Multinationals with affiliated companies in several locations routinely transfer employees of all levels between their affiliates and other offices, and it is increasingly common in smaller companies too. However, employers are often unclear on their rights and obligations when rotating or transferring employees—especially in Thailand where these are separate concepts treated differently by Thai labor law. This article will examine some common (and frequently litigated) issues of which employers should be aware regarding the rotation and transfer of employees.
Rotation refers to moving an employee to a new position within the same company in order to ensure a better fit for the employer’s operations and increase efficiency. An employer has the right to do so under Thai labor law, but is unable to reduce the wages or position level of the rotated employee in doing so, and the basis for the rotation must be in good faith.
In a recent example of bad-faith rotation, considered by the Thai Supreme Court, an employer found out that an employee—a driver—was in the process of organizing a labor union with his colleague. The employer subsequently rotated that employee into the position of assistant head of a transportation department. The Supreme Court found that the employer’s reason for doing so was to separate the employees and prevent them from talking to each other at work, which was not a good-faith basis for the rotation. Accordingly, the Supreme Court ruled that the employer had no right to rotate the employee and ordered the employer to reinstate the employee to his previous position with the same wages and benefits (Supreme Court Case No. 5462/2012), even though the new position to which he had been rotated was, nominally, more senior.
Although it is generally good practice to notify employees of their rotation in advance, the Supreme Court has affirmed that an employer has the right to rotate employees without notice if it does so on a good-faith basis, has a necessary reason to do so, and moves them to a position at the same level, with the same wages. If those employees then refuse to work at the new position and location, the employer is entitled to take disciplinary action against them (Supreme Court Case No. 782-800/1996).
The terminology here is important. The above cases are examples of employee rotation, which employers have the right to do under an employment contract, the employer’s work rules, and in accordance with labor law. However, if an employer moves an employee to another company within the parent company’s group, and the new company pays wages and benefits to the employee, Thai labor law considers it a transfer, subject to different rules.
Transfer of employees to affiliated companies
If an employer would like to transfer an employee to any other company that will pay the employee’s wages and benefits—including an affiliated company in the same group—it will be deemed a change of employer under Thai law, and require the employee’s consent.
The Supreme Court has confirmed that consent does not need to be unanimous among all employees proposed for transfer (provided those who refuse consent are not transferred against their will), and that the nature and terms of employment do not need to be carried over from the old employer to the new employer. In Supreme Court Case No. 782-9487/2008, an employer received some employees from another company, which continued to exist, while other employees who refused to be transferred remained at the old company under better working conditions. The court considered this transfer of employees to be in accordance with the law, and the new employer was not required to maintain the same rights and duties of the previous employer under the Labor Protection Act (LPA). Accordingly, the Supreme Court found that the transfer agreement, signed by both the new employer and the transferred employees, including the new employment conditions, was binding.
Change of employer due to transfer of ownership
Section 13 of the LPA states that when an employer changes due to a transfer of company ownership (whether by assignment, inheritance, merger, or any other method), the employees’ rights, and the previous employer’s duties, shall be enforceable against the new employer. Similarly, when two companies merge to create a new company, the LPA requires that new company to accept the rights and duties for the employees who are transferred. In these circumstances, employees are transferred to the new company immediately and automatically, even if employees do not express their intention to be transferred.
However, the Supreme Court has ruled that if an employee expressly states that they would not like to be transferred, the previous company must terminate that employee, as the previous company no longer exists under the law. If the previous company fails to inform the employees of the termination in advance, as required by law, it is obligated to pay statutory severance and remuneration in lieu of advance notice (Supreme Court Case No. 7242-7254/2002).
Although Section 13 refers to juristic persons, it is important to note that the Supreme Court has ruled that it also applies to individual employers. Therefore, whether the employers are juristic persons or individuals, in the event of transfer of ownership their rights and duties are transferred to the new owner.
Similar to the case of transfer to affiliate companies above, if an employee agrees to be transferred to a new company when ownership changes, the employee must comply with the new work rules, regulations and orders of the new company. In Supreme Court Case No. 1605/2008, the work rules set by an employee’s first employer set the retirement age at 65 years. The employee then agreed to be transferred to work with a second company, and then a third, both of which had work rules setting the retirement age at 60 years. The Supreme Court held that the employee must comply with the new work rules, and could not claim the right to retire at the age of 65 years in accordance with the work rules of the first employer.
Prior to making any decision on whether to rotate or transfer employees, or to change an employee’s employer, employers should make sure that they are fully aware of the legal implications of doing so. In addition, to avoid disputes arising in future, it is always prudent to make sure that employees are fully aware of the implications of any consent that they give.
This story was originally published in the Bangkok Post and is reproduced here with permission and thanks. The original story can be viewed here on the Bangkok Post website.