New Amendment to Thailand’s Labor Protection Act Taking Effect in 2019

On December 13, 2018, the Thai National Legislative Assembly approved a resolution to amend the existing Labor Protection Act (LPA). This amendment to the LPA was published in the Royal Thai Government Gazette on April 5, 2019, and went into effect within 30 days from publication in the Gazette on May 5, 2019). This amendment is largely favorable to employees. Its key aspects include the following.

Payment in Lieu of Notice Upon Termination Must Be Made on the Dismissal Date

Under the new amendment, when notice is required for termination and the employer does not issue an advance notice, the employer is required to make the payment in lieu of notice on the effective date of termination. Prior to amendment, the LPA did not require employers to make this payment on any specific date. As such, the new provision gives more certainty to situations involving termination without notice where notice is required.

New Due Date for Remuneration Payment

All types of remunerations for work must be paid at least once per month. In case of termination, all remunerations and other payments required under the law (a reasonable interpretation of which would include severance) must be paid within three days from the effective date of termination. Prior to this amendment, such timing requirements applied only to wages, overtime pay, holiday pay, and holiday overtime pay — but not other types of remunerations or other payments required under the law.

New Mandatory Paid Leave: Personal Business Leave

Employees are now statutorily entitled to personal business leave of three working days per year. Prior to this amendment, the length of personal business leave was determined by the terms of the employment agreement or work rules.

Changes to Maternity Leave

Pregnant employees are now entitled to maternity leave of 98 days inclusive of holidays (increased from 90 days), which would also include a prenatal time period for pregnancy-related medical appointments. However, paid maternity leave is still capped at 45 working days.

Increased Severance Pay

The amendment introduces an additional level of severance pay rate for employees having worked for an uninterrupted period of 20 years or more, which is the amount equivalent to 400 days of the employee’s last wage (approximately 13.3 months). Prior to this amendment, the statutory severance rate for employees with at least 10 years of consecutive employment (including 20 years or more) was 300 days of pay, which was previously the top level of severance.

New Requirements on Workplace Relocation

The amendment requires that in case 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 when and where the employees will be relocated. If the relocation materially affects the ordinary course of living of an employee, the employee may refuse by giving written notice within 30 days of the relocation notice date, and will receive special severance pay (in the amount equal to the normal severance pay) within seven days from the employment termination date. The employer, however, has the right to appeal the employee’s refusal to the Ministry of Labor.

Equal Pay for Equal Work

Under the amendment, male and female employees who perform work of the same type, quality,  quantity, or work of equal value 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. This amendment introduces “work of equal value” as part of the new condition for equal pay.

Transfer of Employment Requires Employee Consent

The employee’s consent is required when a change of employer registration, or transfer or merger between the employer and another entity results in the transfer of employment to a new employer. Before this amendment, such consent was not required. But the amendment does not apply to a share acquisition.

Increased Penalties for Certain Violations of the LPA

An interest rate of 15 percent per year is applicable to employers that fail to make payments required under the law, including payments in lieu of termination notice (where required); wages, overtime pay, holiday pay, and holiday overtime pay; wages during a temporary cessation of business operations (for reasons other than an act of God); and any type of required severance pay. This represents an increase from the pre-amendment rate of 7.5 percent. The amendment also imposes additional penalties for employers’ severe failure to make statutory payments––if the failure is clearly intentional without reasonable grounds, the employer would be subject to an additional surcharge of another 15 percent of the unpaid balance for every seven days so long as it remains unpaid.

Comment

The amendments impose additional obligations on employers in Thailand in many respects. In light of these changes, employers may want to review employment contracts, benefits and leave policies, and payroll practices.

Written by Kraisorn Rueangkul of DFDL and Jia Li of Ogletree Deakins

© 2019 DFDL and Ogletree, Deakins, Nash, Smoak and Stewart, P.C.