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Legal Insight / Labor Management How to dismiss an employee fairly under Labour laws (Translated in English)

This is the translation of “การเลิกจ้างลูกจ้างโดยชอบด้วยกฎหมายแรงงาน” posted on 2020.04.30

 

Before employing any position, an employer is required to notify an applicant of a job description to ensure the new employee is on the same page and will perform properly for his/her position and objectives of hiring. However, after start working, the new employee’s work performance may fail to meet expectations or standards of the company, or the employer may find inappropriate behavior. Apart from that, an organization may face economic problems, like COVID-19 crisis at this time, which pushes it to terminate some employees in order to stay in business. This article gives you a guideline on how to lawfully dismiss the employee responding to both conditions mentioned above.

Employment termination, according to section 118 of Labour Protection Act, B.E. 2541 (1998), prescribes that “ any act of an employer which prevents an employee from continuing to work and refuses to pay his/her wage, whether due to the termination of the employment contract or for any other reason, and shall include the situation where the employee cannot work and be paid because the employer can no longer operate its business.” That is, the employer refuses to allow the employee to work and does not pay wages.

First of all, the employer needs to know what type of an employment contract it is—whether the expiry date is included or not. This is because the responsibility of the employer, regarding the employee termination, are varied by the types of employment contracts.

 

  1. Fixed-term employment contracts

Section 17, paragraph one, of the Labour Protection Act describes “an employment contract shall expire upon the completion of the specified period of time in the employment contract without advance notice.” That is, before the contract reaches the end date, the employer doesn’t have to remind or notify the employee in advance, because the employee is expected to be aware of the period of the contract and when the expiry date is. For example, a company makes a three-month contract for a secretary position to temporarily substitute for the current secretary who is taking maternity leave. So, after 3 months of working, the contract expires immediately without prior notice from the employer.

 

  1. Indefinite-term employment contracts

Section 17, paragraphs two and three, of the Labour Protection Act prescribes that

“Indefinite-term employment, an employer or an employee may terminate his/her employment by serving written notice on the other party on or before a due date of wage payment in order to take effect on the following due date of wage payment, with no requirement for advance notice of more than three months.

Upon notice under paragraph two, the employer shall pay wages in an amount to be paid up to the time the termination as set out in the notice and may dismiss the employee immediately.”

That is, if the employment contract does not include expiry date of employment, when the employer or the employee would like to end the contract, advance notice of termination is required in order to allow the other party preparation before the expiry date. For example, the employer will find a new employee in time, or the employee will quickly look for a new job. Next, we will talk about the employers’ responsibility when they want to terminate the employment contract. The significant topics are as follows:-

 

How to dismiss employees

  1. Advance notice of dismissal

The employer has to notify before or on the due date of wage payment, so that the termination will take effect on the following wage payment date

Monthly pay: company’s payment day on every 25th of the month, if the employer wants Employee A to work until May 2020 as the last month, the employer must notify the Employee A before 25 April 2020, or on 25 April 2020 at the latest. So, the employment contract will expire on 25 May 2020.

Semi-monthly pay: company’s payment days on every 15th and the last working day of the month. When the employer wants Employee B to work until 30 April 2020 as the last day, the employer must notify the Employee B before 15 April 2020 or on 15 April at the latest, where the wage payment is due according to Section 17, paragraph two. So, the employment contract of Employee B will expire on 30 April 2020.

 

  1. Instant dismissal

Section 17/1 of Labour Protection Act describes “If an employer wishes to terminate an employment agreement immediately without prior notice  under Section 17 paragraph two, the employer shall pay wages on the dismissal date in an amount to be paid from the time of termination to the effective date of such termination.”

This is to say, the employer does not want the employee to work until the expiry date of the contract, and requires the employee to quit the job immediately. In this case, the employer has to make payment in lieu of notice, to compensate the instant unemployment for the employee. For example, company’s payment day is every 25th of the month, if the employer requires the employee to quit instantly on 30 April 2020, he has to pay the wage in the amount to be paid up to 30 April 2020 plus payment in lieu of notice, which the employee is entitled to, from the dismissal date (1 May 2020) to the next payment day (25 May 2020).

 

Exception for a severance pay

Normally, when the employee is dismissed without any fault, the employer responds to pay a severance pay to the employee. Even though, the law specifies responsibility of severance payment for the employer, the employer is exempted to pay the severance pay by the following reasons:-

  1. An employee who has worked for less than 120 days;
  2. An employee whose employment period is fixed and is terminated at the expiration of that period. For example, temporary jobs, seasonal jobs, which such work must finish in two years; or
  3. An employee is terminated because of his/her own faults in accordance with Section 199 of the Labour Protection Act as follows: 3.1 Performing his/her duty dishonestly or intentionally committing a criminal offence against the employer;

3.2  Willfully causing damage to the employer;

3.3 Committing negligent acts causing serious damage to the employer;

3.4Violating work regulations, regulation or order of the employer which is lawful and just for which the employer has already issued the employee a written warning. except in a serious instance for which the employer is not required to give a warning. The written warning shall be valid for not exceeding one year from the date the employee has committed the offence;

3.5 Absenting from duty without justifiable reason for three consecutive working days whether or not they are separated by holiday; or

3.6 Being sentenced to imprisonment by a final court judgment.

 

Severance pay rates

Section 5 of the Labour Protection Act defines severance pay as “the money, which an employer pays to an employee upon the termination of employment, in addition to other monies, which the employer agrees to pay the employee.” Meanwhile, Section 118 prescribes “An employer shall pay severance pay to an employee whose employment is terminated…” By both Sections, the employer is entitled to terminate an employee, but he is required to pay severance pay in order to financially support the employee during the time he/she is looking for a new job. The rates of severance pay is calculated by working period of each employee as described in a table below:-

 

Consecutive working period Minimum rate of severance pay*
less than 120 days
120 days but less than one year not less than 30 days of the most recent wage rate
One year but less than 3 years not less than 90 days of the most recent wage rate
3 years but less than 6 years not less than 180 days of the most recent wage rate
6 years but less than 100 years not less than 240  days of the most recent wage rate
10 years but less than 20 years not less than 300 days of the most recent wage rate
More than 20 years not less than 400 days of the most recent wage rate

*reference to Section 118 of Labour Protection Act

 

Apart from the wage and severance pay, if the employee still has remaining annual leave or holidays, the employer has to pay the employee wages for unused annual leave in termination year and unused and accumulated annual leave, if any. For example, an employer requires Employee A to work on 31 May 2020 as the last day. The employer has to pay for his unused annual leaves of 2020 as well as the unused and accumulated annual leaves of 2019.

 

Termination during probation period

Normally, a company sets a probation period of 119 days to consider work performance of a new employee. The specified probation period is not to let the employee to work for 120 days consecutively, so that the employer does not have to pay a severance pay in the case that the new employer is terminated, because probation is also an indefinite-term employment contract according to Section 17, paragraph two.

 

Dismissal due to economic crisis

Current economic downturn has resulted in a number of companies to lose so much that the business operator closes its business. Ministry of Labour, therefore, has issued “Ministerial Regulation Re: Entitlement to Unemployment Benefit in the case of Unemployment due to Economic Crisis, B.E. 2020” which is a measure by the Social Security Office to financially support the unemployed impacted by economic crisis during 1 March 2020 to 28 February 2022. Qualifications: An employee who has made a contribution for not less than 6 months within 15 months before being unemployed, is entitled to receives benefits as per following rates:-

 

Causes of unemployment unemployment benefits in normal situation (old*) unemployment  benefits in current economic situation (new)
Being terminated 50% for not more than  180 days 70% for not more than   200 days
Resignation or Expiration of employment 30% for not more than  90 days 45% for not more than  90 days

* reference to Ministerial Regulation re: criteria and rates  for Unemployment Benefit in the case of Unemployment, B.E. 2547 (2004), which is still effective.

 

The employee has to apply for such entitlement via the Social Security Office official website. The Social Security Office has set the minimum contribution at 1,650 THB and 15,000 THB at the maximum, for not more than the contribution amount the employer and the employee has contributed previously. For example, an registered employee gets a monthly wage of 20,000 THB, the Social Security Office will calculate his contribution rate from the maximum contribution base of 15,000 THB. Therefore, the employee will receive the unemployment benefit for 6,750 THB per month for not more than 90 days.

 

Unfair Dismissal

In the dismissal case, it leads to the question whether such dismissal is fair for the employee or not. Under section 49 of Act on the Establishment of and Procedure for Labor Court, it prescribes that “Determination on dismissal case, if the Court decides that the dismissal is unfair and orders the employer to reinstate the employee at the same level of wage at the time of dismissal. However, if the Court viewed that the employee and the employer cannot work together, the Court shall fix compensation to be paid to the employee with references to age of the employee, his/her working period, difficulty when dismissed, cause of dismissal and the amount of severance pay which the employee is entitled to.

 

Unfair dismissal means the condition that an employer dismisses an employee without reasonable cause and causes a significant imbalance in the employee’ rights e.g. the employee is dismissed without a severance pay, or the employee was not guilty of misconduct to be dismissed. In such circumstances, the employee may file a complaint to Labour Court to get back to the job, or to claim compensation for unfair dismissal.

Therefore, before making a decision to dismiss any employee, the employer should carefully consider other choices e.g. in the case of dissatisfied performance of the employee, the employer may offer suggestions for better work, or move the employee to another position. In the case that a company faces financial problems, the employer may reduce unnecessary expenses or set clear criteria for dismissal. All the mentioned means is to show that the employer has tried his best to retain the employee, but the dismissal is finally inevitable. So, the dismissal is reasonable.

 

To prove that the dismissal is sensible, the employer should ensure that the dismissal includes reasons as follows:-

  1. the employer has acceptable and necessary causes;
  2. the termination cause is referable such as criteria or KPI, not caused by the employer’s double standard; and
  3. the employer has already done other ways to avoid the dismissal e.g. decrease production cost/salary, moving the employee to another position, and so on.

However, the Court has discretion to consider the cause of the termination together with other related factors. We would like to show you some example of judgements of the Supreme Court as follows:-

 

Example of unfair dismissal

A defendant (an employer) blamed the adjustment of his organizational structure, despite no evidence of such structural change in his organization. Plus, the defendant’s company has already made profit. The Court viewed that the dismissal of the plaintiff (the employee) didn’t help the company to earn profit. So, the purpose of the dismissal is only to cut down its cost and expenses. Additionally, no evidence shows that, before the dismissal, the defendant had tried other methods aiming at reducing unnecessary expense or shows reasonable dismissal procedure. Therefore, the dismissal is not reasonable in accordance with Section 49 of Act on the Establishment of and Procedure for Labor Court (the judgment of the Supreme Court no. 4099/2561)

 

Example of fair dismissal

A defendant (an employer) dismissed a plaintiff (an employee) due to the change of organizational structure for competitive environment and cost-cutting purposes. The defendant wanted to reduce the number of employees by dissolving and minimizing certain departments into teams including the Purchasing department which the plaintiff is a manager. The Department is minimized into a sales team which the manager position is not required anymore. Throughout the process, the defendant is not the only staff who is dismissed. Therefore, the defendant dismissed the plaintiff with reasonable cause, not the unfair dismissal in accordance with Section 49 of Act on the Establishment of and Procedure for Labor Court. Finally, the defendant is relieved from paying compensation to the plaintiff or returning to work. (the judgment of the Supreme Court no. 2124/2555)

 

Finally, both employer and employee may choose negotiation as the initial step to make a compromise agreement and voluntarily terminate the employment contract. This may be the best solution for both parties as the employee won’t have a termination record while the employer is accepted by the employee for reasonable dismissal.

 

Sunida Mahapiroon

Nawapon Yaempiromsri

Translated by Kanyakorn Sakulpram