The Labor Protection Act of 1998 is applicable to all employees and employers, except for the government administration and state enterprises. The Labor Protection Act regulates the minimum rights of both the employee and employer by defining the working hours, welfare funding, holidays, days of sick leave or educational leave, overtime, work safety.
It also contains the rules regarding the end of an employment contract and the procedure to be followed in case of wrongful dismissal. We hereby give an overview of the legal provisions concerning the latter, but emphasize that the parties can agree to apply different terms and conditions since the below only serves as the legal minimum protection.
Ending contract without any cause
In case the employment agreement was concluded for a fixed period of time, the agreement will take an end at that date automatically. If the agreement is applicable for an indefinite amount of time, both the employer and employee can end the employment agreement at any time if a term of notice and severance pay is taken into account and provided that the process is fair and clear.
There is one exception to the below commented legal provisions: if the employee is a member of the employee committee (which has to be installed in case the company employs more than 50 people), he can only be dismissed if the Thai court approved this beforehand.
Terms of notice
The notice period has to amount to at least one pay period, does not have to be longer than three months and takes effect only at the next pay day. The agreement may be terminated immediately if the employer pays the salary that could have been earned during the days of notice.
Example: the employee is dismissed on the 25th of January and is usually paid on the 30th day of each month. The term of notice will start on January 30 and end on February 28.
Example: the employee is dismissed on Monday the 18th and is paid every Monday. The term of notice will amount to seven days starting as from Monday the 25th.
In several special situations, a fixed term of notice has been foreseen by the legislator:
- 60 days notice has to be given to employees that are dismissed in consequence of organisational restructuring, manufacturing process, sales or service, the adoption of machinery, or a change of machinery or technology. Moreover, both the employee and the labor official have to be informed of the exact reason. If the employer fails to do so, the employee has the right to receive an additional special compensation payment in lieu of notice (equal to sixty days’ pay at his/her most recent wage rate or equal to the wages for the last sixty days of work in respect of an employee who is paid a wage on the basis of piece work).
- The employee has to be informed at least 30 days before the company’s relocating, provided that the relocation affects the normal living of an employee or his/her family. If the employer fails to do so, the employee has the right to receive an additional special compensation payment in lieu of notice (equal to thirty days’ pay at his/her most recent wage rate or equal to the wages for the last thirty days of work in respect of an employee who is paid a wage on the basis of piece work).
If the employer failed to give prior notice correctly, interests at a rate of 7% shall be due on the salary earned during the term of notice.
A severance pay will have to be paid to the employee when he/she is dismissed without any reason. The severance pay is based on the duration of the employment:
- 30 days in case the employee worked for more than 120 days but less than one year for the company
- 90 days in case the employee worked for more than one year but less than three years for the company
- 180 days in case the employee worked for the company for more than three years but less than six years
- 240 days in case the employee worked for the company for more than six years but less than ten years
- 300 days in case the employee worked for the company for more than ten years
Do note that the duration of the employment includes the term of notice, holidays and additional days of leave (for whatever reason the employee did not work on these days).
Example: the employee started working for the employer on January 15, is paid every 30th day of the month and is dismissed on June 29: the term of notice will start on June 30 until July 30. The employee will have worked for the employer for six and a half months and thus a severance pay of 30 days will be due.
Example: the employee started working for the employer on January 15, is paid every 30th day of the month and is dismissed on December 15: the term of notice will start on December 30 until January 30. As a consequence, the employee will have worked for the employer for more than one year and will thus receive a severance pay of 90 days will be due.
No severance payment is due when the employee was hired for a particular project, temporary work or seasonal work.
The severance payment must be covered within seven days after the effective termination date. Also the unused annual leave, hours/days of overtime and other amounts due under the agreement have to be paid at that moment. If not, interests at a rate of 15% will be due.
Dismissal with cause
The Labor Protection Act stipulates that an employee may be dismissed without neither notice nor severance payment if the employee:
1. Has performed his duty in a dishonest way
2. Intentionally committed a criminal offense against the employer or intentionally caused him damage
3. Negligently caused serious damage to the employer
4. Violated the lawful and legitimate work regulations and the employer warned the employee in writing beforehand (maximum one year)
5. Did not come to work for three consecutive days without any appropriate reason (regardless of whether or not there was a holiday in between or not)
6. Is imprisoned by a final judgment, unless the sentence was given for an offence which was committed out of negligence
If the employer bases the dismissal on one of these grounds, the reason has to be stated clearly in the dismissal letter. The balance of the salary has to be paid within three days but no further formalities have to be taken into account.
Obviously an employee may not be dismissed for reasons of pregnancy or trade union activities.
Wrongful dismissal (section 123-125)
In case of violation of the Labor Protection Act, the employer risks a fine between 5,000 and 200,000 THB or/and imprisonment of up to one year. The following situations can be considered as a wrongful dismissal:
- The immediate dismissal without a clear and full explanation of the reason or the termination of the agreement without serious cause nor severance pay
- The termination of the agreement without payment of the unused annual leave
- The termination of the agreement based on the (claimed) violation of the work regulations by the employee without any prior warning
We hereafter discuss the civil claims, but do want to mention that in some cases a labor dispute can result in a criminal lawsuit. This will for example be the case when fraud has been committed or when the convicted party fails or refuses to pay the compensation as imposed by the Labor Inspection Officer or the Labor Court.
Labor Inspection Officer
The Labor Inspection Officer as an Investigator
The Labor Inspection Officer has the authority to enter the workplace or office of the employer during working hours in order to inspect the working conditions of the employee and the terms of employment, inquire the facts, take photographs, make photocopies of documents which are connected with employment, the payment of wages, overtime pay, holiday pay, holiday overtime pay, and employee registers, collect samples of materials or products for analysis in connection with work safety, and carry out other actions in order to obtain facts for the implementation of this Act. The Labor Inspection Officer can also issue letters asking employers and/or employees to provide explanations of certain issues, send other information and/or to require behavior in accordance with the Labor Protection Act.
The Labor Inspection Officer as a Judge
If the employer did not take the above into account, the employee (or his legitimate heirs in case of decease) can file a complaint with the Labor Inspection Officer of the locality in which the employee is working or the employer is domiciled. The Labor Inspection Officer shall look into the facts and issue an order within sixty days as from the date of receipt of the petition.
Should the employee not be entitled to receive any compensation under the Labor Protection Act, then the Labor Inspection Officer shall issue an order and inform both parties in writing. In the other scenario, the Labor Inspection Officer shall issue an order requiring the employer to pay the compensation within fifteen days from the date when the employer is notified about the order. The payment shall be done at the workplace unless otherwise requested by the employee. In such case, the employer may be obliged to pay the compensation at the office of the Labor Inspection Officer or at another place as agreed upon between both parties.
If the employee did not receive this compensation within fifteen days from the day on which the Labor Inspection Officer issued the order, the Labor Inspection Officer shall remit such money for maintenance in the Employees Assistance Fund by depositing it in a bank. The employee is entitled to also receive the interests or benefits on the bank account.
If one of the parties does not agree with the verdict of the Labor Inspection Officer, they can request the Labor Court to look into the case within thirty days as calculated from the date of notification of the order. This request can be done both verbally and in writing. If none of the parties has reacted within this deadline, the decision of the Labor Inspection Officer becomes final.
The Labor Court has the duty to try and reach a compromise. If the court succeeds, the parties or the court will draw up a written statement on the position agreed or the case will be withdrawn from the court. If no compromise can be reached, the full litigation process will start. In case the employer starts the procedure before the Labor Court, he/she will have to pay the contested amount to the court. The latter should facilitate payment of the amounts due if the court would agree with the employees view on the facts.
The Labor Court has the power to reinstate the employee at the same salary or, if further cooperation between both parties would no longer be possible, grant compensation to the employee. This compensation will only concern the actual damages, and will in general not include a compensation for psychological or emotional damages as is common in Western law systems). The amount of the compensation will be calculated based upon the damage caused to the employee, taking into account the age of the employee, length of the service, social situation of the employee (e.g. cost of living), the reason of the dismissal, the working conditions and the amount of severance pay to which the employee was entitled initially.
The procedure before the Labor Court is known to be fast and, as is the case in many European countries, is likely to rule in favor of the employee.
Appeals against the decisions taken by the Labor Court have to be addressed to the Supreme Court within 15 days after the Labor Court came to a judgment. As is the case in European law systems, the appeal can only concern questions of law and cannot concern the facts of the case itself. The appeal can only be done in writing and a copy of the Labor Court’s judgment should be attached. A copy is sent to the opposite party, who has to react within seven days.
Complainants do not have to be represented by a lawyer during these procedures but the whole process being in Thai and Thai law being rather complex it is highly recommended to be assisted by a Thai lawyer. Please do not hesitate to contact K Fischer & Co's experienced lawyers to help you.