Coronavirus Outbreak: Workplace Thailand
Employment and labor law issues during the Coronavirus pandemic
The following article addresses the three most pressing and controversial labor law issues in the pandemic crisis. The purpose of this illustration is to provide a realistic picture of the legal structures and problems. It, therefore, offers a distinct contrast to publications that neglect and disregard the attitude of the Thai courts. This would do more harm than good to the reader. However, it is only intended as a first orientation and will be continuously updated according to new developments and insights. #CoronaAlliance
Termination of employment contracts
Legislation: The legal relationship between employer and employee is regulated by Thailand’s Labor Protection Act. Foreign and Thai employees are treated under the law the same. Typically, the employee is free to terminate employment under the terms and conditions mentioned in the employment contract. The employer’s right to terminate might be restricted by statutory requirements. Generally, the three accepted termination causes are (i) economic reasons, (ii) poor performance by the employee and (iii) misconduct. There is no limitation regarding the number of employees that are terminated at the same time.
Compensation payments: If the termination is not justified by any cause, the employer is liable to severance payments between 30 and 400 days salary. Additional compensation has to be paid in case the termination notice is not delivered in time and if the termination is qualified by the labor court as unfair. Also, a 15% interest p.a. can apply.
Force majeure: The Labor Protection Act can be understood in a way, that force majeure justified the termination of employment. The law reduces the salary payment obligations of the employer in case of a suspension of the business, but explicitly excludes the force majeure case from this. However, the force majeure requirements as defined in Thailand’s Civil & Commercial Code are substantial. They place the highest demands on the employer and Thailand’s labor courts.
Reduction of salary during a suspension of business
New rules for business suspensions: Under the no-work-no-pay rule, Thailand’s employment legislation gave the employee limited options in case the business is not accessible. The recent modification of the Labor Protection Act covers a suspension of business under certain conditions. It requires a written notice to the employee and the authorities not less than three working days prior to the suspension. In case of a business suspension, the salary can be reduced to 75% of the salary as had been paid before the suspension.
Employer’s force majeure: The business-suspension-provision explicitly excludes cases of force majeure. This can be interpreted in a way that the force majeure case does neither require to comply with the three days notice period nor with the minimum quota of at least 75% of the previous salary. If the employer can provide the complicated proof of a force majeure situation, there is with immediate effect no obligation at all to pay.
Employee’s force majeure: If the worker is prevented from coming to work because he is obliged to be quarantined due to his infection, he can invoke force majeure himself to break the no-work-no-pay principle. How the Thai labor courts will react to such cases remains to be seen. Here, too, it will be a question of whether the legal requirements for a force majeure event actually exist in the individual case.
Guideline by the Ministry of Labor on March 18, 2020: A newly published guideline deals with payment obligations in case of closure of business by order of the authorities. It deals with the “No Work No Pay” principle, relocation of the workplace, and the obligation of the employee to help the employer minimizing the business interruption.
Social security support: Unpaid employees can receive support payments by Thailand’s social security, subject to 50% limitations, a monthly amount of maximal THB 7,500 and certain categories. Employees who lose their job after March 1, 2020. are under certain conditions eligible to 45% or 70% of their salary for up to 90 or 200 days. Complex conditions apply.
Holiday rules under Thai labor laws
Holiday regulations: The minimum holiday period under Thai legislation amounts six days after the employment agreement exceeds one year. During such holidays, the employee retains the right to be paid, despite he does not work. It is generally the responsibility and the right of the employer to determine the yearly holiday period for all employees. Certain considerations have to be made with respect to fair and equal treatment, the interests of the individual employee and the involvement of the workforce in such planning and decision.
Forced holidays: As a general principle, the employer can consider the pandemic as an operational issue when planning holidays for individual employees. In this respect, the vacation can be scheduled for the time when work performance can be used due to quarantine, curfew, and shutdown, less or not at all. When selecting the employees that are forced to take leave, an appropriate social selection must be made. It can be expected that Thailand’s labor courts will only recognize enforced leave after weighing up legitimate employee interests.
Holidays during business suspension: Another question is whether forced holidays are allowed for a period when the business is closed. A distinction may be made here between regular company holidays and a government-enforced suspension. One aspect may be that the recreational purpose of annual leave is only limited if the employee has to stay at home during his whole annual leave. A shift of the risk of a business closure might be more easily tolerated by the labor courts if the parties agree on a compromise solution.
Force majeure holidays: Aspects of statutory force majeure have to be added to the situation as described above. On the one hand, this concerns employers force majeure with the right to a proportional reduction of holiday periods. On the other hand, this concerns force majeure on the part of the employee who, for example, cannot take his vacation because he is diseased, is in quarantine or is not available due to travel prohibitions. Whether there is room for force majeure in addition to the statutory regulations is determined by examining the individual circumstances. Each case is different.
#CoronaAlliance – Legal assistance and tax advice in the management of the Coronavirus crisis
PUGNATORIUS Ltd. is the Bangkok-based specialist provider of transactional legal and tax advice on foreign investments in Thailand’s manufacturing and service industries as well as property developments and acquisitions. The law firm sees the pandemic as a challenge to protect and enforce the legal and economic interests of international clients in a dynamic situation with high-quality and pragmatic advice and action.
CoronaAlliance: As a founding member of the CoronaAlliance, the law firm advises on the legal implications of the Coronavirus outbreak as well as on tax planning opportunities. It also provides consulting on short-term and long-term measures to avoid or mitigate the damage to companies, individuals, and institutions. It provides guidance in the transition process to the post-pandemic world to protect clients’ assets, wealth, and business. #CoronaAlliance #PostPandemicWorld
The professional services cover the responsibility of the employer and his options for action with regard to employment contracts, wage payments, holiday arrangements, etc. as well as the legal status of the employee and the enforcement of his labor law claims. Other pandemic-linked areas of competence and experience are described at “Legal support and assistance regarding the effects of the #coronavirusoutbreak”.