Siam Legal International

Employment Contracts

Employment contracts are agreements that govern the professional relationship existing between an employer and his or her employee. It is a covenant that lays down the rights and duties of either party during the course of the worker's employment. As such, matters pertaining to these contracts are usually handled with much care and sensitivity. Misunderstandings that arise during the course of an employee's stay within the company may often result in disciplinary action or termination. How the employer handles these issues affects the way the company is perceived outside of the workplace. A potential result of imprudent personnel management is the thinning out of a company's hiring pool. A mishandled workplace breeds dissatisfaction and contempt among its personnel which could eventually reach the attention of potential employees. This could result in lesser job applications and the creation of a bad reputation for the company.

As for the employee, he or she may develop a resentful attitude towards the employer that could affect his or her performance. In ensuring a workplace bereft of any discord, Thai law provides for the following: First, notice should be made that employment contracts may be entered into by both full-time and fixed term employees. In the absence of a written employment contract, Thai law provides for an implied agreement between the employer and the employee. In such a case, it is the provisions of the law and not the terms and conditions agreed upon by both parties that define their relationship.

Second, Thai law allows parties to enter into contracts either orally or in writing. In either case, the law treats the terms and conditions embodied in the agreement as legally binding. In relation to this, there are two kinds of contractual breach that gravely affect an employment contract: grave misconduct and incompetence or the failure to perform one's duties. In understanding the effects of each, resort to pertinent legislation is required.

The primary law dealing with the breach of an employment contract is the Labor Protection Act B.E 2541 (1998). Other articles dealing with the subject matter may be found in the scattered provisions of the Civil and Commercial Code of Thailand. Third, employee termination in Thailand remains a company prerogative. Thai law merely requires one warning letter prior to termination but some companies issue up to three letters. Fourth, Thai law is quite liberal in awarding severance pay to terminated or laid-off employees. Despite a breach of contract, employees are still entitled to severance pay depending on the length of their period of employment. As an exception to this rule, project employees are not given severance pay when the period for their employment expires. It is important, however, that such period coincide with the termination of a particular project to which they were assigned. Fifth, employment contracts should be reviewed on a regular basis in order to accurately reflect the employee's job and position within the company. Moreover, detailed and organized work rules and conditions of employment along with the disciplinary procedures should be provided to the employees.

Furthermore, a standard form of employment contract for each level and rank of employee should be drafted for the convenience of both the employer and the employee. Contracts entered into by foreign employees should be drafted in clear English in order to avoid disputes. Sixth, despite the hesitation in applying the concept of "Constructive Dismissal" in the country, the Thai legal system considers coerced resignations as a form of unlawful termination.