Developments in Judicial Interpretation of Labor Law

Although one sometimes encounters reference to a “precedent” decision from the Thai courts, in fact the decisions of the Thai courts – although frequently persuasive – do not form part of the body of the law.  Divergences in judicial interpretation can therefore arise, even in relation to closely similar facts, and are made more likely by the passage of time.  Divergences in interpretation by the Thai Labor Courts are a case in point.

The term “basic pay” on which the severance pay calculation is based was regularly interpreted in the early years of severance pay entitlement as including various types of allowance, in addition to wage or salary.  As the years went by however the courts gradually became more reluctant to interpret allowances as falling within the basic pay definition.  These days, in cases where the employment contract does not indicate otherwise, the courts are more apt to conclude that allowances are of a welfare character, rather than a payment for work performed. If the court so concludes then the court will likely also find that they are excluded from the basic pay definition and hence from the severance pay calculation.

Claims for unfair dismissal are regularly brought to the Thai courts for adjudication, with the plaintiff almost always requesting additional damages on top of severance pay, rather than reinstatement.  The legislation is not specific as to how such additional damages are to be calculated, and it is left to the discretion of the court. In the early days of the legislation a common judicial practice was to award one month per year of employment.  Today, this “rule of thumb” can hardly be said any longer to be applicable.  The most common factors to which these days the courts have regard in assessing unfair termination damages include the age of the employee, the duration of the employment, the hardship resulting from the termination, the reason for the termination and the severance pay to which the employee is entitled.

It was also the case for many years that the courts would hold that contractual waivers of statutory entitlements, such as severance pay or overtime, are void, even if incorporated into a settlement agreement pursuant to which the employee receives significant financial benefits.  The judicial view taken at the time was that, as a matter of public policy, a statutory protection cannot be validly be waived by its beneficiary.  These days, by contrast, the courts regularly hold that such waivers when included in separation agreements are valid, on the basis that they are compromise agreements under the Civil and Commercial Code.

For many years the courts also regularly interpreted that a settlement agreement containing any sort of waiver or acknowledgment by the employee would be void if signed while the individual in question was still employed.  There was a presumption that any employee, regardless of seniority and/or educational attainment, must be regarded as subject to the undue influence of his/her employer.  In recent years however there have been a clutch of cases in which the courts have held that there is no such automatic presumption of undue influence. Today the courts do have regard to such things as the seniority and educational level of the employee, as well as giving weight to factors such as whether the employee was hurried by the employer into quick acceptance of a separation proposition suddenly placed before him/her.  If the employee is pressed to decide “on the spot” then a finding of undue influence is likely.  It is thus to be recommended these days that employers seeking to conclude separation agreements with employees should clearly provide all requisite and relevant information to employees to allow for their proper consideration of the issues, and should also allow sufficient time for them to do so. Failure by the employer to observe these requirements could lead to any resulting agreement being struck down by the courts.  Provided however that these requirements are observed then the resulting agreement can these days be signed while the individual in question is still in employment.

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