Labor Disputes at Japanese-Affiliated Companies in Vietnam: Practical Legal Solutions to Protect Both Employer and Employees

For Japanese-affiliated companies operating in Vietnam, labor disputes are an unavoidable challenge. Differences between Vietnam's Labor Code and Japanese labor-management practice are frequently at the root of disputes over dismissal, disciplinary action, wages, and social insurance. NEXORA LAW FIRM has supported numerous Japanese-affiliated companies in resolving labor disputes, and provides consistent legal support ranging from risk prevention to dispute resolution. This article explains, from a practical standpoint, the types of labor disputes Japanese-affiliated companies commonly face, the resolution procedures, and points to note.

01 - What Are Labor Disputes at Japanese-Affiliated Companies?

Under Vietnam's 2019 Labor Code and its implementing guidance, a "labor dispute" refers to a difference of opinion or conflict over rights, obligations, or interests arising in the course of the establishment, performance, or termination of an employment relationship (Article 179 of the Code).

Specifically, such disputes arise between the following parties:

Between an employee and an employer (company)
Between an employee and an agency or organization that brokers overseas employment (a dispatch or sending agency)
Between representative organizations on the employee side
Between a dispatched worker and the company to which the worker is dispatched

In short, a labor dispute is a conflict between an employee and an employer over rights, obligations, or interests arising from the conclusion, performance, or termination of a labor contract.

[Typical examples of labor disputes commonly seen at Japanese-affiliated companies]

In practice, Japanese-affiliated companies operating in Vietnam tend to encounter labor disputes in the following situations:

The most common is the unilateral termination of a labor contract.
Where either the employee or the company terminates the contract without meeting the statutory conditions, this can develop into a dispute over unlawful dismissal.
Disputes over disciplinary action or dismissal are also frequent.
Deficiencies in internal labor regulations or procedural violations significantly increase the risk that the company will be found at fault.
Other common issues include:
Unpaid or miscalculated wages, overtime pay, and bonuses
Enrollment in, and payment of, social insurance and unemployment insurance
Reassignment and changes to job duties

These are all typical examples of disputes over working conditions.

In addition, a problem specific to Japanese-affiliated companies is that disputes not infrequently arise between Japanese expatriates, managers, or specialists and Vietnamese employees.

02 - The Main Causes of Labor Disputes at Japanese-Affiliated Companies

In practice, labor disputes at Japanese-affiliated companies tend to share several common causes. The most frequent is applying the head office's Japanese internal rules directly in Vietnam without modification. Japanese employment practices and internal regulations do not necessarily align with Vietnamese labor law, and applying them as-is carries the risk of violating the law.

Another major factor is a failure to register internal labor regulations, or registration that is defective.
Internal labor regulations only acquire legal effect once they have been properly registered with the labor authority, but they are not infrequently found invalid due to formal deficiencies or content that violates the law.

Deficiencies in disciplinary or dismissal procedures are also frequent.
Where a company fails to follow the process set out under Vietnamese law—the proper sequence of steps, evidence collection, consultation with the trade union, and so on—it is placed at a disadvantage.

In addition, an insufficient understanding of basic labor-management rules, such as:

The cap on overtime hours
The method of granting paid leave
The obligation to enroll in social insurance and unemployment insurance

is itself a cause of disputes.

A further issue specific to Japanese-affiliated companies is the difference in labor-management culture between Japan and Vietnam. Differing expectations regarding the superior-subordinate relationship, the evaluation system, and communication styles can lead to misunderstanding and dissatisfaction, which in turn can develop into disputes.

Where these factors are not properly managed, a company may face serious risks such as:

Complaints and grievances from employees
Litigation
Strikes
Administrative sanctions

03 - Common Types of Labor Disputes Seen at Japanese-Affiliated Companies

Labor disputes commonly arising at Japanese-affiliated companies can be classified by content into several typical patterns.

3.1. Disputes over Termination of Employment

The most common dispute concerns the termination of employment. Specific examples include:

Unilateral dismissal that does not meet the statutory requirements
Non-payment of severance pay
Termination of the contract without observing the required advance-notice period

These carry a high risk of being found to constitute unlawful dismissal, exposing the company to significant legal liability.

3.2. Disputes over Wages and Overtime Pay

The next most common category concerns wages and overtime (extra hours worked).

Typical examples include:

Errors in the method of calculating overtime pay
Delays in wage payment
Disputes over bonuses and various allowances

Because wages are the employee's most fundamental right, even a minor error in this area can readily escalate into a major dispute.

3.3. Disputes over Disciplinary Action and Dismissal

Deficiencies in disciplinary or dismissal procedures are also frequent at Japanese-affiliated companies.

Dismissal without just cause
Disciplinary action taken without following the statutory procedure
Cases where the internal labor regulations themselves are found invalid

In these situations, the company is placed in an extremely disadvantageous position.

3.4. Disputes over Social Insurance and Employee Benefits

Disputes over social insurance and employee benefits are also on the rise.

Non-payment or underpayment of social insurance premiums
Disputes over sick leave, maternity leave, and workers' compensation

In these cases, employees not infrequently file complaints with administrative agencies or bring lawsuits.

Table: "Cause - Typical Outcome - Relevant Law" for Labor Disputes

Below is a summary of the dispute types commonly seen in practice.

Main cause | Typical outcome | Relevant law
Unlawful dismissal | Employee files suit, seeks confirmation that the dismissal is invalid, damages, and reinstatement | Labor Code Articles 125, 127, 128
Delayed or unpaid wages | Claim for unpaid wages plus default interest | Labor Code Articles 94-96; Civil Procedure Code Article 32
Non-payment or underpayment of social insurance | Loss of benefit entitlement; administrative complaint or lawsuit | Labor Code Articles 85-86; 2014 Social Insurance Law
Non-payment or miscalculation of severance pay | Lawsuit claiming severance pay | Labor Code Articles 46, 48
Unauthorized resignation (by the employee) | Company claims damages (e.g., half a month's salary, training costs) | Labor Code Articles 35, 40
Breach of the probationary contract or employment contract | Disputes over wages, working hours, and damages | Labor Code Articles 24, 27, 34
Unclear contract terms | Disputes over rights and obligations, risk of escalating into a collective dispute | Labor Code Articles 13-15
Opaque internal labor regulations | Disputes over discipline and treatment; risk of being found invalid | Labor Code Articles 118-122; Decree 145/2020
Insufficient regular dialogue and negotiation | Accumulated dissatisfaction leading to strikes or collective disputes | Labor Code Articles 63, 66

04 - The Procedure for Resolving Labor Disputes in Vietnam

Depending on the type and substance of the labor dispute, resolution generally proceeds through the following stages.

(i) Internal consultation (direct negotiation between the parties)

First, the company and the employee hold direct discussions in an effort to reach an agreed resolution. A sincere response at this early stage helps prevent the dispute from escalating.

(ii) Complaint to the employer or the labor inspection authority

If the parties cannot resolve the matter themselves, the employee may formally lodge a complaint with the employer or the labor inspection authority.

(iii) Mediation by a labor mediator

For many types of dispute, labor mediation is mandatory before litigation. A neutral third party confirms the facts and proposes a settlement.

(iv) Filing suit with the competent court

If mediation fails, the parties may bring an action before the People's Court. Here, the quality of the evidence and the litigation strategy determine the outcome.

(v) Enforcement of the judgment

If the losing party fails to comply even after a final judgment, enforcement proceedings are carried out by the labor enforcement authority.

05 - Legal Risks of an Inadequate Response

Where a Japanese-affiliated company responds incorrectly to a labor dispute, it faces serious risks such as:

The risk that a dismissal will be found unlawful
An order to pay unpaid wages, compensation, and outstanding social insurance contributions
Administrative sanctions under Decree No. 12/2022/ND-CP
Damage to the company's image and workplace environment
The possibility of a collective strike

These risks are not limited to financial loss; they can also cause long-term damage through staff attrition and disruption to business operations.

For Japanese-Affiliated Companies
NEXORA Law Firm's Labor Dispute Services

NEXORA Law Firm provides specialized legal services relating to labor disputes for Japanese-affiliated companies operating in Vietnam.

Our main services include:

Consulting on labor dispute prevention
Review and drafting of employment contracts, internal labor regulations, and collective labor agreements
Representation in negotiations with employees and administrative authorities
Representation in labor mediation and labor litigation
Advice on lawful approaches to disciplinary action and dismissal
Smooth support in Japanese, Vietnamese, and English

Drawing on an understanding of the internal structures and culture unique to Japanese-affiliated companies, we propose realistic, practice-oriented solutions.

If you are facing a labor dispute in Vietnam, please feel free to contact NEXORA. Our experienced attorneys will propose the most appropriate response, promptly and from a practical perspective.