During difficult times, it is normal practice for businesses to adapt by reducing costs to survive. Some businesses may choose to reduce costs by reorganising or downsising, which may be followed by relocation to a smaller office with lower rental fees. To relocate efficiently and legally, businesses should be aware of their obligations under the Thai Labour Protection Act (LPA).
Under section 120 of the LPA, if an employer has to relocate their place of business in a way that will materially impact the ordinary course of living of employees or their families, the employer needs to notify employees not less than 30 days prior to the date of relocation of the place of business.
If any employee would not like to work for the employer at the new place of business, the employee is entitled to terminate their employment contract with the employer within 30 days from the date of receipt of the employer’s notice or the date of relocation of the employer’s place of business, as the case may be, and the employee is entitled to receive special severance equal to statutory severance under section 118 of the LPA.
The amount of the employer’s statutory severance obligation under section 118 depends on the length of an employee’s years of service at the company, which can vary from 30 days to 300 days of last wages.
However, when an employer closes an office and moves employees to a new office, it does not mean that all types of relocation will be considered as “relocation” under section 120 of the LPA, which requires the employer to pay special severance to the employees and to comply with other procedures set out in the LPA.
Combining Multiple Locations
The Thai Supreme Court has ruled that if an employer has two locations and combines the offices by moving its employees to a single location and closing another office, the employer is not obligated to pay special severance to employees, as this does not constitute a relocation under section 120.
For example, if an employer has two existing offices – one in Bangkok and one in Pattaya – and closes one office and moves its employees to the remaining office, this is not an issue of relocation and the employer is not required by the LPA to pay special severance to employees who would not like to move to the other office.
Nearby and Distant Relocations
In another scenario, if any employer relocates their place of business by closing a current office and opening a new office, but the location of the new office does not materially impact the course of living of the employees or their families, the employer is not required to pay special severance.
The Thai Supreme Court has ruled that if an employer relocates their place of business to a new location that is approximately 50 kilometres from the previous office or from Bangkok to another province, this relocation materially affects the course of living of the employees and their families. Therefore, the distance between the employer’s previous office and new office is one major consideration.
Relocation Notification Procedures
Therefore, for the relocation of a company to be subject to section 120 of the LPA, which sets forth specific procedures for the employer to follow, including the payment of special severance to employees, that relocation must affect the ordinary course of an employee’s life or that of his or her family. A summary of processes for an employer to follow in such a circumstance is as follows:
First, the employer must notify the employees no less than 30 days prior to relocation.
Second, if an employee chooses not to relocate with the company, that employee must terminate his or her employment contract within 30 days of receipt of the employer’s relocation notification.
Third, the employer must pay special severance equal to the statutory severance under section 118 of the Labour Protection Act, no later than seven days after the employee’s termination of his or her employment contract.
If an employer fails to inform their employees 30 days in advance of relocation, the employer, in addition to paying special severance under section 120, must also pay an additional amount in lieu of advance notice. This amount is typically equal to approximately one month’s wages, but can be more in some cases.
If an employer fails to satisfy their special severance obligation, the employee can file a complaint with the Labour Welfare Committee within 30 days of the due date of the payment. The employee must first terminate his or her contract pursuant to section 120 before the employer is required to pay special severance and before the employee may file a complaint with the Labour Welfare Committee.
Labour Welfare Committee Orders
If the committee finds that the employee is entitled to special severance, it will issue a written order to the employee within 60 days of receiving the complaint. After receiving the order, the employer must pay the special severance within 30 days. If the employer still fails to pay the special severance, the employer could face criminal charges, with its officers or directors facing possible punishment of imprisonment not exceeding six months, or a fine not exceeding THB 100,000, or both. If the committee finds that the employee is not entitled to the special statutory severance, it must inform all parties in writing.
Within 30 days of receiving the committee’s order, either party may file an appeal with the Labour Court. If an appeal is filed, the employer is required to post a bond equal to the amount in dispute. If neither party appeals the committee’s order within the 30-day prescription period, the committee’s order is final.
As the LPA imposes criminal penalties, such as imprisonment and a fine, for noncompliance, any employer who chooses relocation to reduce costs should be aware of the processes required under Thai law.
Author: This article was prepared by Chusert Supasitthumrong, a partner in the Dispute Resolution Department at Tilleke & Gibbins. Please send comments to Andrew Stoutley at firstname.lastname@example.org.
Series Editor: Christopher F. Bruton is Executive Director of Dataconsult Ltd, email@example.com. Dataconsult’s Thailand Regional Forum provides seminars and extensive documentation to update business on future trends in Thailand and in the Mekong Region.