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The Labour Law Issue in Connection with the Severe Floods in Thailand

Many people are suffering from the widespread floods in Thailand including at least 555,000 employees, and a number of industrial estates in many provinces have been under water for more than a month now. At this moment, the water is advancing on another two industrial estates located on the outskirts of Bangkok. From the severe floods, many questions in respect of the labour law have been raised by both the employers and the employees on how to deal with salary payment to employees who have not been able to work and also whether it is possible to terminate an employee’s employment during the flood when an employee is unable to work.

This paper will discuss (i) salary payments to employees during the flood, (ii) the possibility of employers terminating employees’ employment, and (iii) the possibility of reducing an employee’s salary during the difficult time after the flood has passed.

Salary Payment during the Severe Floods

According to Section 75 of the Labour Protection Act B.E. 2541 as amended in 2551 (the “Act”), the employer is required to pay employee salaries equivalent to 75% of the normal salary during the period that the employer has to suspend its operation for whatever reason that affects the employer’s business operations either wholly or partly for a temporary period of time but not in the case of force majeure. The suspension of the employer’s operation must be notified to the Labour Inspector three working days prior to the date of suspension.

From the Act, if the employer decides to suspend its operations, the salaries of the employees must be paid at the amount of 75% of their normal salary unless the suspension is made on the ground of force majeure. Unfortunately, there is no definition of the term ‘Force Majeure’ in the Act. Thus, the definition of ‘Force Majeure’ under the Civil and Commercial Code (the “CCC”)[1] must be used.

The question that has been frequently raised by both the employers and the employees is whether the severe floods are considered as force majeure. If so, the employers will not be required to pay its employees during any suspended period on the ground of flooding. On the contrary, if flooding is not regarded as force majeure, the employer must pay at least 75% of the normal salary to the employees during the suspended period.

There is no direct Supreme Court decision rendered under the Act confirming this. However, there are a number of Supreme Court decisions rendered under the previous labour law in respect of this issue:

  1. Suspension of factory on the ground of flooding is not a cause for the employer not to pay employee salary (Supreme Court decision No. 118/2525);
  2. Suspension of factory on the ground of factory burning is not a cause for the employer not to pay employee salary (Supreme Court decision No. 1277 – 1278/ 2529); and
  3. Suspension of factory on the ground of factory burning is not a cause for the employer not to pay employee salary (Supreme Court decision No. 2506/

Force Majeure means denotes any event that happening or pernicious results of which could not be prevented even though a person against whom it happened or threatened to happen were to take such appropriate care as might be expected from him in his situation and in such condition 2526). Under this case the court fixed that only 40% of the normal salary must be paid to the employees.

Even though Thailand has not acknowledged the binding system as common law and even though the Supreme Court decision was rendered under the previous labour law, the judgments made in similar matters can still have influence over the decisions to be made in the future. As a result, it is possible that severe floods may not be considered as force majeure and that if the employers suspend operations on this ground, at least 75% percent of the normal salary must be paid to the employees who have the ability to work.

In our view, however, the flooding this year is materially different from flooding in the past as well as the cases previously presented to the Supreme Court as the flooding is severe and widespread. Therefore, the court may consider that the flooding this year is force majeure and that no one could have prevented the event even though all expected appropriate action was taken to try and prevent the flooding. If this is the case, the employer who suspends its operations on this ground may not be required to pay 75% of the normal salary to their employees.

Termination the Employees during Flooding

Another question that has been raised is whether the employer is able to terminate the employee’s employment during the floods without being considered as unfair termination. In our view, even though the statutory severance payment is made to the employee to be terminated, it may still be considered unfair termination if the termination is made on unreasonable grounds. Normally, termination on the ground of cessation of business operations (partly or wholly) or downsizing business operations for survival of an employer’s business (the employer suffers loss) may be considered fair termination. This is confirmed by Supreme Court decision No. 1533/2528.

It is difficult to say whether termination made on the grounds of the cause associated from flooding will be fair. More factors need to be taken into account in order for the court to consider this. Such factors would include the age of the employee, the working period of the employee, the hardship of the employee at the time of dismissal, cause of the dismissal and the severance payment including other compensations the employee is entitled to receiving. From our view, if the employer terminates the employee’s employment on the ground of only the flooding problem without any other supporting reasons such as some departments have to be shutdown, it is likely that the termination will be deemed as unfair termination.

Possibility of Reduction of Employee Salary during Difficult Times after Sever Floods

Salary paid to the employee is considered one of the agreements concerning conditions of employment. If the employer intends to reduce the salary of the employee, consent from the employee is needed. If without such consent, the employer will not be able to do so. The consent must be made in written form.

The above paragraph will also be applied to other benefits provided to the employee. This means that if the employer wishes to reduce any benefit currently provided to the employee, consent from the employee is required and the consent must be made in written form.

By Rawat Chomsri, Partner © October 2011
Khun Rawat can be reached at rawat@siampremier.co.th