his or her title as general director/managing director/ functional director without agreeing to change his or her title and pay rate though the term of 5 years has expired. Therefore, this alternative will be riskier for the Employer if the Employer does not want the Employee to hold that position anymore. Thus, the Employer may consider applying the following solution.
- Signing a LC appendix with the Employee to record the Employee’s title in the same manner as the said solution if the Employer does not want to sign another indefinite-term LC with the Employee. In addition, in order to avoid further legal risks for the Employer in cases where the Employer does not wish to continue re-appointment the Employee, the Employer may include in an appendix the pay rates applying for the above management positions and the period of the appendix (5 years) corresponding to the terms stated in the appointment decisions. Accordingly, when the terms end, the Employer and the Employee can terminate this appendix and continue to implement the signed LC.
 Article 162 Law on Enterprises
Article 162 Law on Enterprises
Article 162 Law on Enterprises