Cambodia: Labor Law Amended for Third Time

On October 5, 2021, Cambodia enacted the third amendment to the country’s main employment legislation, the Labor Law of 1997, revising the rules governing individual labor dispute resolution, work shifts, and public holidays falling on Sundays. The amendment became effective the next day in accordance with a constitutional provision mandating that urgent laws come into force immediately after promulgation. (Constitution art. 93, ¶ 2.) The general rationale behind these changes is to make Cambodia’s private sector more competitive compared to other countries. This amendment is generally supported by employer associations but opposed by worker unions. The first amendment was in 2007 updating provisions on overtime and night-shift pay, and the second was in 2018 establishing the seniority payment concept.

Background to the 2021 Amendment

This 2021 amendment to the Labor Law was prepared by Cambodia’s Ministry of Labor and Vocational Training (MLVT) by consulting representatives of both employers and employees. In September 2020, the MLVT sent a draft to the Council of Ministers, Cambodia’s cabinet headed by Prime Minister Hun Sen. MLVT minister Ith Samheng indicated that these amendments were prepared due to the government’s socioeconomic reforms for globalization and technological revolution, which require Cambodia to have a competitive labor market to draw more international investors.

The Council of Ministers approved the draft on July 9, 2021, with a slight modification. In a press release on July 9, 2021, the Council of Ministers stated that this “amendment to the Labor Law aims to strengthen the competitiveness of the Cambodian economy … aiming to achieve the status of a high middle-income country by 2030 and a high-income country by 2050.” Cambodia’s National Assembly and Senate approved it in September 2021. On October 5, 2021, King Sihamoni signed the draft into law.

This initiative was generally welcomed by the employer representatives. For example, the Garment Manufacturing Association in Cambodia regarded the proposed amendment as “the right reform and at the most suitable time” to “increase production capacity and the country’s competitiveness” in today’s globalization and dynamic international competition. However, labor unions mostly opposed the amendment. For instance, the Collective Union of Movement of Workers’ (CUMW) president claimed that workers would lose many benefits due to the amendment (e.g., the proposed amendment provided for a lower pay rate for night shifts and fewer public holidays) and that the government should focus on solving workers’ problems (e.g., lack of safe transportation and discrimination against unions by employers). The president of the Coalition of Cambodian Apparel Workers’ Democratic Union expressed a similar view. Some unions even boycotted further discussions of the amendment during the drafting period.

Changes under the 2021 Amendment

Arbitration Council’s Jurisdiction Extended to Individual Labor Disputes

The Arbitration Council is an independent, national institution established by the Labor Law to settle labor disputes. (Labor Law arts. 309–317.) The jurisdiction of the Arbitration Council had been limited to collective labor disputes, such as disputes arising “between one or more employers and a certain number of their staff over” a number of issues (e.g., working conditions and employment relationships) and “when this dispute could jeopardize the effective operation of the enterprise or social peacefulness.” (Art. 302.)

Regarding individual labor disputes, the previous version of the Labor Law allowed each disputing party to submit the dispute to the court only if the labor inspector, the governmental authority under the MLVT, does not otherwise resolve it. (Arts. 300 & 301.) An individual labor dispute is “one that arises between the employer and one or more workers or apprentices individually and relates to the interpretation or enforcement of the terms of a labor contract or apprenticeship contract, or the provisions of a collective agreement as well as regulations or laws in effect.” (Art. 300.) The new article 300 includes an option to settle an individual labor dispute at the Arbitration Council as an alternative to the court system. It provides that a disputing party may refer its individual labor dispute to the labor inspector for reconciliation, and if such reconciliation fails or is not chosen, any party can refer the dispute to a court or the Arbitration Council.

Compensated Days Off for Public Holidays Falling on Sunday Eliminated

Before the amendment, article 162 of the Labor Law stated that if any public holiday fell on a Sunday, employees would have the following day off in lieu of that holiday. The amended article no longer contains that provision. This may reduce the total number of public holidays each year, depending on the number of annual public holidays falling on a Sunday, as declared annually by the MLVT. This amendment appears to be consistent with the noticeable trend of the MLVT to reduce the number of annual public holidays overall. The MLVT reduced the number of annual public holidays from 27 days in 2018 and 28 days in 2019 to only 22 days in 2020 and 21 days in 2021. Labor Minister Samheng contended that Cambodia still has fewer working hours per year compared to other countries in the region because the number of annual holidays in Cambodia remains higher than in those countries. The new article aims to improve productivity and promote competitiveness in Cambodia, he said.

Three Work Shifts Per Day Now Permitted

The recent amendment changes how companies may structure their work shifts, allowing them to have up to three shifts per day. While permitting each enterprise to set their work schedule on a case-by-case basis, article 138 initially restricted the number of shifts per day to two: one in the morning and another in the afternoon. This rule is now modified to give companies more flexibility in setting their work shifts to ensure uninterrupted operations. Under the new article 138, companies may set up to three work shifts (morning, afternoon, and night), subject to maximum regular working hours per day under article 137, which is eight hours a day. Labor Minister Samheng said that article 138 was amended to increase Cambodia’s ability to attract modern industries, such as “factories producing electrical equipment, electronics, and processed foods.”

Nightshift Pay Rate Remains Unchanged

The amendment did not reduce the pay rate for regular night shifts as originally proposed. The wage rate for working during the night had already been reduced once before. The original version of article 144 provided that the rate for regular night shifts from 10 p.m. to 5 a.m. would be 200% of normal wages. (Arts. 144 & 139, respectively.) However, the 2007 amendment to the Labor Law reduced that rate to 130%. This amendment did not affect the 200% rate for working overtime during the night.

During the drafting process for the 2021 amendment, there was a proposal to amend article 144 for the second time to reduce the wages of regular night shifts to only 100% of wages during the day (again without affecting the pay rate of working overtime at night). Labor Minister Samheng explained that this pay rate reduction would create more employment opportunities for Cambodian workers and thus boost Cambodia’s economy. This proposal was one of the major dissatisfactions among unions. In September 2020, the MLVT sent the draft with amended article 144 to the Council of Ministers. However, the council rejected the amendment of article 144 before approving and sending the draft to the legislature. Therefore, the rate for regularly working during the night remains 130% of regular wages.

Prepared by Pichrotanak Bunthan, Legal Research Fellow, under the supervision of Sayuri Umeda, Senior Foreign Law Specialist