Decree 145/2020 of the Government clarifies several contents of the Labor Code 2019. One notable point is the guidance on how to calculate the overtime (OT) cap. Specifically, under Article 60.5 of Decree 145/2020, “break time within a work shift will be deducted when calculating the monthly or yearly overtime hours” (“Exemption”). Without further clarification on this provision, it is however unclear how to interpret this Exemption in practice.
Example: A company organizes for its employees to work under the shift pattern of 12 hours/shift (7.00am-7.00pm; 7.00pm-7.00am). For each shift, 10 hours are considered as normal working time, and the remaining 2 hours are overtime. Within a shift, the employees shall be entitled to 60 minutes of break falling within first 10 normal working hours. Will 60 minutes of break be excluded from the total monthly or yearly OT cap of an employee under Article 60.5 above?
Based on Article 60.5 of Decree 145/2020, there may be two different interpretations on the calculation of OT in this case.
The most favourable interpretation for employers is that the whole 60 minutes of break would be excluded from the total monthly or yearly OT cap. That means the break time falling within any working hours of a work shift (i.e. regardless normal working hours or OT hours) or any work shift (i.e. regardless normal shift or OT shift) would be eligible for this exemption (Favourable Interpretation).
One however can take a stricter interpretation that only break time falling within OT hours of a work shift or within an OT work shift can be excluded (Strict Interpretation). That means, in the context of the above example, the whole 60 minutes of break will not be excluded. To be eligible, the employer must arrange for this break to fall within the last 2 OT hours of the shift, or if such break is within a work shift which is an OT shift.
We set out below some arguments for each Interpretation.
1) Arguments to support Favourable Interpretation
The Favourable Interpretation can be supported by the following arguments:
(i) Article 63.1 of Decree 145/2020 provides that a work shift is a working period that begins when the employees start work and ends when they finish and hand over the work to another, including working time and break time. This Article seems to suggest that work shift can be either normal shift or OT shift so the Exemption could apply to break time of either normal shift or OT shift.
(ii) Article 63.3 of Decree 145/2020 provides that the break time will be eligible for the Exemption if it is within a work shift having 6 consecutive hours or more, and the gap between two adjacent shifts must not exceed 45 minutes. That means the break time of any work shift (which is either normal shift or OT shift) which satisfy these conditions will be eligible for the Exemption.
(iii) Article 64.3 of Decree 145/2020 allows an employer to decide when an employee will be entitled to break time during the “working hours” of a work shift, provided that such break time does not fall at the beginning or ending time of a work shift. The “working hours” can be interpreted to include both normal working hours and OT hours. Therefore, the break time of a work shift can fall at any time of the work shift (but not the beginning or ending time of a work shift). That means even if the employer arranges for the break time to fall within the normal working hours of a work shift, it still qualified for the Exemption.
2) Arguments to support Strict Interpretation
For those who take the Strict Interpretation, the main argument is that the main purpose of the Exemption is to calculate the OT hours which an employee can work in a month or a year. Therefore, it would be logical to exclude the break time falling within an OT shift or during the OT hours of a shift from the OT cap because though the employees are entitled to OT wage for such break time, they do not actually work during this period. However, it would not be reasonable to do so for break time included in a normal shift or normal working hours because it is purely normal working time. Further, if the break time included in a normal shift or normal working hours is excluded, this could result in the significant increase of the total actual OT hours of an employee in practice. This may not be consistent with the State policy to gradually reduce the working hours of employees in future.
Due to the ambiguity wording of Article 60.5 of Decree 145/2020, it is not entirely clear which interpretation will be adopted by the authorities. We have consulted with the MOLISA and DOLISA of some provinces but no confirmation is given. It is also uncertain of the MOLISA intends to issue a circular guiding this Exemption. The concerned enterprises may want to send an official letter to the MOLISA to seek for an official interpretation to facilitate their implementation and compliance in practice.