Clarifications on Fixed Duration Contracts and Renewals
On March 17, 2019, the MLVT enacted its Instruction on Determination of Type of Employment Contracts, which clarifies the duration of an FDC. Under the instruction, an employer can enter into an initial FDC with any local or foreign employee for a duration not to exceed two years.
After the initial contract, the employer can renew the FDC one or more times so long as the total duration of the renewals does not exceed two years. If the renewals exceed two years, then the FDC will be deemed a UDC.
For instance, if the initial FDC had a fixed term of six months, then the maximum duration of the FDCs could be two years and six months. If the initial FDC had a fixed term of one year, then the maximum duration of the FDCs would be three years. Likewise, if the initial FDC had a term of two years, then the maximum duration of FDCs could be four years.
If an employee reaches the maximum duration for an FDC and the employer wants to continue the employment on an FDC basis, a one-month break must be inserted between the expiration of the FDC and the start of a new one. If there is no one-month break in employment, the employee will be deemed to be working under a UDC.