Industrial Disputes in Vietnam

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Asia Pacific Journal of Human Resources (2013) 51, 248–268

doi:10.1111/j.1744-7941.2012.00062.x

Industrial disputes in Vietnam: the tale of the wildcat Bernadine Van Gramberg Swinburne University of Technology, Australia Julian Teicher Monash University, Australia Tien Nguyen RMIT University, Vietnam

Vietnam has experienced a combination of sustained high economic growth and high inflation over the last ten years. This has been a ‘double-edged sword’ for the country as rapid price rises have also fuelled the growth in labour conflicts and strikes, which have the potential to negatively affect Vietnam’s continuing economic growth. Added to this potent mix is the increasing evidence that some employers’ strict use of managerial prerogative combined with poor working conditions and harsh treatment of employees have precipitated the growth of ‘wildcat’ strikes particularly in the country’s growing export-oriented private sector. In the absence of publicly available statistics on industrial action in Vietnam, this paper draws on an analysis of strikes reported in the nation’s key newspapers and three elite interviews to explore the types of disputes and their causes as well as the industries most affected. We find that in order to improve the management of workplace conflict, reform to the Labour Code alone is insufficient. There is also a need to train all parties in dispute resolution and to ensure that unions are independent of management. Keywords: labour rights, unions, Vietnam Labour Code, Vietnam labour relations, wildcat strikes, working conditions

Key points 1 Wildcat strikes dominate in foreign-invested enterprises where unions are usually headed by the HR manager. 2 Lack of training of managers and a culture condoning violence toward workers precipitate industrial action. 3 The Labour Code provides an avenue to pursue worker interests but this is largely unworkable. 4 Our study demonstrates the inadequacy of the existing mechanisms for dispute resolution.

Correspondence: Professor Julian Teicher, Monash University, Melbourne, PO Box 197, Caulfield East, Vic. 3145, Australia; e-mail: [email protected] Accepted for publication 28 August 2012. © 2013 Australian Human Resources Institute

Bernadine Van Gramberg, Julian Teicher and Tien Nguyen

Strikes, and particularly ‘wildcat’ strikes where industrial action is led by workers rather than their unions, have become the norm in Vietnam. These are not simply walkouts led by a few angry workers but well-orchestrated, complex and large-scale actions involving thousands of employees. Labour disputes are recorded but statistics are not publicly available; however, various studies have commented on the growing incidence of strikes. For instance, Clarke, Lee and Chi (2007, 546) reported that between 1995 and 2005 there were 978 recorded strikes. Nguye˜ˆ n, Nguye˜ˆ n and Traˆ`n (2007) noted that from 1995 to 2006, there were 1250 strikes. More recently the number of strikes has escalated from these figures. Ha and Pham (2011) cite evidence from the Vietnam General Confederation of Labour (VGCL) that there were 762 strikes in 2008. In their report on the camera industry in Vietnam, Kakuli and Schipper (2011, 4) noted that in 2010, there were 423 registered wildcat strikes in the private sector alone. Ha and Pham (2011) added there were 336 strikes in the first four months of 2011 and predicted that the year would create a record in industrial disputes. Another report confirms the prediction, listing 720 wildcat strikes across the country by August 2011 (Better Work Vietnam 2011, 3). Further, this growth has been largely in the form of wildcat strikes characterised by the lack of union involvement or even knowledge by unions that action is occurring (ILO 2011). But while there is increasing evidence of rising strike activity in Vietnam, the extent of industrial action and its costs are unclear. Strikes now dominate labour relations in the developing private sector and threaten to destabilise key export industries such as textiles, footwear and computer manufacturing. While this disturbing trend has attracted its share of negative publicity and news coverage, there has been only modest academic interest in the matter, perhaps because of the difficulty in obtaining data on the incidence, the numbers of workers involved, methods of resolution and so forth. This paper is an exploratory study into the state of industrial unrest in Vietnam and makes three contributions to the literature. First, it reviews the sparse international and domestic academic literature on industrial disputation in Vietnam. Second, it reports on the analysis of 30 strikes described in 61 newspaper reports collected between January 2010 and December 2011 and on interviews with one senior newspaper manager, a senior official of a major national labour organisation and a human resource consultant. Third, it critically appraises the dispute resolution system in the country through identifying the types of disputes, industries affected, and the utility of the Labour Code in its ability to guide resolution of these conflicts. Our comments on the Labour Code are particularly pertinent as the Code is now under review. The paper commences with a discussion of the legal framework which regulates labour relations in Vietnam and considers the role of unions in the dispute resolution process. The paper then canvasses the international literature on industrial action in Vietnam before turning to our analysis of newspaper accounts and the interviews. The paper concludes that, while the government has implemented a procedure for dispute resolution through the Labour Code, the lack of rigour in enforcing the Code, the absence of independent unions and the need to train all parties in the dispute resolution process, together with the limitations on dealing with certain types of disputes, have meant that © 2013 Australian Human Resources Institute

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wildcat strikes are now the dominant form of overt workplace conflict at a time when the government remains reliant on attracting foreign investment.

The labour relations context The Labour Code In its Preamble, the Vietnam Labour Code of the Socialist Republic of Vietnam (the Code) 1994 (amended 2007) (The Socialist Republic of Vietnam 1994) is presented as an instrument to protect the rights and interests of workers and employers alike with a view to establishing conditions conducive to: harmonious and stable labour relations, contributing to the development of the creativity and talents of intellectual and manual workers and of labour managers in order to achieve productivity, quality and social advancement in labour, production, and services, effective utilization and management of labour, and contributing to industrialization and modernization of the country, for a wealthy and strong country, and a fair and civilized society.

The Code applies to foreign and Vietnamese employers and employees together with trade apprentices and domestic servants and, along with a number of decrees and circulars, and the Law on Social Insurance, establishes the legal regulatory framework in the country (Hull and Trinh 2011). By definition, the Code does not apply to the informal sector, which is large in Vietnam. Cling, Razafindrakoto and Roubaud (2010, 6) note that in 2007, the informal sector accounted for almost a quarter of all main jobs (24%) and most of these were in manufacturing and construction (43% of all informal sector jobs). The Code was established in 1994 and amended in 2002 as the government implemented a market-driven economy; reflected in the diminution of the role of the state, particularly in terms of regulating employment relationships (Li, Taylor and Frost 2003). The Code was next amended in 2006 and 2007 and it is currently under review once again. Chapter VII of the Code provides a detailed set of conditions of employment, even specifying the length of rest and meal breaks, maximum hours of the working week and placing limitations on overtime. The minimum wage in Vietnam is set for workers in four regional centres and for the public services with the highest minimum wages payable in the key production hubs of the country in Hanoi and Ho Chi Minh City (Kakuli and Schipper 2011). Initially, minimum wages were also specified differently for each sector of the economy; for instance the minimum wage expected of a foreign investment enterprise (FIE) was traditionally more than double that paid by a domestic private enterprise (DPE) (Clarke, Lee and Chi 2007). The minimum wage is adjusted yearly but, as the ILO (2010) noted in its Global wages report, adjustments have not kept up with the impact of inflation and real wage growth has not been achieved since 2007. In October 2011 the government increased minimum wages in response to rising inflation and the increasing strikes, bringing forward its quarterly wage adjustment and for the first time equalising wage levels in FIEs and DPEs (Duc 2011). 250

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The body responsible for monitoring enforcement of the Labour Code is the Ministry of Labour, Invalids and Social Affairs (MOLISA) as stipulated by chapter XVI of the Code. However, in practice, the VGCL also undertakes monitoring which we discuss in the next section. The Code lists a range of ‘sanctions’ for those violating it including a: ‘warning, fine, suspension or withdrawal of licences, compulsory payment of compensation, or compulsory cessation of business operations, or criminal prosecution in accordance with the provisions of the law’ (The Socialist Republic of Vietnam 1994, Article 192). Clarke, Lee and Chi (2007) also note that MOLISA can refer employers who breach the Code to the city or province People’s Committee or the Ministry. The authors note that, while these bodies take action by counselling employers on their obligations under the law in the first instance, the ministry is considered a more fearsome threat to employers as it can revoke an employer’s investment licence. These sanctions, however, are reported as being relatively low-level threats to employer behaviours (Meissner and Hung 2008). Theoretically, the Code offers workers high levels of protection. For instance, it restricts employers’ ability to impose fines on employees or dismiss them. The process for dismissal is staged, with three breaches within three months required to terminate a worker for misconduct or poor performance. The disciplinary process requires properly constituted hearings and workers may have representation (Article 87). Chapter XIII of the Code gives the union rights to consultation as well as rights to collectively bargain, and it requires employers to provide facilities and time for union representatives to conduct their duties. In addition, the 2002 amendments required all employers to establish a union within six months of commencing operations (Article 153). Nevertheless, these restrictions on employers and the range of benefits mandated for workers have done little to stop the rising tide of industrial unrest in Vietnam, which appears to be largely in reaction to employer breaches of the Code and increasingly in support of wage demands. There is then a paradox which we explain in that while employers appear highly constrained in their actions, the Code fails to provide workable mechanisms for managing industrial conflict, at least among the FIE companies. Unions The Law on Trade Unions was enacted in 1990 (The Socialist Republic of Vietnam 1990) and grants unions some independence from the Communist Party of Vietnam. It stipulates that ‘the union represents and protects the legal and legitimate rights and interests of the workers; shall bear the responsibility to join with the Government to grow production, create jobs, improve material and spiritual life of employees’ (The Socialist Republic of Vietnam 1990, Article 2). The national union centre, the Vietnam General Confederation of Labour, is protected by the Law on Trade Unions which encourages union organisation and the negotiation of legally binding collective agreements. In effect, the VGCL is the only official union in the country and the Code requires employers to form an enterprise branch. Workers cannot legally form a union independently of the VGCL. © 2013 Australian Human Resources Institute

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As in many other countries, union membership has fallen over time from a high of 100% when Vietnam operated as a state socialist system to about 40% of the total employed labour force in 2003 (Clarke, Lee and Chi 2007). According to Torm (2011), union membership rose from 45% at the end of 2007 to 50% in mid-2010. The authors attribute the increase to rising unionisation in private firms, limited liability companies, joint-stock firms and cooperatives. There are considerable variations between sectors too, with state-owned enterprises (SOEs) recording around 90% unionisation rates, while FIEs record 50% and DPEs 30% (Clarke, Lee and Chi 2007). Torm (2011) suggested a more recent trend of declining unionisation among SOEs as a result of the ‘equitisation’ or privatisation process. What is most surprising in these figures is the relatively large proportion of non-unionised firms despite the Code mandating that: The employer shall be responsible for facilitating the early establishment of trade union organizations. Pending establishment, the local trade union or industry trade union shall appoint a provisional executive committee of the trade union to represent and protect the lawful rights and interests of the employees and the labour collective. (The Socialist Republic of Vietnam 1994, Article 153(1))

These provisional unions are then converted to enterprise-level unions once elections are held for positions. Firms operating in the country without a union are in fact in breach of the Code. This issue is taken up in the discussion section below. A recent union role evolved as a consequence of MOLISA’s yearly inspections of workplaces. It does not have enough inspectors to conduct regular inspections of all the workplaces in Vietnam so in practice monitoring is also undertaken by the VGCL. In 2008 Meissner and Hung reported that MOLISA had 350 inspectors and the VGCL had 100 inspectors. In Hanoi it was reported that there are 11 MOLISA inspectors for 700 SOEs, 600 FIEs, and over 20 000 private enterprises and, at the same time the Ho Chi Minh City Labour Department had 5 inspectors for more than 30 000 enterprises. Both the monitoring and the employee representation roles are problematic for unions. It is common for human resource managers to be the union president in FIEs and this is a contentious issue within the VGCL (Clarke, Lee and Chi 2007). Given that the VGCL is charged with monitoring breaches of the Code, arguably this represents a conflict with union leaders’ managerial interest in the success of the company and their capacity to engage in critical scrutiny of enterprise operations and, further, it makes management union officials tacitly complicit in breaches of the Code (Clarke, Lee and Chi 2007). A recent compliance report in the garment industry by Better Work Vietnam (2011) found other managerial practices used to control the union. For example, in direct breach of the Code, in the 78 garment factories investigated, union meetings could not take place without a management representative being present in 75% of firms. An ILO report (2011) on labour relations reform in Vietnam noted that the trend of increasing wildcat strikes is related to the absence of an effective voice for rank-andfile workers who have little choice but to take matters into their own hands in order 252

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to bring attention to their grievances. The next section turns to the vexed issue of strikes and their resolution in Vietnam. Causes of strikes In canvassing the causes of strikes reported in the international literature, we categorise disputes as those driven by structural factors arising from the country’s legal, economic and political framework as Vietnam moves towards a market-oriented economy; and those driven by employer behaviour, including harsh treatment and even beatings. We consider the structural issues first. The passing of the Law on Enterprises 2001 (The Socialist Republic of Vietnam 2001) provided citizens with the right to establish and operate private businesses and the growth of private firms has been rapid. Between 2000 and 2008 new enterprise creation saw an average of 610 new companies enter the market each month (Meissner and Hung 2008). The country’s Law on Investment 2006 (The Socialist Republic of Vietnam 2006) led to an influx of FIEs and the privatisation of some SOEs. While SOEs dominated the economy in the 1990s, accounting for over 50% of firms in the manufacturing sector and contributing 40% of GDP, the effect of the Doi moi (reform) policy was to drive a market-based economy through the growth of DPEs and FIEs (Jenkins 2004). A 2009 Deloitte tax report noted that the fastest growing companies in Vietnam are the FIEs, comprising joint ventures and fully owned foreign enterprises. It is this growing sector which has contributed to the greatest number of strikes, and the underlying cause of industrial disputes is attributed to the country’s rapid movement towards a market model without a commensurate movement ‘allowing stakeholder influence, participation, and control’ (Meissner and Hung 2008, 267). Similarly, Better Work Vietnam (2011) added that the dominance of management representatives in unions impedes consultation and bargaining at the workplace. In this scenario of a rapidly developing economy with resource bottlenecks, strikes over (above minimum) wages have begun to emerge relatively recently as inflation erodes the buying capacity of wages. Employer behaviour is another key cause of strikes in Vietnam and includes the strict use of managerial prerogative, the poor treatment of workers, poor conditions and breaches of the Code. Clarke, Lee and Chi (2007) reported that an investigation of strikes revealed serious breaches of the law by employers including delays and non-payment of wages, illegal layoffs, failure to pay health insurance contributions, wages below the legal minimum, and withholding agreed bonuses. Meisner and Hung (2008) confirmed these findings, adding the non-payment of overtime, the imposition of excessive overtime and the low quality of accommodation and food as strike issues. More recently, complaints of excessive working hours (often associated with claims of underpayment of wages), poor treatment, and poor conditions at work have become more common. Many of these strikes represent worker responses to frequent employer breaches of the Code which accumulate over time until workers walk off the job in order to force their employers to agree to abide by the Code (Better Work Vietnam 2011). Meissner and Hung (2008) noted that these strikes are severely underreported because employer violations happen at © 2013 Australian Human Resources Institute

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an individual or small group level leaving little recourse for the individuals affected, except to take action without union involvement. In any case, enforcement of the Code is weak, as will be discussed below as we consider the dispute-resolution system in the country. The workplace dispute-resolution system The resolution of labour disputes is provided in chapter XIV of the Code (The Socialist Republic of Vietnam 1994) which sets out separate processes (which include conciliation and non-binding arbitration) for resolving individual and collective disputes. Unlike earlier versions of the Code, the 2007 amendments allow workers to raise both rights and interest disputes. Article 157(2) defines a rights dispute as when there has been a breach of workers’ rights as set out in laws, collective agreements or internal labour rules which have been registered with the government. Interest disputes are framed as disputes over benefits and Article 157(3) defines these as ‘a request of the labour collective to establish new labour conditions’. This clause in particular was inserted to deal with the growing numbers of strikes in pursuit of pay increases above the minimum wage. The Code also provides for the right to strike for collective disputes when dispute procedures have been exhausted and a majority vote of employees is in favour of the strike (Article 172). This does not apply to those employees in ‘enterprises which supply public products and services and at enterprises essential for the national economy or for national defence and security in accordance with the list stipulated by the Government’ (The Socialist Republic of Vietnam, Article 175). Article 176 allows the prime minister to postpone or suspend a strike if it threatens the national economy, which effectively extends the range of sectors where disputes are prohibited. Indeed, the International Trade Union Confederation (ITUC 2011) notes that the government stipulates 54 sectors of the economy as being essential service areas. The clause also empowers the prime minister to assign ‘an authorized State body or organization to resolve the dispute’ in these sectors. A number of bodies are involved in the dispute-resolution process. In order to apply the Code (The Socialist Republic of Vietnam 1994), Article 162 dictates that firms must appoint an enterprise-level Labour Conciliation Council comprised of equal numbers of employees and employer representatives (appointed for two years). Article 157 specifies the range of disputes which can be heard by the enterprise Labour Conciliation Council including individual and collective disputes over interests or rights. Another body described in the Code is the labour conciliator who can conciliate a wider range of disputes than the enterprise Labour Conciliation Council including ‘disputes about performance of vocational training contracts and about fees for providing vocational training’ (Article 163). The chairman of the district-level People’s Committee can be called to resolve collective rights disputes (Article 168(2)). Next, Article 164 establishes Labour Arbitration Councils comprised of up to seven full-time and part-time members who are representatives of the ‘labour body, trade union, employers and bar association or people with experience in the labour management sector within the locality’. They are able to resolve collective disputes over benefits (interests) as outlined in Article 157 and in 254

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addition can be called to settle collective disputes arising in the essential service industries (Article 175). Labour Arbitration Councils provide the parties with a settlement proposal by majority vote (Article 164(5)). There are two Labour Arbitration Councils in Vietnam – one in Hanoi and the other in Ho Chi Minh City. Finally, the act provides for intervention by the People’s Court as the last resort (Article 166). The 2006 amendments to the Code provided (for the first time) a dispute-resolution pathway for individual (as opposed to collective) workplace disputes. Section II of the chapter XIV of the Code specifies that individual disputes may be handled either by the enterprise Labour Conciliation Council or the People’s Court (Article 165). Labour Conciliation Councils must settle these matters within three working days from the time the dispute is lodged and disputants have the right to be represented (Article 165a). They provide disputants with a ‘settlement proposal’ and if disputants agree with the proposal, they must sign the ‘minutes of settlement’ together with the chair of the Labour Conciliation Council or the Labour Conciliator (Article 165a(2)). If they disagree (or if the threeday limit has been exceeded) any disputant may petition the People’s Court to resolve the dispute (165a (3)). But Article 166 restricts the matters which the People’s Court can hear to five comprising: the dismissal of an employee over a disciplinary matter (Article 166(2)(a); compensation relating to a dismissal (Article 166(2)(b)); disputes between housemaids and employers (Article 166(2c)); disputes over social insurance (Article 166(2)(d)); and disputes over compensation between workers and employers who send workers to work abroad under contracts (Article 166(2e)). Clearly, the process for settlement of individual disputes leaves workers largely dependent on the Local Conciliation Councils, in effect at enterprise level. Collective dispute resolution is covered in section III of chapter XIV and the term ‘collective’ is defined as ‘employees working together within any one enterprise or any one section of an enterprise’ (Article 157(4)). Article 170 provides that all collective disputes must first be heard by the enterprise Labour Conciliation Council. Thereafter, the Code provides different procedures for the resolution of rights and interest disputes. For rights disputes, if the parties cannot agree on the settlement proposal provided by the Labour Conciliation Council, Article 170(2) allows disputants to request the chairman of the district-level People’s Committee to settle the matter. Rights disputes must be settled within five working days from the time of lodgement. Article 170a(b) stipulates that all parties must be represented and if necessary, the chairman will involve individuals from higher levels of the union and ‘and representatives of other bodies and organizations concerned to attend the session’. In resolving the dispute, the chairman ‘shall rely on the law on labour, the collective labour agreement and internal labour rules which have been registered and on other legal regulations and agreements in order to consider and deal with conduct in breach of the law by the parties’. Failing settlement or in the event that the chairman exceeded the five-day time limit, parties may lodge their dispute with the People’s Court which will deal with the matter in accordance with the Civil Proceedings Code (Article 170a(2) and Article 170(b) described above). Alternatively the labour collective ‘shall have the right to conduct procedures in order to strike’ (Article 170(2)). © 2013 Australian Human Resources Institute

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In the case of collective interest disputes, disputants can request the Labour Arbitration Council to settle the dispute. Arbitration Councils have a time limit of seven working days from receipt of the dispute (Article 171(1)). Parties are required to be represented and the Arbitration Council may request the participation of higher levels of the union as well as other organisations and bodies (Article 171(2)). The role of the Labour Arbitration Council is to offer a settlement proposal which, if not accepted by the labour collective, or which exceeds the seven-day time limit, can lead to industrial action provided a number of steps (outlined in section IV of the Code) are taken by the labour collective (Article 171(3)). Section IV of chapter XIV describes the process for taking industrial action and Article 172 defines a strike as ‘a temporary and voluntary cessation of work organized by the labour collective in order to resolve a collective labour dispute’. Article 172a describes the parties who may legally lead a strike including: the executive committee of the trade union at the enterprise or where there is no enterprise union, the ‘collective labour representative’ appointed by the labour collective provided that representative has been ‘announced in advance to the labour union of the district, town or provincial city or its equivalent’. In other words, to comply with the Code, all strikes by must be conducted with the support of either the enterprise or district-level union. Moreover, in order to strike there are stringent requirements imposed on unions; they are required to conduct a ballot or collect signatures of employees prior to the strike (Article 174a). A range of other ‘opinions’ must be sought including from the executive committee of the enterprise union, the leader of the ‘union group’, the leader of the ‘manufacturing group’ where the firm has over 300 employees, or the leader and deputy leader of the ‘manufacturing group’ in a case where there is no trade union. The voting provisions are specified in Article 174b which prescribes that at least 50% of employees in workplaces with fewer than 300 workers and 75% of employees in workplaces with over 300 employees must be in favour of the strike. The ITUC has noted that the voting thresholds are unrealistically high, which is an impediment for workers to hold a legal strike (ITUC 2011). Unions must also provide detailed written notice to employers of the strike containing the official trade union seal (Article 174b). In summary, legal strikes must be in relation to collective disputes and must have union involvement. These requirements fail to take into account that most strikes in Vietnam are wildcat strikes; thus the bulk of strikes in the country are illegal. We consider the legality of strikes next. Article 173 of the Code provides seven circumstances in which a strike is illegal. First, Article 173(1) stipulates that strikes which do not arise from a collective labour dispute are illegal. Strikes are also illegal if they are organised by workers in more than one enterprise which means that workers wishing to take sector-wide activity cannot do so legally (Article 173(2)). The Code states that no strike is legal while the dispute is being conciliated by the various Councils or Courts (Article 173(3)). Article 173(4) stipulates that strikes will be illegal if workers are not consulted or if there is a violation of the strike voting provisions. Strikes are also illegal if they occur without the authorisation of the enterprise trade union executive or without notification of the strike 256

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leaders to the VGCL (Article 173(5)). Clearly, most wildcat strikes would fall into this category. Contravention of Article 175(5) which pertains to industrial action in the large number of declared areas of essential services is illegal. Finally, continuing a strike despite a prime ministerial intervention to suspend the strike will also render the strike illegal (Article 175(6)). Over time the Code has shifted in the way it defines and manages illegal strikes. Prior to 2006 only rights-related strikes were legal but, in response to the growing numbers of interest disputes, the Code was amended in 2006 specifically to deal with interest disputes. The 2006 amendments declared that legal strikes must be those over workers’ interests, but in making this change the Code then rendered strikes over workers’ rights illegal. The amendment received its share of criticisms. For instance, as noted by Human Rights Watch (2009): ‘For disputes over rights, if conciliation fails either party can take the case to court, thereby outlawing rights related strikes’. The 2007 amendments provide distinct paths for dealing with rights and interest disputes and provide a mechanism (albeit complicated and highly restrictive) for when rights and interest disputes can give rise to a legal strike. While the Code specifies the course of action to be taken once a strike occurs, there are also a number of avenues for the parties to take which are not specified by the Code. For instance Clarke, Lee and Chi (2007) note that local government can be notified and it will despatch an official from the provincial Labour Department who acts as a mediator. Nguye˜ˆ n, Nguye˜ˆ n and Traˆ`n (2007) reported that these mediators are highly successful in resolving disputes. Another avenue for resolution is via a special task force established by the People’s Committee comprising a local government representative, the union and a member from the Chamber of Commerce and Industry of Vietnam (VCCI). In these cases of intervention by MOLISA, the VGCL or local government, the actual process of resolution is unclear. As an avenue to bring a strike to a close, Article 176a of the Code provides that the parties ‘shall have the right to petition a court to consider the legality of a strike’ and Article 177 vests this jurisdiction in the Provincial People’s Court in the relevant location. Article 179(1) prescribes that workers who refuse to call off the strike shall be subject to a ‘labour disciplinary penalty’ and where the illegal stoppage causes loss or damage to the employer, the organisation or individuals concerned shall be required to pay compensation. That this jurisdiction is exercisable by a court without any particular expertise in labour relations matters is a matter of concern. A new clause (Article 174d inserted in the 2006 amendments of the Code) provides a work stoppage wage to be paid to those employees who do not participate in a strike and who cannot continue work as a result of the strike. The ITUC (2011) has criticised the clause as an opportunity for employers and the government to influence workers’ strike voting intentions. Research into workplace dispute resolution in Vietnam There has been little research into the practice of workplace dispute resolution in Vietnam. The Ho Chi Minh City Labour Arbitration Council conducted a survey of the conciliation © 2013 Australian Human Resources Institute

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process at enterprise and district level in 2003 and reported that some 84 collective disputes and 1118 individual cases had been sent to conciliation since 1995, and 823 of these were successfully resolved. However others have reported less success (e.g. Zhu and Fahey 2000). Nguye˜ˆ n, Nguye˜ˆ n and Traˆ`n (2007) found that the Labour Arbitration Council in Hanoi had settled only two cases since its establishment in 1997, while the Labour Arbitration Council in Ho Chi Minh City had settled only one case since 1998. Nor is there any evidence as to the outcomes of industrial disputes following unsuccessful resolution at this level. Because so few collective disputes are heard by enterprise Labour Conciliation Councils, virtually no collective disputes reach the Arbitration Councils. In theory the workplace dispute-resolution system in Vietnam provides multiple avenues for redress and determination; however, the reality is that many of these procedures are overly complicated and time-consuming, and limited because they apply to situations where unions supervise the process (Nguye˜ˆ n, Nguye˜ˆ n and Traˆ`n 2007). Often the procedures are not used at all (Human Rights Watch 2009). Nguye˜ˆ n, Nguye˜ˆ n and Traˆ`n (2007) observed that at the enterprise Labour Conciliation Council (then termed Grassroots Local Labour Conciliation Council), negotiations rarely ended with a solution to the dispute; Labour Arbitration Councils do not have power to enforce their decisions; and the head of the union is usually the enterprise human resources manager who sides with the employer. Clarke, Lee and Chi (2007) add to this the lack of state supervision of employers to ensure they comply with the laws, and note the failure of the VGCL to adequately represent workers at the workplace. So while on the face of it Vietnam has a highly regulated dispute-resolution system, this applies to only a small part of the workforce, but even here the efficacy of the system is limited and highly variable. By far the dominant approach taken to resolving workplace disputes is the wildcat strike, and this reflects the general failure of the existing formal dispute-resolution system despite the 2006 and 2007 amendments to the Code which sought to cover both interest and rights disputes. In light of this background we now turn to our study. The exploratory study In view of the exploratory nature of this project, we report here on two sources of data: a newspaper search, and three ‘elite’ interviews, respectively with a senior official from a national employer organisation, a prominent human resources consultant and a senior manager of a newspaper. An elite interview is a form of non-probability sampling where informants are selected for their salience to the topic under investigation; for example, expertise (Hochschild 2009). To search for newspaper articles reporting the industrial disputes we used a range of online search engines through various browsers (Internet Explorer, Mozilla Firefox and Google Chrome). The terms we used to search comprised: ‘strikes’, ‘workplace conflicts’, ‘labour disputes’, ‘industrial disputes’, ‘wildcat strikes’ and ‘work stoppages’. The equivalents of these terms in Vietnamese were also used to search for Vietnamese language news articles. In many cases, the online articles suggested other related articles; these related articles were also analysed. The search was conducted for 258

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Table 1

Reasons and industry location for the reported disputes in 30 reported cases in 2011

Industry

No. of disputes N = 30

No. of workers involved

Salary or allowances

Apparel Fisheries Footwear Motor production Petroleum Rattan products Rubber plantation Taxi Wood products for export Other Total

5 2 11 2 1 1 1 1 1

4000 1350 31650 3600 18 100 67 20 3000

4 2 10 2

5 30

5270 47725

5 27

1 1 1 1

Managers’ behaviours, cultural difference issues

3 1

Long hours, extra hours without pay

Poor workplace conditions

Contract issues

1 1 5

1

1 1 1

Other rights issues

Other interest issues

1 2

1 2

1 1

5

1 1

1

9

1 3

1 1

4

4

4

Source: Authors’ newspaper analysis of strikes 2010–11.

articles published from January 2010 to December 2011, and was limited to those sources reporting industrial disputes in Vietnam. We also accessed the hard copy newspaper Lao Dong which reported 20 strikes in 2011 (it was not available for 2010). We consolidated the articles describing the same cases and, of the 61 articles collected over the two-year period, we obtained 30 cases which allowed us to identify the region, industry and cause of the strike. As will be evident from the discussion above, this is not an iteration of all industrial disputes but reflects those cases which newspapers chose to report; however, in view of the absence of published data on the causes, nature and incidence of industrial disputes our cases provide insights which are otherwise unavailable. These findings are contained in Table 1. We also conducted a thematic review of the articles identifying two broad themes based on rights disputes and interest disputes which are described in the next section. In order to gain a deeper understanding of the issues behind labour disputes in Vietnam, we conducted interviews with three experts. The interviews were around 90 minutes duration and consisted of open discussions based on four broad semi-structured areas: causes of strikes, factors contributing to the rise in strikes, the industries and companies associated with the strikes, and the behaviour and roles of the parties (employers, unions and employees) in workplace disputes. Reasons for strikes From our interview with the newspaper manager, we confirmed our expectation that the reporting of strikes is necessarily selective, partly due to editorial decisions about what is newsworthy but also due to the nature of political processes in Vietnam. Reports of strikes are generally confined to the first quarter of the year, finishing before the national holiday celebrating the reunification of Vietnam on 30 April. The newspaper manager also stated © 2013 Australian Human Resources Institute

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that reporting on strikes has the effect of stimulating even more strikes (because of the level of worker ‘success’) and this makes it a politically sensitive issue for newspapers, which also limits the number of public reports each year. The human resources consultant went further, stating that the reporters sometimes see their role as reporting strikes in the heroic light of worker success. In 2008, however, the Party Congress apparently ‘instructed reporters to be responsible’ and for some time after that reporting was subdued. In the study period, the combined online and hardcopy search identified 30 separate strike incidents, of which 16 were located in industrial parks (zoned areas of land for commercial purposes) while the other case locations were not reported. In this data, disputes over salary and allowance demands (27 reports) dominated the reasons for taking industrial action. Other reasons included long hours and unpaid hours (9 reports); negative management behaviours and cultural insensitivity (5 reports); and poor workplace conditions (3 reports). There were 4 rights-based issues including dismissal of workers without reasons, non-payment of maternity leave and denial of annual leave. Additionally, we noted four employment contract issues including lower than agreed bonuses, disputes over the Tet bonus (normally an additionally month’s pay for the lunar New Year holiday), and lower than agreed piecework rates. The data reported here also reveal that in most strikes, multiple causes were reported in Table 1 representing a combination of rights and interest disputes. The rise of the wildcat strike The newspaper reports confirmed the growing strike figures reported in the wider literature. Ta Lam (2011) wrote that, of 175 strikes in Ho Chi Minh City reported in the first six months of 2011, at least 70 occurred in industrial parks and export processing zones. This is described as a seven-fold increase compared to the same period in 2010.The increase is attributed to demands for salary and allowance increases; benefits such as meal quality; and disputes over long working hours (Ta Lam 2011). In Binh Duong province, one of the provinces with the highest economic growth in the south of the country, there were 150 strikes reported in the first six months of 2011 involving almost 80 000 workers, a 50% increase compared to the same time period in 2010 (Ngoc Quy 2011). The main driver for the disputes reported in the newspapers and confirmed by our informants is inflationary pressures on both employees and employers. Rising inflation reaching 19.8% in the year to May 2011 (Economist Intelligence Report 2011) has placed workers under increasing financial pressures due to continuous increases in home rents, utilities and prices of goods without commensurate salary increases (Thuy Hiep and Trong Binh 2010). Importantly, this has given rise to a range of strikes over workers’ interests rather than rights as in earlier times, and because the bulk of these disputes are conducted by unauthorised labour collectives (without union sanction or involvement as required by the Code) they are illegal (wildcat) strikes. Inflation has also had its effects on the quality of meals which are provided by employers and form part of the working conditions of most workers. Decreased meal quality is driven by employers not increasing their budgets for meal provision in the face of falling profit margins caused by infla260

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tion of input prices and the continuing devaluation of the currency. Additionally, two of our informants commented that most employers now contract out their meal services, adding to the difficulty of ensuring good meal quality. According to Dang Ngoc Tung, the chairman of VGCL (cited in Duong Minh Duc 2011a), workers rely on the meals provided by employers because, typically, low wages and long working hours limit their ability to prepare adequate meals at home. Consequently, the meal provided at work is the workers’ main meal of the day and as meal quality drops workers’ complaints have increased. Technically, employers have fulfilled their legal obligation to provide the meal and so these strikes represent interest disputes which are considered legal under the Code but only if the labour collective is supported by the union as required under Article 172a. Strikes are also focused on wage and bonus demands. One example provided by Tam Thien (2011) reported that many companies have set a combination of high production targets and low piecework rates which results in workers not being able to meet their production targets and being denied the expected bonuses which would apply at the end of the production cycle. Strikes in these companies occur when the workers complain to no avail about the unrealistic targets. This problem is interwoven with another issue identified by some writers that the minimum wage is too low in Vietnam to adequately provide for adequate living conditions, leading to ongoing tensions in the employment relationship. In other words, as the level of the minimum wage does not enable an adequate living standard, workers are reliant on their bonuses for their survival. For instance, Tam Thien (2011) reported that in the manufacturing industry the minimum wage covers only 60% of average living costs. While interest disputes are increasing, rights disputes continue as many employers, particularly in FIEs, breach the set of workers’ rights guaranteed by the Code or the collective agreement. The newspaper articles canvassed here focused on issues of lower bonuses than agreed, unpaid hours, unpaid maternity leave, denial of annual leave and excessive overtime. For example, the Code provides a maximum of 200 overtime hours a year for workers (Article 69) but many enterprises require their workers to work in excess of this (Ta Lam 2011). Nam Anh (2011) reports that some companies assign work to their employees not in accord with their labour contracts and there are many instances of workers being dismissed without the employer following the procedure prescribed by the Code. Foreign investment enterprises There were 424 reported strike cases in 2010 of which 80% occurred in FIEs, 20% in domestic private enterprises, and only 0.25% in government companies (Nam Anh 2011). FIEs incur massive economic losses from these disputes. For instance, in a strike at a footwear company in Hai Phong in April 2011 which lasted for 9 days, the company reported a loss of around US$40 million (Tam Thien 2011). Given the significant economic costs for FIEs it is surprising that they do not manage industrial relations more proactively and consider the business case for adopting good dispute-resolution practices and trained © 2013 Australian Human Resources Institute

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human resources staff. This is particularly relevant when considering the low unionisation levels in these firms and, consequentially, the greater potential for wildcat strikes to occur. From our interviews several factors contribute to explaining the higher incidence of strikes in FIEs. First, most of the strikes occur in the labour-intensive FIEs typically employing thousands of low-skilled and low-wage workers on assembly lines. These workers are reportedly less likely to join a union as they resent paying the union fees (Employer association interview). As most of these mass production companies mostly operate on low profit margins, they rely on generating high volumes of production. When inflation is high, workers demand salary rises and these demands threaten profit margins which are continually being eroded by both domestic price inflation and devaluation of the currency, particularly as most non-labour inputs are imported. Employers who are subject to these pressures have an incentive to resist wage rises and to cut costs by denying worker demands. The employer association official we interviewed noted that it is quite a different scenario from those FIEs specialising in the high-tech sector which employ highly skilled staff, as disputes in those companies are more likely to be individualised and are likely to result in unhappy staff quitting for another better paying employer. Cultural differences (and intolerance) between employers and their employees in FIEs have been important factors in wildcat strike activities. Many FIEs in the manufacturing sector are multinational enterprises which employ Korean or Taiwanese managers who reportedly have little knowledge in managing human resources and a ‘military’ disposition that sometimes manifests itself in physical violence toward workers (interview with Newspaper manager). Meanwhile, due to tight labour market conditions, most of the available workers lack education (few have completed high school) nor have industrial training. Typically, these workers’ previous experience will have been in farming or small family businesses in the informal sector and consequently they are not well socialised for industrial work. In some cases harsh treatment by managers provides a trigger for a wildcat strike where accumulated complaints about low wages and poor conditions surface as the public face of the strike, whereas its root cause is in the mistreatment, both physical and mental of the workers concerned (Employer association interview). The inadequacies of government inspection bodies and apparent ineffectiveness of sanctions for breaching the Code have also been reported as reasons for increasing strikes (Hai Van 2011; Le Thanh Ha 2011). For instance, Ta Lam (2011) notes that in the auditing of 968 enterprises in Ho Chi Minh City in the first half of 2011, the Department of Labour, Invalids and Social Affairs (DOLISA) (the provincial and city offices of MOLISA) issued fines totalling some VND 2.75 billion. This equates to each enterprise paying about US$150 (some VND 3 million) for their violations. According to Ta Lam (2011), Nguyen Thi Dan, manager of the Salary Department of DOLISA (Ho Chi Minh City), stated that the penalty levied on companies that violate the Code is too low and is not effective in preventing breaches of the Code. Chan (2010, 46) describes the situation differently, arguing that Vietnam has a system of ‘harsh laws, soft implementation’ and that it is not the lack of effective sanctions which is the issue but rather, that the role of the state in dispute resolution is often to negotiate with employers to grant workers’ demands so they 262

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will return to work: ‘in Vietnam, the workers go on strike in order to get the local state to negotiate on their behalf ’ (Chan 2010, 48). While there is merit in Chan’s point, it remains that the poorly crafted regime of sanctions and dispute settlement procedures does little to encourage compliance with the Code. Dispute resolution in the press It is not possible to identify the outcome of the 30 strikes reported here, although we were informed that such disputes are generally resolved by payment to the workers, often including for the time taken on strike. Indeed, we were advised that if employers do not compensate workers for time on strike, they may refuse to return to work and even take jobs with other employers (Employer association interview). It was further explained that family and friendship networks based on place of origin operate to spread information about the most lucrative job opportunities. In this relation, we note that newspapers do not reveal the outcomes of strikes due to concerns that this might encourage workers in other companies to also go on strike for the sort of extra pay and conditions granted in other companies (Newspaper manager interview). In all 30 cases, the newspapers reported the involvement of representatives from the VGCL, DOLISA and police. Their initial role was to attend the scene of the strike and these officials were reported to calm the situation and prevent outbreaks of violence. As the strikes progressed, these parties commonly acted as mediators between company managers and striking workers. One commentator noted that unions in many enterprises are weak and play an insufficient role in conflict management to prevent strike action, exacerbated by the fact that most union leaders are managers employed by the company (Ngoc Quy 2011). As a result, when a dispute occurs, the union leader remains very close to the management point of view in the negotiation process. In some cases, workers undertake wildcat action in defiance of their elected union representative because that person lacks the training and independence to adequately represent their interests. Such a situation is in the interests of neither management nor labour (Employer association interview). The lack of union leadership is a key reason why workers’ interests fail to be reconciled with those of their management. It is also a key reason why there has been such a growth in wildcat strikes, particularly in the more sparsely unionised FIEs. As noted earlier in this paper, the Code specifies a process for dispute resolution which culminates in the right to strike, provided that all steps have been exhausted. In a workshop on ‘Promoting the improvement of the labour dispute resolution system outof-court’ held in Hanoi in April 2011, Pham Minh Huan, deputy minister of MOLISA, stated that most labour disputes skipped the negotiation steps (conducted by enterprise Conciliation Councils) in the Code, with workers instead filing complaints to the relevant government office (such as the District People’s Committee). It has been argued that when the enterprise Conciliation Councils are bypassed, subsequent dispute resolution is more complicated (Kim Thanh 2011). In a similar vein, Mai Duc Thien, deputy head of the Legal Affairs Department, MOLISA (cited in P Thanh 2011), observed that the role of © 2013 Australian Human Resources Institute

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the enterprise Conciliation Councils is vague. In 2009, while 80% of Vietnamese enterprises were unionised, only 67% had formed an enterprise Conciliation Council as required under the Code. The lack of training and skills for Conciliation Council members has been argued to be another key reason for the councils being either unsuccessful in resolving disputes or bypassed entirely (Kim Thanh 2011). The gridlock in the system is seen as a weakness of the current Code and there have been discussions on revising it to add several sections on dispute resolution (Duong Minh Duc 2011b). This has proven to be a major task. Several drafts of the new sections have been proposed and discussed by various interest groups and the National Assembly but plans to enact the changes did not come to fruition in 2011. Discussion The rising tide of industrial conflict in Vietnam is an important issue for policy-makers and businesses but our capacity to analyse this issue is hampered by a dearth of publicly available information. In undertaking a careful study of newspaper coverage over almost two years, we utilised the available information to shed light on this important issue and to highlight the problem posed by the government’s failure to facilitate the provision of publicly available data related to industrial disputes. The major limitations that we discovered were that the nature, extent, and industry location of strikes are not well known nor are the causes, methods of resolution or outcomes well understood. Clearly, greater knowledge and public debate on these issues is important to policy-makers and industry participants in both improving the operation of the existing system of dispute resolution and in creating a better system. While the data are inadequate, an examination of existing publications and laws pertaining to labour relations demonstrates that the Code is both flawed and incompletely specified. The emphasis in recent revisions of the Code has shifted from the protection of workers’ rights to providing workers with an avenue to pursue their interests is an attempt to put the reins on the increasing number of interest disputes in the country. However, on its own this is insufficient to deal with the growing number of FIEs with their low unionisation rates in which labour collectives are less likely to rely on their enterprise union, often headed by their human resources manager, to voice their concerns. While workers lack confidence in unions, dispute-resolution processes which ultimately require the involvement of unions will continue to be ignored and the wildcat strike is likely to remain commonplace in Vietnam. Recognising that the government is unlikely to legislate to provide workers with choice of union in the foreseeable future (as it has not ratified ILO Convention 98 on the Right to Organise), workers’ collectives need to be able to be full participants in the dispute-resolution processes of the Code. Two other problems in managing strikes are also highlighted by this study. First, bodies such as DOLISA, the VGCL and VCCI are seen to play an important role in dispute resolution, but the adequacy of these resources remains uncertain and the nature or efficacy of their interventions is not well understood. Second, the processes of dispute 264

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resolution under the Code have been criticised for reasons including that there are too many steps, that the processes of resolution are not clearly specified and there is a dearth of appropriately trained officials. In practical terms our study has highlighted other shortcomings in dispute resolution. A key problem is that the requirement to form enterprise unions as branches of the VGCL is frequently ignored. Even when it is not ignored, union officials are typically ill-prepared for their tasks and there is a lack of clear delineation of management and unions, and this is something which is not just the subject matter of ILO conventions, such as Article 2 of Convention 98 on the Right to Organise and Collective Bargaining; rather it highlights the inadequate protection of workers’ rights and interests despite the expressed intent of the Code. This problem is exacerbated by a dearth of training of the participants in the system at all levels, but especially at the workplace. Worker representatives are often hampered by a lack of basic education and then by specific training in relation to dispute resolution. The lack of training of management representatives is perhaps more profound, particularly in labour-intensive FIEs where managers lack training in both dispute resolution and the broader human resources management function. An important and related issue is the problem with management cultures which condone violence toward workers, even though such acts may precipitate industrial action. Notwithstanding the limitations of this exploratory study, the discussion would not be complete without a plea for research on the extent, causes and resolution of disputes but also of the differences between state-owned enterprises, domestic enterprises and FIEs. The present dearth of information sometimes leads to an unsubstantiated belief that conflict is confined to the FIE sector of the economy. Conclusions This paper critically examines and extends the existing research on strikes and the disputeresolution system in Vietnam. In doing so it also utilises an analysis of almost two years of newspaper reporting of industrial disputes, a move which was necessary in light of the absence of any publicly available data on industrial disputes or their resolution. This information was supplemented by three elite interviews. From this research it is clear that the incidence of strikes is increasing and that, unlike in the past, disputes are increasingly interest based, particularly in FIEs and comprised almost entirely of illegal, wildcat strikes. This strike activity has been driven by a combination of structural changes to the economy and poor managerial behaviour. Thus, rising inflation; a low minimum wage structure; the expansion of mass manufacturing with its tight profit margins; and shortcomings in the system of industrial regulation have played their part in fuelling strikes. Particular concerns are the lack of training of participants at all levels, lack of independent union representation at the workplace levels and insufficient articulation of all available disputeresolution processes in the Code. In addition it is clear that in labour-intensive exportoriented industries the lack of appropriately qualified human resources professionals is a major drawback. While the Code is currently under review, we argue that although good © 2013 Australian Human Resources Institute

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dispute-resolution processes are important, they cannot succeed in the absence of identifying the structural and behavioural drivers of strike activity, particularly in understanding that employees need independent representation in order for them to effectively voice their concerns and participate in the dispute-resolution process. Bernadine Van Gramberg (PhD, Monash) is deputy dean, Faculty of Business and Enterprise at Swinburne University of Technology. Bernadine’s teaching, research and consulting are in the fields of dispute resolution and public sector management. Julian Teicher (PhD, Melb.) is professor of industrial relations in the Faculty of Business and Economics at Monash University. His research and publication spans workplace relations and public management and governance. He has a particular interest in developing countries. Tien Nguyen (PhD, MIT) is a senior lecturer and head of Graduate Studies at RMIT University, Vietnam where he teaches MBA human resources and management decision making subjects. He has extensive experience working in corporate industrial relations in Vietnam.

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