Business Relocation Under Thai Law and the New Approach Taken by the Court
Under Thai labour laws, employers are required to offer severance pay to employees who are terminated based on non-statutory grounds. Severance pay is not required if the employee resigns by himself or by herself. Nevertheless, if it is established that the employee resigns as a result of relocation of work premises initiated by the employer and the relocation substantially affects the normal livelihood of the employee or the employee’s family, the employee may refuse to be relocated to the new location and instead choose to resign. In this case, the resigning employee will also be entitled to special severance pay at a rate no less than the rate of severance pay offered in the case of termination if the employee informs the employer of his or her resignation within 30 days of the employer's relocation notification date or the relocation date (if the employer fails to notify).
Based on past court precedents, this special severance pay provision has been interpreted very strictly and narrowly. Relocation refers to the process involving an employer closing a business premise in its entirety and subsequently opening another new premise in a different location, as opposed to an employer simply assigning an employee to work in another existing premise or branch. For example, if an employer has two offices, one in Bangkok and the other in Chiang Mai, and the employer assigns an employee based in the Bangkok office to work in the Chiang Mai office without closing the Bangkok office, this would not be considered a relocation that would entitle the resigned employees substantially affected by such relocation to special severance pay.
Interestingly, the recent Supreme Court decision has gone one step further in analyzing whether a scenario such as the scenario previously mentioned would be considered a "relocation" for the purpose of determining whether the special severance pay will be triggered. This court tends to take the approach that protects the right to special severance pay of affected employees, while also taking into account the employer's bad faith and intention. In this case, the employer's headquarters had originally been in Bangkok. However, in 2006, the employer had set up another office in Samut Sakhon and also changed its headquarters from Bangkok to the Samut Sakhon office while keeping both premises in operation. Afterwards, the employer gradually ordered its employees to be relocated to its new headquarters in Samut Sakhon. All of the employees were eventually relocated within a span of approximately two years from the date of the first relocation. The employer finally closed its Bangkok office.
It would seem that this case would not fall within the court's interpretation of "relocation" and is only a case of assigning employees to work at another existing business premise based on past Supreme Court decisions given that the Bangkok office was still operating at the time when all relocations was taking place. Thus, the affected employees should not have been entitled to special severance pay under the law. Interestingly, the employer also cited various past Supreme Court decisions in supporting its argument of a narrow interpretation given to "relocation".
Nevertheless, the Supreme Court took into account two important facts. First is the fact that the employer changed its headquarters from Bangkok to its new office in Samut Sakhon and second and more importantly, is the fact that the Bangkok office was closed right after all of the employees had been relocated. The court held the view that such actions combined to show the true intention of the employer, which was to close the Bangkok office and relocate the employees to the Samut Sakhon office. Hence, this was deemed a case of "relocation" under the law whereby special severance is required to be paid to employees who are substantially affected and chose to resign from their jobs.
This Supreme Court's decision addressed the loophole that would allow some employers to get around the special severance pay requirement by piercing through all the facts to discover the employer's true intention. It is prudent for companies to ensure that in the case of relocation under the law, special severance is required to be paid to employees whose livelihood and whose family's livelihood are adversely affected by the relocation. Failure to comply with the special severance pay requirement could subject the employer and its responsible directors to a maximum of six months' imprisonment and/or a fine of THB 100,000 plus an interest of 15% of the outstanding special severance pay until it is fully paid.