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Labour laws explained

Labour laws explained


By Curran Hendry
Following the "Labour Law Amendment Delayed" article published in the Phnom Penh Post on March 6, we received a number of requests from our clients to clarify the situation concerning draft amendments to Articles 67 and 73 of the 1997 Cambodian Labour Law.  

The issue has generated substantial attention across the Cambodian public and private sector. At the root of the debate is the time an employer can keep employees on fixed duration contracts, and whether the employer is required to retain an employee on a contract of undetermined duration.

First, let's look at a brief overview of the two types of contracts. 

A labour contract signed in Cambodia with consent for a specific duration, no longer than two years, and containing a precise ending date is considered to be a Contract of Specified Duration (CSD).  CSDs are common in Cambodia and useful for employers looking to address time-specific requirements. They tend to be used more in the manufacturing sector where staffing requirements are often in flux.  

At the end of a CSD, employers are required to provide a severance payment to employees based on a collective agreement, with a minimum payment of 5 percent of total contract wages.  If an employer wishes to terminate a contract prior to its agreed ending date, barring mutual party agreement, serious employee misconduct or acts of God, the employer may be liable to pay damages no less than the remainder of the contract value. 

A contract without a specific ending date is categorised as a Contract of Unspecified Duration (CUD).  CUDs are more common in sectors employing skilled professionals as they are a key element in attracting, developing, and retaining the best employees. Should an employer wish to terminate a CUD, the employer is liable for several additional employee payments, including notification period, annual leave, dismissal indemnity, and damages (in cases of termination without valid reason).   

In the March 6 Post article, a statement from the Ministry of Labour and Vocational Training affirmed that the draft amendment was simply a clarification of the existing articles, which have, in previous situations, been a topic of contention among unions, organisations (public and private), and government  officials. 

According to the ministry, the draft amendment was designed to clarify point two of Article 67 of the Cambodia Labour Law, which, as currently written, leaves room for multiple interpretations:

"The labour contract signed with consent for a specific duration cannot be for a period longer than two years.  It can be renewed one or more times, as long as the renewal does not surpass the maximum duration of two years."

The draft amendment, which also alters subsequent wording in Article 73, modifies the wording of Article 67 as follows:
"The labour contract signed with consent for a specific duration cannot be for a period longer than two years. This contract can be renewed one or more times, as long as each renewal does not surpass the maximum duration of two years."

While the draft amendment makes it clear that an employer may hire using CSDs indefinitely provided any one contract does not exceed two years in length, some unions and organisations have disputed the draft amendments and argue that as originally written, the article's intention is that after working with one company for two years, an employee must be offered a CUD. 

These differing interpretations have yet to be resolved, and the Industrial Relations Working Group stated in a letter circulated last week that the draft amendments were not yet finalised and were still under discussion with all concerned parties and institutions.

Curran Hendry is director of strategic human

resources consulting firm AAA Cambodia.

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