A foreign group seconds its general director to the Vietnamese subsidiary with a global-form appointment letter stating that the arrangement is governed by home-country law and that all disputes go to foreign arbitration. Two years later, when the relationship breaks down, the first question on both sides is which instrument actually governs: the appointment letter under foreign law, or the labour contract signed in Vietnam under the Labour Code? The answer drives everything from forum, to severance on exit, to the enforceability of confidentiality and non-compete clauses, and it is not as simple as reading the choice-of-law clause.
The legal framework: a foreign-related employment relationship still has a mandatory Vietnamese core
The starting point is where the work is performed. A foreign national working in Vietnam must satisfy the conditions in Article 151 of the Labour Code No. 45/2019/QH14, including a work permit under Decree No. 219/2025/ND-CP or an exemption case. A labour contract for work performed in Vietnam is a Vietnamese-law labour contract, carrying mandatory standards on minimum wage, working time and rest, occupational safety, compulsory social insurance under the Law on Social Insurance No. 41/2024/QH15, and termination procedure. These standards are imperative: the parties cannot contract below them or displace them by choosing foreign law.
Beyond that mandatory core, the Civil Code 2015, through its private-international-law rules, allows parts of a foreign-related civil relationship to follow a law the parties choose, typically clauses on confidentiality, training-cost reimbursement within legal limits, parent-company share awards, or post-employment obligations. Even in this negotiable zone, the chosen law cannot neutralize Vietnamese mandatory rules for work performed on Vietnamese territory. In short, a foreign expert’s package usually lives under two layers of law at once, and disputes ignite exactly at the border between them.
Applying the framework: dissect the dispute claim by claim
When a dispute erupts, the correct method is to dissect it claim by claim. Claims for severance, unpaid salary, the lawfulness of termination and social insurance are judged under mandatory Vietnamese law whatever the contract says. Claims about post-employment non-competes, relocation-package clawbacks under a global benefits plan or share awards sit in a greyer zone: their validity is assessed through the Civil Code 2015 private-international-law lens and against Vietnamese labour law limits on restraining an employee’s freedom to work.
As to forum, an individual labour dispute over work in Vietnam belongs to the Vietnamese courts through the labour-mediator then litigation route; a foreign arbitration clause in an appointment letter does not automatically pull the mandatory labour part away from Vietnamese courts, because an arbitration agreement only bites on the purely civil or commercial parts the parties may freely dispose of. The common group mistake is a single document mixing corporate office, employment and global benefits; when trouble comes, the three layers are dragged to three different forums. The safer architecture separates documents: a Vietnamese-law labour contract for the local employment, a standalone agreement for global benefits, and dispute clauses written separately for each instrument.
Checklist for reviewing foreign-employee contracts before signing and in a dispute
- Identify which document is the Vietnamese-law labour contract and which is an appointment letter or benefits agreement, so one text does not carry three legal relationships.
- Test every clause on pay, hours, termination and severance against the mandatory standards of the 2019 Labour Code and the conditions in Article 151.
- Align the contract term, the work-permit term under Decree No. 219/2025/ND-CP and the residence-card term with one another.
- Draft the choice-of-law clause in layers: mandatory employment parts expressly under Vietnamese law, global benefits under their own law and forum.
- In a dispute, build a claim-by-claim table of governing law and forum before choosing between mediation and litigation strategy.
Frequently Asked Questions
Which country’s law applies to a contract with a foreign employee?
Work performed in Vietnam is governed by Vietnamese law: a labour contract signed in Vietnam follows the 2019 Labour Code with mandatory standards on pay, hours, insurance and termination. Global-benefit elements such as parent-company share awards may follow a chosen law under the Civil Code 2015 private-international-law principles, but that choice does not displace Vietnamese mandatory rules for the local employment relationship.
Can the parties agree to apply foreign law?
Yes, within limits. A foreign choice of law works for civil and commercial matters the law leaves to party autonomy; it cannot replace the foreign-worker conditions in Article 151 of the Labour Code, cannot lower the employee’s minimum entitlements, and cannot remove compulsory social insurance. An over-broad choice-of-law clause is typically read down by Vietnamese courts when they hear the labour part of a dispute.
Where are disputes filed?
An individual labour dispute arising from work in Vietnam goes through a labour mediator and then to the Vietnamese people’s court where the employment is based. Only a genuinely separate civil or commercial dispute, such as a parent-company share plan under its own agreement, can follow the forum that agreement selects, including foreign arbitration where the arbitration agreement is valid.
Which clauses must follow Vietnamese law?
Clauses on foreign-worker eligibility, minimum wage, working time and rest, occupational safety and health, compulsory social insurance, termination grounds and procedure, severance allowance and job-loss allowance are all in the mandatory Vietnamese group. The contract term must also not exceed the work permit’s validity, a constraint many global template contracts overlook.
This article has been quality-reviewed by the FLAW AI Legal Council