Procedures For Terminating the Agreement
In all cases, the termination of an employment agreement must conform to the terms of the agreement, applicable work rules, and applicable law.
Under the Labor Protection Act, fixed term employment agreements will automatically terminate at the end of the fixed period, without the need to give prior notice.
If an employee is employed under an indefinite employment agreement, the employee is entitled to notice of at least one full payment cycle in advance of the effective date of termination, or payment of wages in lieu thereof. The termination notice must be on the employee’s payday or in advance thereof, such that the effective date of termination would be the following payday. An employer can immediately terminate the services of an employee by making a payment of wages in lieu of notice, equal to the number of days by which the notice is deficient.
Following termination, employees may bring claims for unfair/wrongful termination. In such cases, if the labor court is of the opinion that termination was unfair/wrongful, the court may order the employer to reinstate the employee at the employee’s wage rate at the time of termination. If the labor court finds that the employer and the employee cannot work together anymore, the Labor Court may award monetary damages to be paid by the employer, taking account of the employee’s age and tenure, employee hardship, the cause of termination, and the compensation to which the employee might be entitled. Compensation for unfair/wrongful termination is not fixed by statute, but the Labor Court is generally consistent in its calculation of damages. In successful claims, the typical award is equal to one to two months of compensation for the first year of service and one month of compensation for each subsequent year.
An employer may instantly terminate an employee, without notice or severance pay, if the employee dishonestly performs his/her duty or intentionally commits a criminal act against the employer; intentionally causes the employer to suffer losses; performs an act of gross negligence which causes the employer to suffer severe losses; violates the lawful and just work rules or regulations or orders of an employer after having received written warning within one year (for serious situations, a warning is not required); is absent from work without a justifiable reason for three consecutive working days, regardless of whether there is holiday in between; or is imprisoned by a final judgment (if it is an offense committed through negligence or a petty offense, it must be one that caused the employer to suffer damages).
In other cases, if the employer requires the employee to leave his/her job immediately, the employer will be required to pay wages in lieu of the advance notice required.
The law is written to require the employee to give at least one pay period advance notice, prior to resignation, and contracts are sometimes drafted to provide for longer notice periods (up to three months). However, from a practical standpoint, an employee may resign at any time, given the difficulty of proving damages in connection with insufficient notice.
Termination On Notice
In case an employment agreement between an employer and an employee is indefinite, the employer is required to serve a notice of termination to the employee of at least one full payment cycle in advance of the effective date of termination, unless the period for serving such notice is stated to be longer in the employment agreement, or payment of wages in lieu thereof is made. For more information, please also see the third paragraph of item 4 above: “Firing the Employee.” There are certain circumstances where employment may be terminated on notice with immediate effect (see “Instant Dismissal,” above).
Termination By Reason Of The Employee's Age
As mentioned above, Thai law does not provide a maximum age of employment in the private sector. In the private sector, retirement age depends on the employer’s policy. If the employer does not have a retirement policy, or if the employer’s retirement policy sets the retirement age above 60 years old, employees who are 60 years old or more may exercise their right of retirement. Even if the retirement age and policy are “fair,” termination by reason of the employee’s age would be considered termination without cause, thereby entitling the employee to the usual severance and other payments, as well as notice requirements and so on.
Automatic Termination In Cases Of Force Majeure
If situations arise that make it impossible for an employment contract to be performed, the parties may be excused from performance. If an agreement provides that the employment shall terminate in a case of force majeure, the employer would still have to fulfill statutory obligations toward the employee, as described herein, such as payment of severance, etc.
There is no concept of collective dismissals under Thai law.
Termination By Parties’ Agreement
The parties are free to agree to terminate the employment agreement. However, the parties cannot contract out of the minimum requirements set forth under Thai law, such as the employer’s obligations with respect to severance, notice of termination, payment for annual vacation from the current year and past years, etc.
Directors Or Other Senior Officers
If a director is an employee, the normal requirements of the Labor Protection Act would apply, such as severance and notice of termination, with respect to the termination of employment of such person. We would offer the same comment with respect to “Senior Officers”. In addition, there are specific requirements applicable to removing and appointing directors and the procedures associated therewith, as contained the Civil and Commercial Code, other related laws, and the company's Articles of Association.
Special Rules For Categories Of Employee
There are special requirements applicable to the employment of women, pregnant women, and children, some examples of which are described elsewhere in this document.
Thailand does not have any specific legislation to protect or incentivize whistleblowers. However, under the Witness Protection in Criminal Cases Act, witnesses are eligible for special protection measures in anti-corruption cases.
Specific Rules For Companies in Financial Difficulty
The Labor Protection Act provides no specific rules for companies facing financial difficulties.
Special Rules For Garden Leave
Under Thai law, there are no rules specific to garden leave. Nonetheless, in practice, the employer may request an employee not to come to work during a specified period of time prior to the effective date of termination.
However, during that period, the employment relationship still exists—that is, the employee will remain employed by the employer, and the employer must continue to pay all wages, employment benefits, and other payments due under the applicable employment agreement and other terms of employment. In addition, the employee’s years of service with the employer continue to accumulate during this period.
Restricting Future Activities
Generally, non-competition provisions are enforceable under Thai law, so long as they are not contrary to public order and good morals and are not unfair pursuant to the Unfair Contract Terms Act and the Labor Protection Act. In analyzing the fairness of the clause, the court is to take into account the length of time and geographic scope of the restriction; the remaining opportunity and ability of the employee to practice his/her occupation; and the lawful interests of the parties.
Statutory severance pay ranges from 30 days to 400 days, depending on the length of the employee’s service with the employer, as follows:
|Length of service
| 120 days but less than 1 year
|| 30 days at the last wage rate or the last 30 days’ wages for the work unit performed
| 1 year but less than 3 years
|| 90 days at the last wage rate or the last 90 days’ wages for the work unit performed
| 3 years but less than 6 years
|| 180 days at the last wage rate or the last 180 days’ wages for the work unit performed
| 6 years but less than 10 years
|| 240 days at the last wage rate or the last 240 days’ wages for the work unit performed
| 10 years but less than 20 years
|| 300 days at the last wage rate or the last 300 days’ wages for the work unit performed
| 20 years or more
|| 400 days at the last wage rate or the last 400 days’ wages for the work unit performed
An employer need not pay severance if an employee has been terminated for cause, as described above. In such cases, the employer should indicate a reason supporting such termination for cause, in the termination notice.
If an employee’s employment agreement or applicable work rules and regulations provide better severance that that provided in law, the law will give effect to such superior terms. Moreover, depending on how such terms are written, it is possible that they may provide for the employee to receive statutory severance plus additional termination benefits.
Special Tax Provisions And Severance Payments
Subject to certain conditions, a severance payment to a terminated employee is exempt from tax up to Baht 300,000. In addition, for employees who have been employed at least five years, the Revenue Code provides for special tax computation.
Allowances Payable To Employees After Termination
The Labor Protection Act does not require employers to pay any allowances to employees after termination, unless otherwise provided in the employment agreement or applicable work rules.
Time Limits For Claims Following Termination
An employee’s claim for wages or other remuneration, including disbursements, or an employer’s claim for advances must be issued within two years following termination. The statute of limitations on claims for severance and unfair termination is ten years.