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Right of Lockout

The article with the title: “Right of Lockout” written by Lawyer Tran Thanh Tung – Partner of Phuoc & Partners is published in Saigon Economic Times dated 15/04/2010.

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For the first time, the right of lockout is stated in Article 239 of the Labour Code as amended in the term “enterprise closure”. This article is to contribute some more opinions regarding the regulation on the right of lockout

Lockout – a new right of employers

Lockout is a right of employers, being often compared with strike, a right of employees. Lockout has not been stated in current Labour Code. For the first time, the right of lockout is introduced in Article 239 of the Labour Code (as amended) in the term “enterprise close”. According to the draft, closing an enterprise means “the employer decides to temporarily close the enterprise during the strike to protect the assets of the enterprise, preventing abuse of the strike to sabotage of extremist elements and because the enterprise does not have enough manpower to maintain the normal operation of the enterprise”.

As defined by the International Labour Organization (ILO) in 1993, lockout is “a total or partial temporary closure of one or more places of employment, or the hindering of the normal work activities of employees, by one or more employers with a view to enforcing or resisting demands of or expressing grievances, or supporting other employers in their demands or grievances”.

When comparing the two definitions, we see that the draft regulations have significant differences compared to that in ILO definition. According to ILO, lockout first of all is a total or partial temporary closure of one or more places of employment rather than temporary closure of an enterprise. ILO’s regulations are reasonable because an enterprise may have different factories/manufacturing places and in case of labour dispute or strike, the employer may temporarily close the factory(ies)/ manufacturing place(s) where occur the dispute, strike, rather than and are not necessarily to close the operation of other factory(ies)/manufacturing place(s) having no dispute or strike or close the entire enterprise.

Next, according to ILO definition, lockout is the active action of the employer in order to enforcing or resisting demands of or expressing grievances, or supporting other employers in their demands or grievances – such as other enterprises in the same association. Meanwhile, Article 239 of the draft recognizes the lockout right as a passive and defensive protest measure of the employer when the employees go on strike, with the purpose of protection of enterprise’s assets and avoidance of destructive actions of extremists and/or due to the employer has not sufficient manpower to operate the enterprise.

Furthermore, according to the draft, the lockout right of enterprises exists only during the employee’s strike, since the draft prohibits the employer of closing his enterprise before the commencement of the employee’s strike to threaten the strikers, or after the end of the strike to take revenge of the strikers (Article 241 of the draft), while this content is not found in the ILO definition.

As a result, in general, ILO definition reflected the nature of the lockout right as a right of the employer, being enforced actively rather than a passive self-defense measure against the strike of the employee. Therefore, in principle, lockout does not necessarily take place during the employee strike only.

Since it is the right of the employer, when the employer enforces this right, even damages caused to the employee, laws shall not force the employer to compensate the employee for those damages, unless the employer breaches the laws. Article 243 of the draft only forces the employer to pay salaries, allowances and other benefits to the employee when the employer breaches legal provisions (with regard to the notice period about lockout, lockout before the strike or after the strike ended.) However, if the lockout leads the employees who did not involve in the strike to their stoppage, the employer has to pay the stoppage salaries and other benefits for these employees.

Some suggestions

Firstly, the term “enterprise close” itself easily leads to misunderstanding, since in reality the term “enterprise close” is often understood as the liquidation or dissolution of an enterprise. The identification of the concept of “enterprise” with “factory/place of production” in the draft made the scope of application of lockout right too broad. As analyzed above, the employer may close one or more factories/ places of employment having dispute or strike, but not necessarily to close down his entire enterprise. According to my personal opinion, compared with the term “enterprise close”, the term “lockout” demonstrates most clearly and concisely the nature of the issue. If no more accurate terms can be found, we should use the term “lockout” as the world’s practices.

Secondly, once defined the lockout right as a right of the employer, we should not specify in detail the purpose of lockout as in the draft. The employer carries out the lockout for various reasons but not necessarily because of having not enough work forces to maintain normal operation. So, the more we try list purposes of the lockout, the more actual shortcomings we make. Furthermore, we should consider using the concept of “extremist elements” in the draft because this is a sensible concept and it is difficult for a determination. Furthermore, strike is the right of the employee and when the employee executes his right to strike, on what criteria can we base to classify them into the “extremist elements”?

According to the draft, the closure of an enterprise must be decided by the employer. However, for joint stock companies, the draft forces the closure of the enterprise shall be decided by the Board of Management by ballot with an approval of more than 50% members (Article 240 of the draft). We reckon that the lockout decision is an internal matter of the enterprise, according to the law and the Charter of an enterprise; therefore, labour law should not have specific regulations on competence of making decision on lockout for joint stock companies. The solution may be the enterprise – as the employer – through his legal representative issuing the lockout decision is legally sufficient.

Furthermore, it should consider the lockout notice period of the employer. According to Article 240 of the draft, the lockout decision shall be notified to the collective employees, state management authority on labor and labor union at province level at least three working days before implementation. We agree that lockout needs to be notified to the concerned parties, but if the employer is forced to notice at least three working days, the purpose of lockout may be difficult to achieve. Why? As analyzed above, one of purposes of lockout, according to the draft, is to protect property, prevent the abuse of strike to destroy the enterprise’s property. The destruction of enterprise’s property is an act strictly prohibited by labour law and often takes place spontaneously and without notice. To protect his assets, with the meaning of self-defense action, the employer has to carry out the lockout when the risk of sabotage or acts of sabotage is taking place. If the lockout may only be carried out after three days of notice, the destruction of property, if there is, has already taken place, and then the purpose of self-defense of the lockout is not achieved.

One of shortcomings in the regulations on lockout is that the draft does not specify which authority has the right to determine the act of unlawful lockout. If no authority have the right to determine the legality of the lockout, what will be the basis for payments of salaries, allowances and other benefits for the employee in case of unlawful lockout?

Lockout is a very new issue in the legislation on labour of Vietnam, therefore, careful consideration is required in prior to actual application. In acceptance of lockout, not only the employee but also the employer suffers a lot of damages. Therefore, the employer will have to consider very carefully when carry out this right. Although recognized as right of the employer*, but the content of the draft does not expose this sense and there are issues to be considered.

* Clause 3, Article 238 stipulates that employer has right to decide to close his enterprise during the strike by employees.

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