The adverse impacts of the COVID-19 pandemic have led employers to look for ways to mitigate the losses being wrought by the turmoil. While working remotely from home is a viable option for some, economic slowdown or to the nature of some industries make it unfeasible for others.

This article considers the legality of some measures to mitigate employment costs in Laos.

Can an employer suspend an employment contract?

No. Lao labor law currently only allows employment contracts to be suspended for national military service, or in the case of that employee being detained, held, or restricted in a certain area by a government authority. Hardship facing the company—even of the scale faced under the current pandemic—is, for now, not a valid reason for suspending an employment contract in Laos. If the contract itself has a specific provision for suspension under circumstances such as this, suspension might be possible, but the opinion of the local authorities should be sought first.

Can an employer unilaterally reduce an employee’s salary?

There is no such provision under Lao labor law. However, the law provides that, in the event of a temporary suspension of the business (not merely a slowdown of any degree) ordered by relevant local authorities or resulting from a decision of the employer, the employer must continue to pay employee salaries at a rate of at least 50% of their regular salary. The law does not limit the duration of the suspension, and does not address whether any reason (such as force majeure) must be demonstrated by the employer. Based on our experience, and discussions with the authorities, the current situation may fall under the scope of the temporary suspension provision, offering some potential relief to affected companies.

Can an employer terminate a contract?

An employer may terminate an employment contract for “business reasons,” as defined under Lao labor law, which includes instances where economic conditions make reducing employee numbers necessary. To do so, a number of requirements must be met:

• The employer must consult the trade union, the employees’ representative, or the majority of the employees to explain the reasons for the termination in advance. 
• Minutes of the above meeting must be taken and signed by all attendees, and reported to the Labor Administration Agency.
• Advance notice (30 or 45 days, depending on the nature of the work) must be given to all employees.
• Severance payment, as laid out by the law, must be paid.

Employers may also agree on termination of the employment contract by mutual consent with the employees.

We note that many companies are considering use of the term force majeure to justify termination of relationships under the outbreak across multiple jurisdictions. Please note that Lao labor law does not define force majeure, and it is therefore not yet a statutory reason for terminating an employment contract in Laos. However, further developments on this may soon be provided by the local authorities.

Can employees refuse to work, citing concerns of an unsafe environment?

Yes. Under Lao law, employers generally have a duty to provide a safe workplace for employees, and the Decree on Occupational Safety and Health further allows employees to refuse to work if they judge that the conditions are not sufficiently safe. However, this provision is relatively new (implemented in February 2019), so there is a lack of guiding precedent.

Breaches of regulations relating to labor safety, labor hygiene, and workplace safety are also punishable under the new Penal Code published in October 2018. Workplace health and safety obligations are thus an important consideration for employers at this time. At the very least, employers should comply with the notice recently issued by the Ministry of Labor and Social Welfare (No. 0709, dated March 11, 2020), which requires employers to provide equipment (such as soap, hand sanitizer gel, masks, etc.) at their own expense to protect employees from COVID-19. The notice also asks employers to stay up to date on their employees’ health, monitoring whether any of them exhibit symptoms associated with COVID-19 and taking appropriate measures if they do so.

The situation is evolving day by day. Employers should always be sure they are acting on the most up-to-date information, as exceptional measures may be taken by the authorities to cope with this exceptional situation. In this shifting environment, it is always possible that some of the above observations of the law may be affected by forthcoming special measures, so employers should closely monitor the developments to ensure they are acting on the most up-to-date information.