Minimum statutory terms
Termination of employment
Discrimination and harassment
Occupational health and safety
Regulation of outsourcing and contracting
Industrial relations

Acknowledgment

This Guide was prepared by the Workplace Law & Advisory – Asia practice of Freehills International Lawyers, with assistance from the following firms:

Contacts:

George Cooper
Practice Leader
+65 6236 9941 begin_of_the_skype_highlighting              +65 6236 9941 
george.cooper@freehills.com

Celia Yuen
Senior Associate
+65 6236 9972 begin_of_the_skype_highlighting              +65 6236 9972 
celia.yuen@freehills.com

Note:     This Guide:

• is current to 31 March 2010;
• contains general introductory information only, without an assumption of a duty of care by Freehills or the other firms listed;
• does not contain legal advice; and
• is not intended to be, nor should it be relied on as, a substitute for legal or other professional advice.

If employers have workplace relations issues or requirements in particular jurisdictions, then Freehills Workplace Law & Advisory - Asia can assist, working with local counsel.

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Minimum statutory terms
Key statutes
Thailand has a civil law legal system similar to the civil law countries of continental Europe. Its laws consist of the Constitution, as well as Codes, Acts and delegated legislation in the form of decrees, notifications, rulings, announcements and regulations. Judicial precedent is not binding, but decisions of the Supreme Court will be treated with great respect by the lower courts.
The key statutes that impact upon employment arrangements in Thailand are as follows:

• Civil and Commercial Code
• Labour Courts Act
• Labour Protection Act
• Labour Relations Act
• the Provident Fund Acts
• the Social Security Acts
• Unfair Contract Terms Act, and
• Workmen’s Compensation Act.

In addition, the employment of foreigners is governed by the Foreign Employment Act and relevant provisions of the Immigration Act.

Employer work rules
An employer with 10 or more employees must have work rules and regulations in the Thai language which are registered with the Labour Office having jurisdiction over the registered office of the employer. The work rules must contain at least the matters provided in Clause 108 of the Labour Protection Act, such as normal working days, hours and rest time, holidays and procedures to take leave. The work rules must be announced within 15 days from the date the employer has at least 10 employees, and must be posted in the workplace.

Probationary period
It is generally recommended that employers include a probationary period in the contract of employment, as employees on probation (up to a maximum of 120 days) are not entitled to severance payments as provided for under the Labour Protection Act, provided that the Act’s requirements concerning notice are observed.

An employer and employee may agree to include a provision in the employment contract dealing with the duration and effect of the probationary period. Such provision will be subject to the general power of the court under the Labour Protection Act to review the fairness of the terms of an employment contract.

Minimum wage
Under the Labour Protection Act, the Minister has power to make minimum wages orders. These orders are made on a province by province basis, setting out the minimum daily wage, and are usually reviewed at least annually.

Remuneration structure
Wages may be agreed to be paid on a periodical (for example, per hour, per day, per week, per month) basis or on a piecework basis.

In addition to ordinary wages which are paid for regular full-time work, an employee may be entitled to overtime wages, holiday wages or a combination of both.

‘Wages’, which are used for calculation of severance pay, are to be distinguished from ‘payments for welfare’, which are not. The former includes such things as regular allowances, such as a car allowance. The latter includes such things as provident fund contributions made by the employer, income tax where this is paid by the employer, costs of transport to and from work in an employer-supplied vehicle, and discretionary bonuses.

Working hours
Hours of work—Working hours vary depending on the nature of the work, however the maximum working hours should not exceed eight hours per day or 48 hours per week.
Where fewer than eight hours are worked in a given day, the balance can be carried forward and added to another day, to extend the maximum working hours to nine hours (note that the employee may still have an overtime entitlement with respect to those hours, and that the weekly 48-hour cap still applies).

Rest periods—In general, an employee is entitled to a break of at least one hour but no more than two hours after five hours of work, unless otherwise agreed to the benefit of the employee. The break period is generally not counted as part of working hours.

An employer must provide an employee with at least one weekly holiday/rest day.

Overtime—An employer cannot require an employee to work overtime without the employee’s consent, except where the nature or type of work necessitates continuous performance, where stoppage may damage the work or in other prescribed circumstances. Regulations prescribe that overtime must not exceed 36 hours per week.

When overtime work lasts for two hours or more, the employee is generally entitled to a rest period of at least 20 minutes before the employee starts to work overtime (excluding work which is of a continuous nature or type and which the employee consents to perform or which is urgent).

In broad terms, managerial employees and salespersons employed on a commission basis are not entitled to additional payment in respect of overtime—that is, employees authorised to act on behalf of the employer in hiring, paying compensation, reducing wages or terminating employment.

Employees who do not fall into the managerial employee or commission sales category are entitled to payment for overtime work. Depending on the type of work being performed, the employee will be entitled to payment at either the regular wage rate or at 150% of the regular wage rate. Overtime work during holidays is paid at 300% of the regular wage rate.

Public holidays
Employees are entitled to a minimum of 13 paid public holidays per year, including Labour Day (1 May).

Employers in certain specified industries may require employees to work on a public holiday (for example, hotels, entertainment, transportation, restaurants, healthcare facilities etc).
An employee who performs work on a holiday is entitled to payment at the rate of 200% of the ordinary wage rate.

Paid annual leave
After one year’s service, an employee is entitled to a paid annual holiday of six working days per annum. The timing of the annual holiday may be fixed in advance by the employer or agreed between the employer and employee. Accrued but untaken annual leave must be paid out upon termination of employment.

Although the statutory minimum is six working days, a more generous entitlement may be provided for in the contract of employment and/or work rules.

Other types of leave
Maternity leave—Female employees are entitled to maternity leave for a maximum period of 90 days, 45 days of which is on full pay.

Sickness leave—Employees are entitled to sick leave for as long as the sickness lasts. The first 30 working days of sickness leave per annum is paid leave. If sickness leave is taken for three or more working days, the employer may require the employee to provide a medical certificate.

Military service leave—Employees are entitled to up to 60 days per annum of paid military service leave for military service, military draft, military training or tests of readiness, as required under the law.

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Termination of employment
Legal requirements
The Labour Protection Act provides that an employer may terminate the employment of an employee whose employment term is not specified, by giving advance notice and making a severance payment in accordance with the Labour Protection Act.

However, this power to terminate employment must be considered in conjunction with the Labour Courts Act, pursuant to which the Labour Court may order a remedy if it considers that the termination of employment was ‘unfair’. There is no exhaustive definition of what ‘unfair’ means—some examples of circumstances that courts have considered unfair include:

• termination without cause
• termination without any fault of the employee
• termination as disciplinary action, in circumstances where the penalty imposed is not in accordance with the employer’s work rules
• termination where the employer cannot produce witnesses or evidence to prove default by the employee, or
• discriminatory termination.

Notice periods
When an employment contract for a fixed period has expired, the employment will end without the need to give notice.

Where the employment contract does not specify the period of employment, the minimum statutory notice period is at least one, actual prospective pay period for the employee concerned, provided that no more than three months notice need be given.

Payment may be made in lieu of notice.

No notice is required where employment is terminated for a permitted cause as prescribed under either the Labour Protection Act or the Civil and Commercial Code, which includes:

• dishonest performance of duties or committing an intentional criminal offence against the employer
• intentionally causing harm to the employer
• gross negligence causing serious harm to the employer
• violating work rules or orders of the employer for which a written warning has previously been issued to the employee (note that a warning is valid for two years, and that serious violations might not require a warning)
• neglecting the employee’s duties/absence from employment for three consecutive working days without justifiable cause, and
• being sentenced to imprisonment under a final court judgment, except for the offences arising out of negligent acts or for petty offences.

In these circumstances, the employer will not be obliged to make a severance payment nor a payment of accrued annual leave.

Restrictions on the ability to terminate employment
An employer may not dismiss a female employee for the reason of pregnancy, and also may not dismiss an employee for trade union membership or trade union activities.

Remedies
The Labour Court has power to order the reinstatement of the employee at the same wage rate that previously applied. If the court decides that the parties cannot work together, then the court will assess and compensate the employee’s losses taking into account his/her age, length of service, hardship at the time of dismissal, the reasons for the dismissal, and the severance compensation that the employee is entitled to receive.

Severance payments
Except where employment is terminated for a permitted statutory cause as listed in ‘Notice periods’ above, the employee will be entitled to a severance payment upon termination, based on the following scale:

No severance pay is due where the employment is for a fixed duration and employment expires at the end of the contract period, provided that:

• the employment was for work on a specific project which is not in the normal course of the employer’s business or trade, and which had a definite beginning and end, or
• the employment was for seasonal work, provided the work was completed within a period not exceeding two years, and the parties made a written agreement as such upon commencement of employment.

Specific requirements applicable to redundancy
If dismissal occurs due to a redundancy arising out of a change in machinery or technology, then 60 days advance notice of dismissal must be given to the employee and to the Labour Inspection Office. If such notice is not given, then 60 days special compensation is payable to the employee, based on the usual wage rate or piecework rate.

In addition, if dismissal occurs due to a change in machinery or technology, dismissed employees with over six years service are entitled to additional ‘special compensation’ of 15 days pay for each year of service, up to a maximum payment of 360 days pay, once again based on the usual wage rate or piecework rate.

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Discrimination and harassment
The Labour Protection Act requires equal treatment of men and women in employment, equal pay for equal work, and prohibits termination of employment on the grounds of pregnancy.

Sexual harassment is also prohibited by the Labour Protection Act.

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Occupational health and safety
The Labour Protection Act empowers the Ministry of Labour to formulate and issue regulations for the health and safety of employees. Many such regulations have been issued, and are generally applicable to particular industries or types of employment.

A business operation with 50 or more employees is required to set up a welfare committee on the business premises, comprising at least five employee representatives. The employer is required to hold meetings with the welfare committee at least once every three months. The duties of the Committee are to discuss employees’ welfare with the employer, and to make proposals on welfare to the Committee on Labour Welfare (a government body).

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Regulation of outsourcing and contracting
Pursuant to the Labour Protection Act, a company is deemed for the purposes of that Act to be the employer of any outsourced workers, where such workers perform core duties of the business of the employer. Pursuant to the Act, the employer is obliged to ensure that such outsourced workers receive fair benefits and welfare without discrimination as compared with direct employees. Thus such companies may be subject to the usual employment obligations of an employer, for example, the collection and remittance of social security or workers’ compensation contributions.

In contrast, if the outsourced worker is performing non-core functions and duties (for example, businesses often outsource functions such as cleaning or catering within their offices), then the non-discrimination obligation will not apply.

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Industrial relations
Legislation in brief
The Labour Relations Act is the key piece of legislation that deals with industrial relations, trade unions, employers’ associations and industrial action. The Labour Relations Act provides a framework for the making of labour demands and the settlement and arbitration of labour disputes, and also imposes limitations on the circumstances in which strikes and lockouts can be called.

Role of trade unions and collective agreements
Trade unions—Historically, Thailand has never had a strong trade union movement. Modern industrial relations in Thailand are still in relative infancy. The government has been promoting industrial peace and tripartism.

The Labour Relations Act provides for two types of labour unions, namely company labour unions and industrial labour unions.

Collective agreements—The Labour Protection Act provides that an employer who employs 10 or more employees must have work rules and regulations dealing with certain prescribed matters.

The Labour Relations Act provides that a business with 20 or more employees must prepare a written ‘Employment Terms Agreement’.

The legislation recognises that the Employment Terms Agreement required by the Labour Relations Act may be constituted by work rules prepared in accordance with the Labour Protection Act.

The Labour Relations Act also provides for the setting up of an employee committee in places of business with more than 50 employees.

Collective bargaining in Thailand is generally conducted at the enterprise level rather than the industry level. Unorganised workers have the same rights and privileges to bargain collectively as do unionised workers, since employees comprising not less than 15% of the total employees of an establishment can demand improvements in their employment conditions.

Industrial action and disputes
The Labour Relations Act establishes procedures for labour negotiations, mediation by the Department of Labour Protection and Welfare officials, and arbitration by the Labour Relations Committee.

A labour dispute can be referred to a conciliation officer, who will mediate the dispute. During a labour dispute period, if the settlement fails, the employer may effect a lockout or the employees may go on strike, subject to certain restrictions on some businesses (for example, essential services affecting the general public, railways, telephones etc).

Where the negotiations and mediation by the conciliation officer fail, the employer and employee may agree to appoint an arbitrator to rule on the labour dispute relating to the conditions of employment. Alternatively, the matter will be referred to the Labour Relations Committee for determination. The Committee’s decision can be appealed to the Minister of Interior within seven days from the date of receipt of the decision.

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