One Monday morning, the HR department receives a dispute claim from a former employee who left three months earlier, concerning severance allowance. The labor conciliator invited both sides but failed to settle the matter. The director asks: "Is going to court our only option now?" The answer is no — the 2019 Labor Code gives employers a third door that many have yet to explore: the Labor Arbitration Council.
Three avenues for resolving individual labor disputes
Article 187 of Labor Code No. 45/2019/QH14 provides that the authorities competent to resolve individual labor disputes comprise three subjects: labor conciliators, the Labor Arbitration Council, and the People’s Courts. Labor arbitration is therefore neither a pilot scheme nor a policy proposal — it is a dispute resolution forum established by statute, existing alongside conciliation and litigation.
On the validity of the cited law: Labor Code 45/2019/QH14 remains in force as of 19 October 2026. Law No. 124/2025/QH15 (the 2025 Law on Vocational Education), in its Article 43, amends point (a) of clause 2 of Article 59 and clause 3 of Article 61 of the Labor Code with effect from 1 January 2026, but only in relation to vocational training and apprenticeships — Articles 185 through 197 on labor dispute resolution are untouched. Employers should consult consolidated text 18/VBHN-VPQH of 2026 for the most up-to-date content.
Mandatory conciliation first: the rule and six exceptions
Clause 1 of Article 188 requires individual labor disputes to go through conciliation by a labor conciliator before being brought to the Labor Arbitration Council or a court. This is a mandatory step, but the law lists six categories of disputes that may proceed directly without conciliation. A request to the Labor Arbitration Council is accepted only on the basis of mutual consent of the disputing parties (Clause 1, Article 189 of the 2019 Labor Code); a unilateral request will not be accepted:
- disputes over disciplinary dismissal or unilateral termination of the labor contract;
- disputes over damages compensation and allowances upon termination of the labor contract;
- disputes between domestic workers and their employers;
- disputes over social insurance, health insurance, unemployment insurance, and occupational accident and disease insurance;
- disputes over damages between employees and enterprises sending workers abroad under contract;
- disputes over labor subleasing.
Returning to the opening scenario: a severance allowance dispute falls into the second exception, so the employer may request the Labor Arbitration Council — but ONLY on the basis of mutual consent (Clause 1, Article 189 of the 2019 Labor Code) — or file a court lawsuit immediately, without conciliation.
How the Labor Arbitration Council operates
One important condition first: under Clause 1, Article 189 of the 2019 Labor Code, disputing parties may request the Labor Arbitration Council to resolve a dispute only on the basis of mutual consent; a unilateral request will not be accepted. Clause 4 of Article 185 provides that upon receiving a dispute resolution request, the Labor Arbitration Council shall establish an Arbitration Board as follows: each disputing party selects one arbitrator from the list of labor arbitrators; the two selected arbitrators jointly select another arbitrator as head of the board; where both parties select the same arbitrator, the board consists of that single arbitrator. Clause 5 of Article 185 provides that the board works collectively and decides by majority.
Decree No. 145/2020/ND-CP of 14 December 2020 (effective 1 February 2021, still in force) details the procedure in Articles 101 and 102: within 07 working days of receiving a dispute resolution request, the Labor Arbitration Council must establish the Arbitration Board. Where one or both parties fail to select an arbitrator, or the two selected arbitrators cannot agree on a head of the board, the Chairperson of the Council shall make the selection in their stead. This mechanism ensures proceedings cannot be stalled by a non-cooperating party.
Legal effect of the decision: the key difference from commercial arbitration
Many employers are familiar with commercial arbitration and assume a labor arbitration decision is likewise "final and immediately enforceable." That assumption must be avoided. Clause 5 of Article 189 of the 2019 Labor Code provides: if either party fails to implement the dispute resolution decision of the Labor Arbitration Board, the parties may request a court to resolve the dispute. In other words, a labor arbitration decision has no direct enforcement effect like a court judgment; its value lies in expertise, speed, and consensus — since the parties themselves participated in selecting the arbitrators.
For contrast: clause 5 of Article 61 of the 2010 Law on Commercial Arbitration provides that a commercial arbitral award is final and takes effect from the date of issuance; the separate right to request enforcement belongs to clause 1, Article 66 (the prevailing party may petition the competent civil enforcement authority) — ad hoc awards must first be registered with the court under Article 62. Labor arbitration and commercial arbitration are distinct regimes governed by different statutes — reasoning cannot be mechanically transferred from one to the other.
Which forum should an employer choose
There is no one-size-fits-all answer; employers should compare the three forums against practical criteria:
- Labor conciliator: a mandatory first step (except for the six exceptions); fast, low cost, and preserves the employment relationship; but the outcome depends entirely on the voluntary agreement of both sides.
- Labor Arbitration Council: suitable where the dispute involves specialized labor expertise, the parties wish to preserve a cooperative relationship, or a professionally grounded decision is needed faster than court proceedings — and only where both parties give mutual consent to submit the dispute to arbitration (a mandatory condition under Clause 1, Article 189 of the 2019 Labor Code); the limitation is that the decision lacks direct enforcement effect.
- People’s Court: suitable where an enforceable judgment is required or the dispute is complex or high-value; the trade-off is lengthy proceedings and the publicity of a trial.
Policy trends to watch — current law versus proposals, clearly separated
The amended Law on Employment has been passed by the National Assembly and takes effect on 1 January 2026, introducing a new unemployment insurance framework — this is current law that employers must track. By contrast, the following remain at the policy proposal and discussion stage and are not yet mandatory rules: caps on overtime hours; social insurance for platform and gig workers; sector-level collective labor agreements. This article presents them as trends for proactive preparation, not as rules in force.
The link to arbitration: unemployment insurance disputes fall into the category exempt from mandatory conciliation under clause 1 of Article 188, so as the new unemployment insurance framework takes practical effect, employers have one more reason to consider bringing such disputes to the Labor Arbitration Council (provided both parties give mutual consent, as required by Clause 1, Article 189) rather than waiting through prolonged litigation.
Five immediate actions for employers
- Review labor contracts and internal labor regulations: record a clear internal dispute resolution process, but note that no agreement may remove the parties’ right to request court resolution under clause 5 of Article 189.
- Build the case file as soon as a dispute arises: meeting minutes, payroll records, disciplinary decisions — whichever forum is chosen, complete evidence remains decisive.
- Assess the forum against a cost–time–enforceability matrix before filing, instead of defaulting to a court lawsuit.
- Prefer conciliation and arbitration while cooperation is still possible, especially with key employees whose relationship the business wants to preserve.
- Consult counsel before choosing a forum for high-value or precedent-setting disputes.
Frequently asked questions
Must every individual labor dispute go through conciliation before arbitration or court?
No. Clause 1 of Article 188 of the 2019 Labor Code requires prior conciliation, but lists six exempt categories that may proceed directly, covering dismissal, unilateral termination, damages and termination allowances, domestic workers, insurance schemes, overseas labor, and labor subleasing. Note: even within the exceptions, a request to the Labor Arbitration Council is accepted only on the basis of mutual consent (Clause 1, Article 189 of the 2019 Labor Code); a unilateral request will not be accepted.
Is a Labor Arbitration Board decision enforceable?
It has no direct enforcement effect. Under clause 5 of Article 189, if a party fails to voluntarily implement the board’s decision, the parties may request a court to resolve the dispute. This is the fundamental difference from commercial arbitral awards.
Can an employer and employee agree in the labor contract that disputes go only to arbitration, excluding courts?
No agreement can remove the right to request court resolution. Clause 5 of Article 189 preserves the parties’ right to ask a court to resolve the dispute where the arbitration board’s decision is not implemented. A contractual clause restricting that right cannot override the statute.
After filing a request, how long until the Arbitration Board is established?
Under Article 102 of Decree 145/2020/ND-CP, the Labor Arbitration Council must establish the Arbitration Board within 07 working days of receiving the request. If a party fails to select an arbitrator, the Council Chairperson selects one in their stead so the procedure is not blocked.
Must a severance allowance dispute go through conciliation first?
No. Disputes over allowances upon termination of the labor contract fall within the exceptions in clause 1 of Article 188, so the employee or employer may file a court lawsuit directly; recourse to the Labor Arbitration Council additionally requires the mutual consent of both parties (Clause 1, Article 189 — a unilateral request will not be accepted).
This article is pending QA review by the FLAW AI Legal Council
