Issues of article 67, paragraph 2 of the Labor Law: What is the duration of a fixed-term employment contract?

Under the Labor Law, there are two types of employment contracts: fixed duration contract and contract with an unlimited duration. Article 67, paragraph 2, of the Labor Law provides that” the labor contract signed with consent for a specific duration cannot be for a period longer than two years. It can be renewed one or more times, as long as the renewal does not surpass the maximum duration of two years.” Failure in fulfilling the above requirements causes fixed duration contract to become to the contract with an indefinite duration.

The problem is that the content of Article 67, paragraph 2 above seems to be easy to understand, but when implemented, there are different interpretation and understanding regarding the contract period. (1) The fixed duration contract has total of duration of more than 2 years. The initial contract must not exceed 2 years, but may continue as long as each renewal has a duration of no more than 2 years. (2) The total duration contract must not exceed 4 years, the initial contract must not exceed 2 years, but may continue once or more as long as the total extended period does not exceed 2 years. (3) The contract can not exceed the total duration of more than 2 years, the first time plus the subsequent duration of renewal shall be no more than 2 years.

In resolving collective labor disputes, the Arbitration Council applies the second interpretation to resolve disputes related to Article 67, point 2 (Case 10/03, 2003). In Japan, before the amendment to the Labor Contract Act in 2012, there was no law that allowed to change the type of contract as in Cambodia. Therefore, without special agreement of the parties, the fixed duration contract cannot become an indefinite contract, even if the worker has continuously worked for years.

After the said amendment, Article 18 of the Labor Contract Act stipulates that if a fixed-duration contract continued for a total duration of more than 5 years, when the worker proposes to change fixed duration contract to an employment contract with an unlimited duration, it is seemed that the employer accepts this proposal. This means that a fixed-duration contract becomes an undefined contract if the contract continues for more than five years, and the worker demonstrates the willingness to change the type of contract.

(*Fixed duration employment contract in Cambodia, Labor Law 1997)

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