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Is There any Need Establishing a Trade Union of the Enterprise?

The article with the title: “Is There any Need Establishing a Trade Union of the Enterprise?” written by Lawyer Nguyen Huu Phuoc & Lawyer Lac Thi Tu Duy – Phuoc & Partners is published on Nhip Cau Dau Tu, on Monday, 08/02/2010.


An effective trade union of the enterprise can help harmonize benefits between employers and employees, thereby contributing to corporate productivity enhancement.

Foreign-invested enterprises and privately-owned enterprises psychologically have long wavered over establishing their own trade unions. Their view is that the operation of an enterprise’s trade union is time-consuming, over-manned and troublesome, and in addition, they have to pay union fee for its operation which is equivalent to 1% of their salary/wage fund. Meanwhile, even employees are not eager to join such trade union. They share the same thoughts with enterprises because they are entitled to almost no benefit while they have to pay union fee.

Up to August 2009, the recent statistical data by the Vietnam General Confederation of Labor showed that 60% of foreign-invested enterprises and 80% of privately-owned enterprises had yet to organize trade unions of enterprises. Meanwhile, an enterprise’s trade union plays a crucial role in establishing a harmonizing relationship between employers and employees. Either with no enterprise’s trade union or with an ill-functioning grassroots union, many businesses must face legal troubles that are regrettable and substantially harmful.


The disputes between employees and employers may arise in various forms:

Collective dispute: From 1995 until now, there have occurred nearly 3,000 strikes and go-slows, but their majority has been illegally conducted. The main reason results from the fact that the enterprise establishes no enterprise’s trade union or the executive board of an enterprise’s trade union takes no regulatory moves to organize a lawful strike (a strike is considered to be lawful when it complies with procedures arranged by an enterprise’s trade union.)

Evidently, the strikes on a large scale and to a persistent extent will lead to substantial consequences and no one other than enterprise owners is first victimized by the gravest damages: they still pay salary to non-strikers (the persons who are suspended from work because of a strike) while fixed costs continue arising. More seriously, production and business activities come to a deadlock, which brings employees into discredit in the face of their customers, leaving them missing out on the opportunity to do business because of dealing with disputes.

Certain other issues loom into sight. For example, the enterprise will be carefully “screened” about its operations by the relevant organizations; and the post-strike relationship between employees and employers subjects to tension, affecting corporate productivity in respect of business and production.

Individual dispute: Recently, the disputes over labor disciplinary measures (dismissal or unilateral termination of the labor contract) or those over damage compensation and severance allowance upon termination have been on the rise partly due to economic difficulties, partly due to the fact that employees are more aware of their rights.

Another important reason that the disputes partly stem from any employer’s limited awareness of the role of enterprise’s trade union during the labour dispute resolution. As a result, an enterprise may encounter sharp responses from employees. In order to protect their rights, they ask for the attorney’s help and send complaints to any local labor management agency and even to any police authority.

Most enterprises, that are entangled with such troubles, have one point in common: their trade union has not yet been established or the role of such trade union is limited. Consulting his/her trade union, an employer will be provided with basic details in connection with procedures for legally retrenching an employee.

Either due to lack of an enterprise’s trade union or with a state of its quasi-inexistence, many enterprises are reluctant to address disputes by restoring an employee to work (in case of their losing lawsuit). Worse, more people are seduced into joining any strike.


The current Labor Code regulates the establishment of an enterprise’s trade union at any enterprise is compulsory, latest 6 months from the date of such enterprise coming into operation. At the same time, the enterprise owner shall be responsible for coordinating with and enabling such union to work in accordance with its functions and duties. Such is the legal ground for the existence of an enterprise’s trade union. But it is critical as to how to change awareness of the role of enterprise’s trade unions in the labor relationships. After all, the establishment of an enterprise’s tread union is mainly for taking care of the life of, protecting the legal rights and interests of all employees in an enterprise and aims at helping such enterprise appropriately follow the labor laws, thereby ensures beneficial harmonization between employers and employees.

With its effective performance, an enterprise’s trade union will bring substantial benefits both to the enterprise and to its employees. Firstly, an enterprise’s trade union will assist its employer in building internal labor regulations, salary table and collective labor agreement. The enterprise should also coordinate with employees in such a way that its trade union really serves as a bridge of aspirations between employees and enterprise owner.

Secondly, upon restructuring or technological improvement, an enterprise’s trade union might help its enterprise owner re-assign workforce and terminate labor contract alike.

Thirdly, in case of arising disputes such as unilateral termination of labor contract, labor disciplinary measures, strikes, the enterprise’s trade unions will organize dialogs to reconcile benefits between employees and employer and address labor disputes through the role of an independent mediator.

On the other hand, taking care of the employees’ material and spiritual life is one of the duties done by an enterprise’s trade union. This equals to the fact that such trade union does so on behalf of its enterprise owner or assists him/her in conducting regimes and policies for employees.

Once their care is duly taken and their legitimate rights and benefits are ensured, they will get attached to the enterprise on the long term and productive efficiency and labor performance are thereby enhanced. And the best beneficiary is no one other than the enterprise.