2019 10 April

Thailand Legal Update: New Amendment to Thailand’s Labor Protection Act Taking Effect on May 6, 2019

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The Thai National Legislative Assembly approved a resolution to amend the existing Labor Protection Act (the “LPA”) on December 13, 2018. This amendment to the LPA has been published in the Government Gazette on April 5, 2019, and will come into effect on May 6, 2019. Key takeaways of this amendment, which is largely favorable to employees, are set out below:

Transfer of Employment: Employee’s Consent Required

The employee’s consent is now required when a change of employer registration, or a merger between the employer and another company results in the transfer of employment to a new entity (for instance, when a new company is created following the merger between two companies). Before this amendment, such consent was not required. Although the amendment is silent on the form of the consent given by the employee, employers should seek to get a written consent for the sake of security.   

New Mandatory Paid Leave: Personal Business Leave

Employees are now statutorily entitled to personal business leave of 3 working days per year. Prior to this amendment, personal business leave were granted to employees in accordance with their employment agreements or the company work rules.

Changes to Maternity Leave: Extended to 98 Days

Maternity leave entitlement for pregnant employees is now set at 98 days per pregnancy (increased from 90 days) and is extended to leave taken for pre-natal care, such as to attend medical appointments. Full paid maternity leave remains, however, capped at 45 working days.

Payment in Lieu of Notice upon Termination To Occur on Dismissal Date

Where an employer wishes to terminate an indefinite term employment contract with immediate effect and without giving the statutory notice (ie, for other reason than a “permitted cause” under the LPA or the Civil and Commercial Code), payment in lieu of notice must now be made on the effective date of termination. Prior to amendment, the LPA did not require employers to pay the payment in lieu of notice on any specific date. As such, the new provision gives more certainty to employers wishing to terminate employees without notice where such notice is required. 

New Due Date for Remuneration Payment

As per the LPA, all types of remuneration for work must be paid at least once a month. In case of termination, all remunerations (including pro-rata bonus, premium and other benefits) and other statutory payments (including, in our reasonable interpretation, severance pay) must be paid within 3 days following the effective date of termination. Prior to the amendment, this timing requirement for payment applied to wages, holiday pay, overtime pay, and holiday overtime pay, but not to other types of remunerations or other statutory payments, such as severance. Again, this new provision gives more certainty to employers and HR departments in the event of breakdown of the employment relationship.

Increased Penalties for Certain Violations of the LPA

An interest rate of 15% per year is now applicable to employers who fail to make payments in lieu of notice for termination (where required) or statutory payments for temporary cessation of the employer’s operations (for reasons other than an act of god). This constitutes a significant increase since the rate was previously set at 7.5%.

This change also means that the law has now included the said statutory payments as part of severe failure to make statutory payments under the law whereby if the failure occurs with the clear intent of the employer without reasonable grounds, then, the employer would be subject to an additional surcharge of another 15% of the unpaid balance of the said statutory payments for every 7 day so long as they remain unpaid. 

Increased Severance Pay

The amendment increases the amount of statutory severance pay for employees having worked for an uninterrupted period of 20 years or more by raising it to 400 days of the employee’s last wage (approximately 13.3 months).  Prior to this amendment, the statutory severance pay for employees with 10 years of seniority or more in the company was capped at 300 days of pay.

Workplace Relocation: New Requirements

The amendment lays down various changes pertaining to the relocation of employees to a new place of business. In the event of a workplace relocation (whether to a new location or to another existing location), the employer is required to post a notice at the current workplace for a consecutive period of at least 30 days prior to the relocation. Such notice must be conspicuous and must clearly state the timing for relocation and the new expected workplace.

If the relocation materially affects the ordinary course of living of an employee, the employee may refuse to relocate by giving a written notice to the employer within 30 days of the relocation notice date. Following this notice, the employment contract will be deemed to be terminated on the date of relocation and the employee will receive special severance pay (the amount of which is equal to the statutory severance pay) within 7 days from the termination date. The employer, however, may appeal the reasons invoked by the employee before the Ministry of Labor.

Equal Pay for Equal Work

The amendment aims to promote and enhance gender equality through the concept of “work of the equal values” as part of the new condition for equal pay. Male and female employees who perform work of the same type, quality,  quantity, or work of equal values must receive equal compensation, including the equality in wages, overtime payments, payments for work performed on holidays, and overtime payments for work performed on holidays.

Managing the Workforce in Light of The Amendment  

This amendment adds significant obligations on employers in Thailand in many aspects. Accordingly, employers and HR departments should review their internal policies, employment contracts and internal HR process to ensure compliance with these provisions.


DFDL Contacts

Kraisorn Rueangkul

Partner, DFDL Thailand

Kraisorn@dfdl.com

Marion Carles Salmon

Regional Legal Adviser, DFDL Thailand

Marion.CarlesSalmon@dfdl.com


The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.


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