While Thailand is not typically known for being a highly litigious country, labor disputes and the Termination of Employment, present a different scenario. According to the Annual Statistical Report from the Thai Judiciary, over 10,000 labor dispute cases have been recorded annually in recent years.
A frequent issue for employers in Thailand is dealing with claims of unfair termination. The country’s labor protection laws are notably “pro-employee,” which means terminations without valid reasons are often viewed unfavorably by both the courts and the general culture.
Such claims can create substantial financial and logistical challenges for both foreign and local employers.
This article provides an overview of the legal principles related to unfair termination in Thailand, common claims made by employees, strategies to minimize these risks, and how to manage claims when they occur.
Legal Principles of Unfair Termination
Under Thailand’s Labour Protection Act B.E. 2541 (1998) (LPA), employers are generally required to pay severance upon termination unless the dismissal falls under specific justifiable reasons outlined in section 119 of the LPA.
Severance pay is not necessary if the termination is due to employee dishonesty, criminal activities, intentional or negligent damage to the employer, violations of company rules, neglect of duty without reasonable justification, or imprisonment.
Compensation for Unfair Termination
If an employee is terminated “without cause,” severance and other statutory payments must be made. Severance pay is calculated based on the employee’s final wages and their length of service with the employer.
In most jurisdictions, severance pay typically includes a specified number of weeks’ pay for each year of service, up to a certain maximum. This calculation may vary depending on company policy, collective bargaining agreements, and local labor laws.
Additionally, employees may be entitled to other statutory payments, such as accrued vacation pay, bonuses, and any outstanding commissions.
Ultimately, both the employer and the employee benefit from understanding their rights and responsibilities regarding termination. Open communication, adherence to policies, and a respectful approach can help minimize conflicts and foster a healthier work environment.
Minimizing Risks of Unfair Termination in Thailand
Even if statutory payments are correctly made, employees may still file claims for “unfair termination” in Thai courts.
The definition of “unfair” is not clear-cut, and courts assess the reasonableness of terminations on a case-by-case basis, often not from the employer’s perspective. To reduce risks, it is advisable for employers to consult a Thai lawyer before proceeding with an employee’s termination.
Common Claims for Unfair Termination
Based on experience and legal precedents, common grounds for unfair termination claims include:
- Discrimination or unfair treatment of a specific employee leading to termination.
- Termination without valid reasons or inadequate notice.
- Termination for performance issues without prior warnings or opportunities for improvement.
- Termination for minor infractions or minor rule violations without written warnings.
- Termination based on perceived financial losses without substantial evidence.
- Termination due to company restructuring or redundancy while the business remains profitable.
- Coerced resignation or forced signing of resignation or mutual separation agreements.
Strategies for Minimizing Unfair Dismissal Claims
When dealing with terminations, especially due to poor performance or conflicts, employers can take the following steps to reduce the risk of unfair dismissal claims:
- Provide Clear Notice: Inform the employee about performance issues through detailed feedback and a performance improvement plan (PIP), both verbally and in writing, before considering termination to the employee.
- Document Termination Reasons: If performance does not improve, prepare a termination letter detailing the reasons for dismissal. Encourage, but do not force, the employee to resign.
- Meet Statutory Requirements: Ensure all statutory and contractual entitlements are paid to the employee.
- Consider a Mutual Separation Agreement: Offer a mutual separation agreement with confidentiality clauses and a waiver of future claims, potentially including an additional “ex-gratia” payment.
Handling Terminations for Specific Reasons
- Redundancy, Reorganization, or Restructuring: Employers must prove that the reorganization was necessary due to financial issues, ensure a fair selection process, and align actions with the company’s financial situation. Proper notification to labor authorities and employees is required, and special severance pay may apply in some cases.
- Office Relocation: Provide at least 30 days’ notice to employees about the relocation, including details of the new location. If the relocation significantly impacts employees’ living conditions, they must notify the employer within 30 days to receive special severance pay.
- Business Transfer: Employees do not automatically transfer to a new employer. Consent must be obtained from employees, and the new employer must honor the same rights and terms. If employees refuse to transfer, the new employer must either offer a new contract or terminate the employee with full statutory payments.
Managing Unfair Termination Claims
If an unfair termination claim is filed:
- Prepare for Legal Proceedings: Note the hearing date and engage local labor lawyers who specialize in Thai court processes. Determine if an extension for filing a defense is needed.
- Gather Evidence: Collect evidence supporting the grounds for termination, such as performance issues, financial conditions, and any counterclaims against the employee’s accusations.
- Explore Settlement Options: Consider negotiating a settlement with the employee, taking into account potential court-awarded compensation. Thai courts often encourage settlement discussions early in the process.
- Draft a Settlement Agreement: Ensure any settlement agreement sent to the employee includes confidentiality clauses and a waiver of further claims.
Conclusion
Unfair termination claims are relatively common in Thailand, but employers can take proactive steps to mitigate risks and manage claims effectively.
By understanding the LPA requirements and following best practices, employers can reduce their exposure. If faced with a claim, employing practical strategies can help minimize the impact on the company’s resources and operations.
About AO’s Legal Services
At AO, we offer expert legal services tailored to meet the diverse needs of businesses operating in Thailand.
Our team consists of highly experienced legal professionals who specialize in Thai Labour Law, ensuring that your business navigates the complexities of employment regulations with ease.
Located in Bangkok, AO provides a range of legal services including drafting and reviewing contracts, managing compliance issues, and handling employment disputes between the employer and the employee.
We pride ourselves on our ability to offer strategic legal advice that is both practical and effective, helping you avoid costly litigation and maintain a harmonious workplace.
In addition to our legal expertise, AO is part of the Alliott Global Alliance (AGA), one of the world’s largest and fastest-growing global alliances.
This affiliation enables us to extend our services internationally, offering you comprehensive support wherever your business operations may take you.
FAQs to Further Your Research
Q: What is severance pay in the context of termination of employment in Thailand?
A: Severance pay is a form of compensation that an employee is entitled to receive when their employment is terminated under certain conditions, according to Thai law, and the employee will be entitled to it if the termination is without justifiable reason for three months. The amount of compensation depends on the duration of the employee’s service and is governed by Section 17 of the Labour Protection Act.
Q: What are the legal grounds for termination of employment in Thailand?
A: The legal grounds for termination of employment in Thailand include justifiable reasons such as violation of work regulations, misconduct, or redundancy. If the termination is without justifiable reason, the employee may be entitled to compensation paid to the employee as outlined in Section 119 of the Labour Protection Act.
Q: How should an employer notify an employee of termination of employment?
A: An employer must provide a notice to the employee, which should include the date of termination and the reasons for the termination. It is recommended to send a formal letter of termination of employment to ensure clarity and compliance with Thai labour laws.
Q: What happens if an employee’s employment is terminated without justifiable reason?
A: If an employee’s employment is terminated without justifiable reason, the employee is entitled to severance pay and may also seek compensation through the labour court for damages resulting from the unjust termination.
Q: How much notice must an employer give before terminating the employment of an employee?
A: According to Thai labour law, the employer must notify the employee in advance at least 30 days before the date of termination, unless otherwise stated in the employment agreement.
Q: Can an employee terminate their employment contract voluntarily?
A: Yes, an employee can terminate their employment contract voluntarily. However, they must provide notice to the employer as specified in the employment agreement, typically at least 30 days in advance.
Q: What is the process for an employee to challenge their termination of employment?
A: An employee who believes their termination was unjust can file a complaint with the labour court or seek mediation services. It is advisable to gather all relevant documents, including the employment contract and any correspondence related to the termination.
Q: What are the potential consequences for an employer who dismisses an employee without following the proper termination procedures?
A: An employer who dismisses an employee without following proper termination procedures may face legal repercussions, including a requirement to pay severance pay and other compensation to the employee. Additionally, the employer may be subject to claims in the labour court for unfair dismissal.
Q: Is an employee entitled to severance pay if they are dismissed during their probation period?
A: Generally, employees who are dismissed during their probation period are not entitled to severance pay unless the employment agreement stipulates otherwise. However, this can vary based on the terms outlined in the employment contract.
Q: What should an employee do if they have not received their severance pay after termination?
A: If an employee has not received their severance pay after termination, they should first contact their former employer to inquire about the delay. If the issue is not resolved, the employee can file a complaint with the labour court to seek the compensation owed to them.