Thailand’s labour woes: A ‘lawsuit’ of unexpected disputes

Labour disputes in Thailand have surged, contrary to the country’s generally non-litigious reputation. According to the Thai Office of the Judiciary’s Annual Statistical Report, more than 10,000 labour dispute cases have been recorded annually over the past five years.

Employers in Thailand frequently face claims of unfair termination, a significant source of financial and operational issues for both local and foreign businesses. Thailand’s labour laws are notably protective of employees, making the termination of employees without just cause particularly challenging and often leading to disputes.

Under the Labour Protection Act B.E. 2541 (1998) (LPA), employers must pay severance to terminated employees unless the termination is “with cause” as specified under section 119 of the LPA. These causes include dishonesty, criminal offences, intentional or negligent damage to the employer, violation of work rules, unjustified neglect of duty, or imprisonment.

If an employee is terminated “without cause,” employers are obligated to provide severance and other statutory payments based on the employee’s last wages and the duration of their employment. Even with these payments, employees may still pursue claims for “unfair termination” in court. Thai courts evaluate such claims on a case-by-case basis, often from the employee’s perspective, rather than the employer’s.

Employers are advised to consult a Thai lawyer prior to terminating an employee to mitigate potential exposure to unfair termination claims. Common causes for such claims include discrimination, lack of valid termination reasons, insufficient notice, and failure to provide opportunities for performance improvement, reported Bangkok Post.

To reduce the risk of unfair dismissal claims, employers should:

1. Provide performance-related feedback and a performance improvement plan (PIP) in both verbal and written forms, ensuring the employee is not surprised by the termination.
2. If performance does not improve, issue a termination letter detailing the reasons and encourage (but not force) the employee to resign.
3. Ensure all statutory and contractual payments are made to the employee.
4. Where possible, enter into a Mutual Separation Agreement with the employee, often including an additional “ex-gratia” payment, confidentiality clauses, and a waiver of claims.

If the grounds for termination fall into specific categories, employers should consider the following:

• In the event of an unfair termination claim, employers should take proactive steps to manage the process, thereby reducing the burden, time, and costs involved. Awareness of LPA requirements and adherence to best practices can help employers avoid unnecessary exposure when terminating employees.
• For detailed legal guidance and support, employers can contact Emi Rowse Igusa, Partner and head of Japan Practice; Niruch (Nick) Winiyakul, Partner, Dispute Resolution Practice; or Ittipat Nimboonchaj, Associate, Dispute Resolution Practice at Kudun and Partners. Ben Cheok, Head of Business Development, is also available for further information.
• Christopher F. Bruton, Executive Director of Dataconsult Ltd., serves as the series editor, providing seminars and documentation on future business trends in Thailand and the Mekong Region through Dataconsult’s Thailand Regional Forum at Sasin.