Recent Key Updates in Thailand Labour Protection Law

Recent Key Updates in Thailand Labour Protection Law

 The Labour Protection Act BE 2541 (1998) (the “LPA”) has been periodically amended. The recent key amendments were made by the Labour Protection Act (No.6) BE 2560 (2017) and the Labour Protection Act (No.7) BE 2562 (2019), which became effective from 1 September 2017 and 5 May 2019, respectively. The key amendments aim to provide more benefits and protection to the employees in many areas, including but not limited to the following issues:

1. Retirement is Termination

Although retirement had long been interpreted by the Supreme Court as termination of employment, it has only explicitly been reaffirmed by virtue of Section 118/1, added by the LPA (No.6) in 2017, that “retirement as agreed between the employer and the employee, or as designated by the employer shall be regarded as termination of employment”. Therefore, the retired employee shall be entitled to, among other termination payments, severance pay at the rate provided in Item 2 below.

It should be noted that before the LPA (No.6) came into force, employees working in private sector in Thailand has no mandatory retirement age. Now, it does not matter if the employer and employees have agreed or not agreed on the retirement age or agreed to have the retirement age more than 60 years old. In any cases, the employee who reaches 60 years old or more is entitled to express their intention to retire to the employer and the retirement shall take affects upon completion of 30 days as from the date the employees express their intention thereof. For this scenario, the employer will also be obliged to make, among other termination payments, severance pay to the retired employees.

2. New Rate of Severance Pay

An employee who has been terminated without cause will be entitled to, among others, severance pay; the rate of which depends on an employee’s length of service and last wage rate. Thailand has applied the same rate of severance pay since promulgation of the LPA in 1998 until this was adjusted on 5 May 2019. The previous and the current rates of severance pay are as follows:

3. Adjustment to Default Interest Rate

Default interest at the rate of 15% per annum was previously applied for failure to pay back a security deposit for work or for damage to work, wages, overtime pay, holiday pay, holiday overtime pay, severance pay and special severance pay. According to the new law, said default interest rate extends to cover default in making payment in lieu of advance notice of termination (when a timely advance notice of termination is not given as required by law); payment during temporary closure of business of the employer; and any payments that the employer is required to make under the LPA. The said 15% per annum default interest is relatively high compared to regular default interest rate in other transactions, which is 7.5% per annum.

4. Amendments to Two Types of Leave

Although the 2019 LPA does not establish new types of leave, it does impose amendments to two existing types of leave, namely personal leave and maternity leave; the essence of which are summarised as follows:

4.1     Personal leave – before the enforcement of the new law, an employee was entitled to personal leave in accordance with the work rules of the employer. Therefore, the amount of days and whether or not the employee would be entitled to take personal leave with or without pay depends on the employer. Currently, the law clearly stipulates that an employee must be entitled to take personal leave for at least 3 working days with pay.

4.2     Maternity Leave – a female employee is currently entitled to 98 days of maternity leave (previously 90 days). In this connection, maternity leave under the new law also extends to cover prenatal check-ups. Despite the aforementioned, the employer is obliged to pay wages to the employee during maternity leave not exceeding 45 days per year; and the employee is entitled to another 45 days with pay from the Social Security Office (same as the old law).

5. Change of Employer Needs Consent from Employees 

Previously, the LPA provided in essence that when there is a change of employer, all rights and duties associated with such employee shall be transferred to the new employer by operation of law. The same concepts still apply under the new LPA; however, the new law in 2019 makes it clear that any change of employer for whatever reason must also require the employee’s consent. This includes a case where the employer is a juristic person and a change, transfer or merger with another juristic person is registered, resulting in the employee having a new employer, such as in the case of amalgamation (Company A + Company B results in the formation of Company C).

6. Special Severance Pay in the event of Relocation of Place of Business of the Employer

Pursuant to the old law, if an employer relocates its place of business to another place and said relocation significantly affects the ordinary course of living of an employee or his/her family, the employer is required to give notice to the employee at least 30 days before the relocation. In such regard, the employee could refuse to move to the new location and would be entitled to special severance pay (at the same rate as normal severance pay required by law in the event of termination without cause). If the employer fails to provide timely notice, the employee will also be entitled to special severance pay in lieu of said notice of termination. It should be noted that if the employee fails to pay special severance pay or special severance pay in lieu of notice of termination within 7 days as from the date on which the employee terminates the contract; the employee would be entitled to lodge a complaint to the Labour Welfare Committee. The Labour Welfare Committee shall consider and issue an order within 60 days from the date of receiving the complaint. The order of the Labour Welfare Committee shall be final, unless the employer or the employee appeals against the order to the court within 30 days from the date of acknowledgement of the order. Where the employer is a party who brings the case before the court, the employer shall deposit a security with the court in equal to an amount to be paid by the order so as to further the proceeding of the case. In case the employee is a party who brings the case before the court, no deposit is required. If either party brings the case to the court without referring the matter to the Labour Welfare Committee beforehand, the case will be dismissed by the court. In should be noted that according to the old law, these criteria do not apply to relocation of the place of business of an employer to another of the employer’s existing places of business.

However, the new statutory provisions governing ‘relocation of place of business of employer’ now extends to cover both relocation of business to the employer’s new location and also to another of the employer’s existing places of business. The method of notifying employees of such relocation also changes, from giving notice (as mentioned above) to posting an announcement in a prominent place at the current business premises at least 30 days before relocation; failing which, the employer will be subject to special severance pay in lieu of advance notice of termination (same rate as the old law). An employee whose normal living conditions will be significantly affected by the relocation will be entitled to refuse to work at the new location by giving written notice to the employer within 30 days from the date of posting the announcement or the relocation, as the case may be, and will be entitled to special severance pay (same rate referred to in Item 2 above) within 7 days from the date of relocation (the new law considers the contract of employment as being terminated on the date of relocation of the employer’s establishment). If the employer disagrees with the employee’s reason, the employer may file a petition with the Labour Welfare Committee. In other words, the duty to file a petition with the Labour Welfare Committee has been shifted from the employee, under the old law, to the employer, under the present law. Except this, the same process regarding the Labour Welfare Committee as mentioned under the old law above applies.

Conclusion:

The aforementioned are examples of some key updates in the LPA only. Please note there are more amendments to the LPA in further detail; consequently, please ensure that you keep fully updated on the applicable law(s) or involve an experienced counsel when making any important decisions with regard to employment in Thailand.