Employee Termination in Thailand — caution, not as simple as you might assume

Occasionally, an employer-employee relationship doesn’t work out. In fact, the relationship sometimes degrades to such a degree that one or both parties wish to terminate it immediately. For the employee, this is generally simple: unless the employment contract contains a provision otherwise regulating self-termination, an employee may quit by giving notice at least one full wage payment cycle before termination is to take effect. For the employer who wishes to terminate an employee, however, the situation is not so simple.

The Labor Protection Act (1998) (the “LPA”) was largely enacted to protect employees, whom it assumes are generally in a less powerful position than their employer. That said, the LPA does allow an employer to terminate an employee for “cause,” limited to one of the following reasons:

1. The employee worked dishonestly or intentionally committed a criminal offense against the employer;
2. The employee intentionally caused damage to the employer;
3. The employee committed a negligent act that caused serious damage to the employer;
4. The employee violated the employer’s work rules, regulations, or a lawful and fair order, and the employer had given written warning of the violation within the previous twelve months (note: for particularly egregious violations, no prior warning is required);
5. The employee was absent from work without justifiable cause for at least three consecutive working days; or
6. The employee was sentenced to imprisonment by a final court judgment (if the offense involved mere negligence or was a petty offense, it must also have caused damage to the employer to qualify).

It is critical to note that if an employer terminates an employee for “cause,” the employer must notify the employee of the reason for termination at the time it occurs. If the employer fails to do so, it will not be permitted to later claim the termination was for cause, and the termination will be treated as if it had no cause at all.

If an employer terminates an employee for any reason other than “cause” as defined above, the employer may be held liable for one or more of the following:

1. Payment in Lieu of Notice

Section 582 of the Civil and Commercial Code requires a party to an employment agreement to give the other party notice of termination at least one full wage payment cycle before termination takes effect. Notice need not be given more than three months in advance, even where the wage cycle itself exceeds three months.

For example, if an employee is paid at the end of each month and the employer wishes to terminate as soon as possible without incurring this liability, the employer cannot terminate effective the end of March on 12 March, since that would not constitute one full wage cycle. The earliest the employer could properly terminate without liability would be 30 April — even with notice given as early as 12 March. The employer could instead wait until 31 March to give notice effective 30 April without incurring liability. If, however, the employer gave notice on 12 March of termination effective 31 March, the employer would be liable for a full month’s pay, since the employee should have been allowed to work through the end of April.

2. Severance Pay

Under Section 118 of the LPA, an employer who terminates an employee without “cause” may be liable for severance pay based on length of employment:

3. Unfair Dismissal Compensation

Apart from the liabilities above, if a termination is found to be “unfair,” Section 49 of the Establishment of and Labor Court Procedure Act (1979) allows the court to require the employer to pay additional compensation in an amount it deems appropriate.

The Act does not explicitly define “unfair,” but the following summaries of actual labor court rulings offer guidance:

Terminations found to be unfair, where:

1. An employee’s husband was working for a competing company;
2. An employee worked as a technician in a field requiring a legal license, and was terminated after the employer discovered the license had expired — while other technicians with similarly expired licenses were not terminated;
3. An employer’s annual profit had decreased compared to previous years, though the business remained profitable, and the employer terminated an employee in response; and
4. An employee was gambling outside of working hours, and while the employer’s work regulations specified a financial penalty for such conduct, the employer terminated the employee instead.

Terminations found not to be unfair, where:

1. An employee’s performance was insufficient during the employer’s probation period;
2. An employee was terminated in line with the employer’s work regulations on retirement; and
3. An employer’s business was unprofitable for successive years, the employer had taken steps to reduce employment costs (such as offering voluntary resignation), and was eventually forced to terminate an employee who declined to resign in order to save the business as a whole.