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Better Factories concerned about labour contracts 

CLEC - 2010-07-07

Better Factories Cambodia is concerned by a rise in the use of Fixed Duration Contracts (FDCs) for long term employment. 'An increasing number of garment factories have started  to use Fixed Duration Contracts for  all  workers,   which  is  troubling  because   it  may indicate  that  they  misunderstand the  appropriate use of the different types of contracts, or that they are using FDCs to  undermine workers' employment  security', said Ms Anne Ziebarth, legal advisor,  Better  Factories Cambodia.

Under Cambodian Labour Law there are two main categories of employment contract.   Workers may be employed on Undetermined Duration Contracts (UDCs) or Fixed Duration Contracts. As their  names  suggest, a UDC is valid for an  unlimited time,  while  a FDC is valid  for  a  specific  period  of time  (e.g.  3 months or 6 months). UDCs are generally favored for long- term   employment, because   they   offer   enhanced employment security, while FDCs are designed for   short-term   periods of employment (e.g. for casual workers).

'The ILO recommends that fixed duration contracts should  not be used for long term  employment, and suggests that permanent employees  should  be put on UDCs,' Ms Ziebarth said.

The Garment Manufacturers Association in Cambodia (GMAC) does not   give official advice to    garment   factories about which type of contract to use. 'The decision to use either a FDC or a UDC lies with the individual factories according to their needs, but obviously temporary or seasonal workers must be issued with Fixed Duration Contracts', said Dr Ken Loo, Secretary  General  of GMAC.

According to Dr Loo, the main reason factories are choosing to use FDCs instead   of UDCs is because they like the certainty associated with Fixed Duration Contracts. 'For companies, the real advantage of FDCs is that they know exactly how much compensation to pay in the event of termination, while for UDCs, it is very subjective and difficult to forecast'.

When deciding which type of contract to use, employers should consider all the associated administrative, business and financial costs, Ms Ziebarth said. 'An important consideration in a tight labour market needs to be worker satisfaction   and   low worker turnover because    that   leads   to   improved    productivity. We are seeing more disputes arising over the type of contract  used   to  employ   permanent  workers,   with workers in some factories complaining that they lack security   of  employment  because   they   are   working under  repeating  short-term FDCs,' she added.

Better   Factories   Cambodia understands that   there may be sound operational reasons for using FDCs. However,   in some cases it appears   that   employers prefer FDCs to UDCs because they believe that it is easier to terminate workers.  Employers are expected to have a valid reason relating to business needs or the worker's aptitude before deciding to terminate a worker on an Undetermined Duration Contract. Without a valid reason an employer is liable to pay damages in addition to lay-off compensation. Although employers do not have an obligation to renew an FDC when it expires,   they   still are   prohibited from   terminating workers on FDCs for illegitimate reasons. 'It would be a violation  of the  Labour Law  to terminate a worker based  on  anti-union discrimination, no  matter   what type of contract they are working under,' said Ms Ziebarth.

Experts   say  that  the  costs  involved  with  FDCs  are often  higher  than   for  UDCs. 'If you  compare  how much it costs to validly lay-off a worker on a UDC compared with an FDC you will find that  quite  often the FDC is more costly', said Ms Ann Vireak a labour law specialist with the Community Legal Education Center. 'FDCs  also place an additional administrative burden on companies, because  they must  individually track  each  contract and  then  make  a choice  to either terminate or renew a worker's contract when it expires. Factories that forget to do this may find that the FDC has automatically converted to a UDC as specified in the Labour Law', she said.

'Even putting the costs aside, Better Factories Cambodia would like to see factories using the appropriate contract and treating workers and union activists fairly', Ms Ziebarth said.

Better Factories Cambodia understands that choosing to use either a Fixed Duration Contract or Undetermined Duration Contract can be difficult. Some of the training programs offered by Better Factories Cambodia include information on contracts and other human resource issues.

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