Unfair Termination

I have received multiple requests from corporate clients for advice or representation in labor claims, particularly over unfair termination.  This article discusses the principle of unfair termination, precedent cases, and how employers can minimize exposure to such claims.

Thailand’s Labor Protection Act B.E. 2541 (1998) (“LPA”) does not refer to “unfair termination.” The Establishment and Procedure of the Labor Court Act B.E. 2522 (1979) (“EPLA”) that addresses “unfair termination,” but does not define it. 

The Court, according to the ELPA’s Section 49 can exercise discretion to determine whether a termination is “unfair.” Broadly speaking, the Labor Court will consider a termination unfair, if made without cause, or with cause that is insufficient or unreasonable. 

If the Court determines a termination as unfair, it can order the employer to re-hire the ex-employee. If the Court determines the employee cannot continue with employer, it will order the employer to pay unfair termination damages.

Where the Labor Court considers a termination as unfair, it can award damages in amounts at its own discretion.  There is no statutory provision setting out calculation of the damages.  The Labor Court generally refers to its internal guidelines, which are based on the sense of proportion, to determine such damages on a case-by-case basis.

Unfair termination damages award under the ELPA’s Section 49 is not severance pay under the LPA’s Section 118.  Where an employer makes severance payments to a terminated employee, the employer may still have to pay unfair termination damages, provided the Court finds the termination unfair.  Otherwise, where termination is made with statutory cause under the LPA’s Section 119 and where the employer is not obligated to pay severance, the termination should stand as fair.

Examples of fair and unfair termination can be gleaned from higher court rulings, despite their varying facts and circumstances.

• Employer suffered harsh economic circumstances. Employer started to reduce its costs by multiple schemes, e.g. reduction of work shifts, extension of temporary business suspension (LPA’s Section 75), and early retirement plans.  Employer then decided to terminate some employees according to its own criteria, e.g. previous disciplinary actions, number of used leave days, employees with shorter work periods.  (Supreme Court Rulings 8757-8760/2561 (2018))
• Employer terminated its HR manager for collecting money from foreign workers to unofficially facilitate their legal compliance. The Court ruled that the HR manager’s actions were not corrupt. The Court also ruled the employer must pay severance.  However, the Court further ruled that the employer did not have to pay unfair termination damages as the HR’s manager’s actions, though not unlawful against the employer, were improper.  (Supreme Court Ruling 4020/2561 (2018))
• Employer terminated an employee who, as a consequence of his not caring for his own health, could not perform his duty. The Court ruled that the termination was fair. (Court of Appeal for Specialized Case 1622/2562 (2019))
• Employer terminated an employee, with a history of fraud, who was acting suspiciously on the job. The employer ultimately lost confidence and trust in the employee.  The Court ruled that termination was fair. (Supreme Court Ruling 587/2563 (2020))

(1)  Employer terminated an employee without advance notice over poor performance after only 50 days on the job.  The Court ruled the termination as unfair because the employee should be given ample time to adapt given the nature of the work.  The Court ordered the employer to pay unfair termination damages equal to one month of the employee’s salary. (Court of Appeal for Specialized Cases 731/2563 (2020))

(2)  Employer, a manufacturer of brake-pads, terminated certain employees due to sale of the business.   The Court ruled the termination unfair because the employer was not suffering any economic problems.  In addition, sale of the business and the terminations were made according to the policy of the Japanese parent company.  The Court was not convinced by the employer’s argument that the termination was fair  because it requested the buying company to accept employment of the terminated employees without probation.  (Court of Appeal for Specialized Cases 1070-1120/2562 (2019))

(3)  Employer claimed economic loss as reason for termination without evidence of such loss. The Court ruled that the termination as unfair due to the employer’s lack of demonstrable evidence.  (Supreme Court Rulings 3933/2546 (2003), 276/2543 (2000), 1850/2547 (2004)).

Terminations are part of the reality of doing business.  Employers can make these sometimes difficult decisions while mitigating risks of unfair termination claims.  Where an employer wishes to terminate an employee due to incompetence or poor performance, he/she should try to move the employee to another work position, yet provide evaluations to substantiate the termination.  During economic downturns, the employer may try a company-wide or division-specific “voluntary” early retirement program.  A voluntary resignation should not be deemed unfair termination. 

Ultimately, the Labor Court determines whether termination is made with sufficient cause.  Even where termination is fair, employers may still have to make other payments to ex-employees,  e.g. unused leave days, one month's pay at the latest wage rate in lieu of one month's advance notice and severance pay, unless the termination falls under the LPA’s Section 119.