Unfair Termination (Part 2)

Author: Mr. Worasete Phueksakon

Legal Consultant

This article continues from Unfair Termination (Part 1) by examining various other situations involving termination and discussing whether they are deemed to be unfair by the Supreme Court of Thailand.

5. Case Study 5 – Termination Due to Reorganization of a Business

About termination based on the reorganization of a business, this reason has frequently been used by employers to justify terminating staff when their business was suffering and was in trouble. There are several cases in which the Supreme Court has specified criteria for determining whether a termination for this reason is unfair or not, these criteria are as follows:
– If a business suffers financial losses which will mean that the employer cannot operate their business in the long term and as a result it then reorganizes the business by terminating certain staff to ensure that the business can continue in operation, then such termination(s) will be considered as fair terminations if it can be shown that these termination(s) will directly help the employer continue operating their business.

– In the case of a business which has achieved accrued profits which suffers a loss of profit in a single year if such business determines to terminate staff due to a reorganization based on this loss, then such termination will likely not be considered reasonable enough to be found to be a ‘fair’ termination.

– If an employer dissolves a position(s) or department(s) in their business because of a structural reorganization, the employer is permitted to terminate those affected employee(s) and such termination(s) shall not be deemed to be unfair. However, if the employer hires someone to work in lieu of the employee in that ‘dissolved’ position, such termination will be deemed to be unfair.

– With regard to the termination based on reorganization, such termination cannot be used in a discriminatory manner against certain staff; rather it must be exercised in an impartial way. For instance an employer who must cut staffing numbers due to reorganization should not terminate those staff they dislike first, rather the decision to terminate staff should be based on employee performance and which staff abided by work rules (i.e. attendance record) and performed better in their work role(s).

– The Court also noted that before terminating staff under a reorganization an employer should first try to utilize other suitable and fair measures such as decreasing staff workdays, working hours or overtime pay etc.

With regard to termination based on the reorganization of a business, the following case studies will provide some guidance on the matter.

In red case number 4753-4760/2546 the employer made a profit of approximately 29 million Baht in the fiscal year 1998, however in fiscal year 1999/2000 the employer made a loss of approximately 248 million Baht . During the financial year of 1998/1999, the employer announced a notification to staff regarding voluntary resignations for employees whereby the employer would shut down a part of the business and the employer would make a payment to such employees at the rate of 50% of their normal wages if they agreed to resign their employment. The Court held that while the employees were in fact terminated, the employer’s business faced a loss in his turnover and such business would be likely worsen. Therefore the Court found that the employer was entitled to use his judgment to reorganize his business for its survival. The Court further determined that termination based on this reason shall not be deemed the unfair termination if it complies with the stipulated regulations and does not unjustly discriminate against a particular employee or group of employees.

In red case number 1850/2547 the employer ran a tourist business company which had fully paid up share capital. Another company was a shareholder in this employer’s tourist business company and it faced a loss. Although the tourist business company’s turnover was decreasingly profitable, such business still made a profit. Moreover, the work of the tourist business company did not significantly decrease or suffer such losses that would justify the owner of the tourist business company to cut expenses and the number of the employees to ensure the survival of the business. Therefore, the Court held that it was unreasonable for the employer to terminate the employees of the tourist business company to reduce such expenses and that such terminations were unfair..

6. Case Study 6 – Termination Based on the Provisions in an Employment Contract

If an employer and employee made an employment contract in writing from the beginning of the working relationship and the employer at a later date terminates the employee due to their default or breach of the contract or their failure to comply with its provisions, such termination shall not be deemed to be an unfair termination.

In red case number 1250/2529 the employer and the employee made an employment contract which specified the period of work for the employee to be a minimum of one year and a maximum of two years. After one year of work, the employer terminated his employee because of the employee’s performance which was inconsistent with the objectives of the contract. In this case the Court found that the employee’s termination under these circumstances did not constitute an unfair termination

In red case number 258/2545 and 3471/2545 the employer terminated the employee because he reached the employer’s official retirement age according to the employer’s work rules such termination was exercised without discriminating against the employee. The Court held that it was reasonable enough for the employer to terminate the employee and as such it was not deemed as being an unfair termination.

7. Case Study 7 – Termination Due to Inefficient Performance of the Employee.

7.1 Termination due to Negligent Work Performance of Employee
With regard to an employee who negligently performs his duty, if the employer issues a warning to the employee due to such negligence but the employee continues to perform his work duties negligently then the employer would have reasonable grounds to terminate the employee and such termination shall not be deemed to be an unfair termination. The following judicial decisions will provide further guidance on the matter.

In red case number 49/2549 the employee frequently failed to fully submit the toll fee to their supervisor. The supervisor warned the employee about this issue but the employee failed to improve his performance and he still submitted the toll fee incompletely on several subsequent occasions. The employer set up a committee to investigate the employee’s discipline and then terminated the employee. The Court decided that the employer had reasonable grounds to not trust the employee to be a staff who collected the toll fee and as such the employee’s termination was considered as being fair.

7.2 Termination due to Employee failure to Work Effectively with Subordinate
In red case number 6840/2544 the employee often willfully acted against the employer’s orders which caused pressure to his subordinates and discourage them to work which in turn resulted in their work being of low quality. Therefore, the Court found that the employee could not work together with his subordinate and that he made several mistakes, moreover his supervisor already warned the employee about these issues. Following the warning the employee failed to improve himself as evidenced by the fact that there were products returned to the employer due to the employee’s failures which caused damage to the employer. Hence, the Labor Court decided that given the above factors the employer’s terminated the employee with fairness.

7.3 Termination due to Employee Failing to Adhere to Employer’s Work Rules
In red case number 2671/2527 the employer checked his employee’s health and discovered that it was poor. Moreover, the employer found that the employee could not perform his work duties at an adequate standard and that he neglected to follow up his work. With regard to the employee’s behavior, the Court found that his conduct enabled the employer to use its work rules to terminate the employee and that such termination would be considered as being fair.

In this article I have attempted to explain the criterion that the Supreme Court considers when it determines whether termination is unfair. I have examined various circumstances and have referred to the abstracts of various final judgments in order to simplify the issues for readers. In summation, if an employer wishes to fairly terminate his staff, they will have need to prove that they had a sufficiently reasonable justification or that such termination is to be done in accordance with the employment contract, work regulations, the orders/work rules, however, it is worth noting that the employer must have clear evidence to support such termination and such termination is not discriminatory in nature.