Vietnamese workers in a bind as underperforming enterprises stalled insurance payment

With the help of the unions, hundreds of employees of the South Korea-invested company Sang Hun in Dong Xoai Commune of the southern province Binh Phuoc received their three months’ salary owed by the company’s directors who have fled the country.-VNA/VNS Photo Duong Chi Tuong

When they returned after their vacation earlier this month, they were refused entry into their own factory by a group of strangers.

In front of securely locked doors a tense atmosphere was building. The usual hum of machinery could not be heard.

Confused workers were told the management board had left and all facilities vacated without any prior notice.

According to workers of the Nam Phuong Co Ltd - with 100 per cent capital from South Korea and legally represented by a man known as Nam Sung Ho, ten days ago, the board of directors held a meeting and declared all workers take a short break as there were no orders left to do.

Workers were also told to report back for duty by November 1.

During their break, some workers said they noticed that machines and products were being transported from the factory but merely thought some upgrades or renovation was underway.

There was an official notice by the company’s director Nam Sung Ho on October 30, declaring halt of operations. And it was not until a day later did word reach the workers, and the situation was already out of the hands.

The company claimed it had to return the facilities to the owner as the contracts expired.

It also said it would pay half of the September wage on November 3, while the October wage would be paid in two weeks.

In the notice, Nam Sung Ho sent an apology and asked for understanding.

However, the company already missed its November 3 promise and with the director nowhere to be found, the next deadline also looks uncertain.

Fleeing responsibility

This has actually been the second time this year the South Korean director has disappeared.

According to the HCM City State insurance agency, Nam Phuong Co Ltd currently owes some VND28.6 billion (US$1.2 million) in workers’ social and health insurance payments.

Two months ago, Nam Phuong’s workers sued the company and demanded payment of social insurance, unemployment benefits and maternity benefits.

Cu Chi District court ruled in favour of the workers, a rare success among plenty of other disputes.

But up until now, the verdict was more of a moral support than a concrete result even after the police’s involvement was requested to frame the issue as a criminal case.

Huynh Van Tuan, chairman of unions under the HCM City’s Industrial Zones and Processing Zones’ management board, has helped with the hard-earned legal win for the wronged workers.

He said after the first time Nam Phuong’s director disappeared, the unions have asked competent authorities to put the man on no-fly list.

“We have done all that we could, within our purview, but the authorities must really need to be more involved,” Tuan said.

Legal centres and labour federation units across the city are working on behalf of workers to claim rightful benefits for them from the employers “on long-term absence.”

Sunlight Co Ltd, another South Korea-invested factory set in Binh Tan District has a legal representative registered as Oh Ock Ji.

But the woman is reportedly hardly ever in Vietnam and the whole operations are entrusted into the hands of her daughter, Kim Ei Wha.

From March, Kim Ei Wha supposedly fled the country, leaving a standing debt of VND200million worth of salary in two previous months, VND2.5 billion in late insurance payment and another VND500 million in factory lease.

In the coastal province of Ba Ria-Vung Tau, a familiar story played out as the Canadian director of the steel company Metacor Co Ltd fled the country and is unable to be contacted, leaving behind a tremendous amount of debts and angry employees.

Lawsuit roadblocks

Since the beginning of 2018, insurance frauds and payment avoidance is officially a crime and offenders could face up to seven years in prison if convicted.

This means that “the workers’ rights are protected at the highest level and violators are deemed criminals,” said Nguyen Hoa Binh, chief justice of the Supreme People’s Court.

However, legal officials who initiate lawsuits on behalf of the workers, told Lao Dong (Labour) newspaper the biggest challenge is following through procedures as required by the court: Many workers don’t even have a legal contract with the employer, local governments are struggling in verifying the legal status of unions’ representatives, while in other cases, each judge who undertook the cases started by several individual workers against their employing company demands different sorts of documents, making the whole process much more time-consuming and labouring.

But, Phan Thi Lan, who is currently managing some 21 lawsuits, said the court’s requirements such as a company-approved salary sheet, labour contracts or court fees are not unreasonable, but it would be difficult to obtain as the employer is no longer in Vietnam.

“The court could exercise some liberty in these special circumstances, but the most important thing to be done now is to have a unified protocol to follow across all court levels,” Lan said.

Mai Đuc Thang, an insurance payment collection official from the State-run agency Vietnam Social Insurance (VSI), said the preferable route to resolve late benefits payment is through legal action.

“However, it is not always applicable. A ruling against the employer could mean the end of the company, and thousands of workers would be out of a job, therefore, cautious steps are urged,” Thang said, adding that conventional measures like advocating, issuing warning and fining are usually done first.

“We must create conditions for the companies to grow and the employees to keep their job. Only the persistently trespassing ones are to be brought to court,” Thang said.

Benefits on hold

According to the latest report by the VSI, by the end of September, the total insurance debt by companies in Vietnam reached upwards of VND1 trillion ($42.6 million), affecting the rights of more than 59,000 workers, causing long-standing lawsuits, disputes and strikes.

Le Đinh Quang, Deputy Director of the Department of Labour Relations of the Vietnam General Confederation of Labour, said that currently, when the companies are bankrupted and dissolved, late benefits (health, unemployment and social insurance) payment for workers are actually not the primary concern, overshadowed by more ‘pressing’ items such as bankruptcy costs, late wage and job loss allowances.

In addition, most assets of bankrupt foreign-invested companies are bank’s mortgages therefore during liquidation, after taking out loans, the remaining money is usually insufficient to pay the late benefits.

The VSSI currently proposed to the Government that the late payment fines could go into a fund that will be used to cover monthly insurance premiums for workers whose employers have not carried out their responsibilities properly.

Phan Huu Thang, former head of foreign investment department under the Ministry of Investment and Planning, said local agencies – the management board of the industrial zone, the local investment and planning offices, as well as tax and insurance agencies – have not closely followed the business performance and activities of the FDI enterprise.

Reviews should be done at least every three months to manage risks, Thang said, adding that the process is simple and takes little time but not many localities are doing them.

In long term, approval of FDI projects should be more selective and considerate of the investor’s prior records.