Disputes Arising from Breach of Contract in the Provision of Foreign Labor Supply Services in Vietnam

1. Common Scenario – When Contracts for Foreign Labor Supply Services Face Issues

Company A signs a service provision contract with Company B to lease foreign workers for production support. The agreement clearly outlines labor conditions, compensation liabilities, contract duration, and skill requirements. However, upon execution, the workers did not meet the required skills as promised, and Company B delayed payments, leading to production disruptions and financial losses.

Legal Analysis: What should be noted in foreign labor supply contracts?

• Labor leasing contracts must be in writing and contain essential elements such as: workplace, job requirements, lease duration, safety and hygiene conditions, accident liability, and obligations of both parties as regulated under Article 55 of the 2019 Labor Code.

• Contracts must not include provisions that reduce the workers’ rights compared to the official contract between the leasing company and the workers.

• Only enterprises with a valid labor leasing license and the required deposit are allowed to provide such services.

• The leasing company must pay wages equal to or higher than those of equivalent workers at the client company, submit periodic reports, and take responsibility for insurance, discipline, and labor information.

2. When Disputes Arise – How to Handle Them Effectively and Amicably

Company A discovers that the service provider breached the contract (e.g., insufficient staff supply, unqualified skills, or delayed payments). What should you do?

2.1 Reconciliation and Negotiation as the First Step

Enterprises should first propose a good-faith negotiation with the service provider, requesting corrections or reasonable compensation. This approach helps save time and costs while maintaining business reputation and relationships.

2.2 When Negotiation Fails – Move to Arbitration or Court

According to the 2019 Labor Code, individual labor disputes typically require mediation before proceeding to labor arbitration or court, except for disputes regarding compensation between Vietnamese workers and overseas employers under a contract — these do not require mediation.

In disputes between Company A and the foreign labor supply service provider, if mediation is not mandatory or fails, the parties may choose:

• Labor Arbitration Council: Quick and confidential. Each party selects one arbitrator, and those two choose a third as Chairperson — suitable for cases involving foreign elements.

• Court with Jurisdiction: Appropriate if arbitration is not preferred or if the requesting party seeks a public ruling.

2.3 Workers’ Rights – Support from the Overseas Employment Support Fund

If the dispute involves Vietnamese workers abroad under contract, they may receive support from the Overseas Employment Support Fund: 50% of legal fees or court costs (up to VND 50 million per case; VND 100 million for group cases), and temporary housing support if needed.

3. Practical Experience from Law Firms – "How Do Companies Handle It?"

3.1 Prepare a Solid Documentation File

Maintain copies of the service contract, staff handover minutes, skill verification, email correspondence, payment invoices, etc., to provide clear evidence in case of disputes.

Send a written notice requesting the fulfillment of obligations (payment, performance improvement) within a reasonable timeframe and retain it as evidence for potential legal actions.

3.2 Be Flexible in Choosing Resolution Methods

Professional law firms in Vietnam often advise companies to:

• Prioritize negotiation and reconciliation to preserve business relationships and achieve quick results.

• If unsuccessful, proceed with the Labor Arbitration Council — especially effective for foreign-related disputes due to its confidentiality, flexibility, and fast processing (typically within 30 days).

3.3 Understand Current Laws and Regulations to Avoid Contract Risks

• Ensure the contract complies with format and content requirements (Articles 55–56 of the 2019 Labor Code).

• Verify whether the service provider holds a valid labor leasing license and has deposited the required amount (VND 2 billion).

• Avoid including any terms that infringe upon labor rights.

Conclusion

Facing risks due to violations in foreign labor supply service contracts? Take smart action from the start:

• Draft a formal request and gather full documentation.

• Prioritize good-faith reconciliation; if it fails, escalate to labor arbitration for swift and secure resolution.

• Understand worker rights, especially when supported by the Overseas Employment Support Fund in case of disputes.

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