Key issues that employers should be aware of regarding employment contracts in Thailand

In Thailand it is not necessary for an employment contract to be signed between an employer and an employee in order for a legally recognized employment relationship to be formed. Indeed, such legal relationship can be created by the actions of the parties when a person performs work for another party and such party pays wage in return for such work. Even though the parties don’t enter into a signed employment contract, the legal relationship between them is still governed by applicable Thai law including the Labour Protection Act B.E. 2541 (1998) and the Civil and Commercial Code (especially sections 575-586 Hire of Services). If the parties wish to have more comprehensive legal protections apart from those provided under the law then it is advisable that they ensure that a suitably drafted employment contract is made. When using an employment agreement, the writer advises that it would be better to customize their employment contracts so that different levels and types of staff have different employment contracts which better suit roles and which provide more effective protections for the employer. This article shall cover various types of employment contract clauses and discuss what clauses should be used in various types of contracts.

Parties to the Agreement
It is advisable that all employment agreements should be clear about exactly who the parties are. The document should clearly spell out the full legal name of the employee and the employer. In the case of an employee, given that they are a natural person it is advisable to reference their identification such as their Thai ID card or in the case of a foreigner, their passport, including the reference number of such document. In the case of a company, the name should reflect that as appears on its official company registration.

Definitions
Strictly speaking, a definitions section is not necessarily required in every employment agreement, however having such a clause can be a useful tool for employers as it can help to remove ambiguity on certain key terms such as ‘Confidential Information’, ‘Trade Secrets’ and ‘Intellectual Property’. This in turn can better help to make relevant clauses in the agreement more comprehensive and effective in protecting the interests of the employer.

Work Commencement Date
One of the most important things which an employment contract should always cover is the commencement date from when the employee shall start working for the employer. This detail is vitally important as it shall provide key evidence as to how long the employee has actually worked for the employer and thus shall impact other important matters such as how much severance pay the employee is due in case they are later terminated without cause.

Workplace Location
It is advisable that in most employment agreements it is clearly defined where the employee shall perform their work, if they shall be required to perform their work at more than one location then this should be specified in the contract too. Furthermore, if business travel to other locations (domestic or international) is necessary then the agreement should reflect this fact too so that the employer can later rely on this condition of employment.

Working Days and Hours
It is sensible for employment agreements to clearly state the work days and working hours they shall be required to perform, especially if they are inconsistent with those stated in the employer’s work rules (if any). In the case of any inconsistency with work rules/ policies it would be sensible for the employment contract to state that in the case of any conflict/ inconsistency between the agreement and the work rules/ policies then the terms of the agreement shall prevail.

Employee Remuneration
The type and amount of employee remuneration (which they shall be provided at the beginning of the job) should normally be specified in all employment contracts so that it is clear what the employees’ are entitled to, so that there is no ambiguity on this key issue. It should be noted that if an employees’ salary is later increased by the employer then they should do so by an official letter issued to the employee which clarifies what their new salary shall be. If an employer does not have work rules or policies which cover the payment of salary/wages then it would be advisable for the employment agreement to specify how salary/wages shall be paid and when they shall be paid (monthly etc). Moreover, to avoid confusion the agreement should clarify that the employer is entitled to deduct all applicable taxes and required contributions from the employee’s salary/wages including applicable social security contributions.

Compliance with Work Rules/Policies
If an employer has work rules or workplace policies in effect or will likely implement them in the future then it would be advisable for an employer to specify in the employment agreement that the employee agrees to comply with them (as well as future amendments) so that there is clear evidence to show that the employee agrees to follow them as a condition of their employment.

Employee Indemnity
If an employee’s work role has the potential to cause significant damage to their employer then it would be advisable for their employment agreement to contain an indemnity clause which indemnifies the employer against all losses or damage incurred or suffered by the employer which arises from or out of any claims made on or against the employer in respect of or in relation to the employee’s negligent act or omission or their breach of any term or condition of their employment agreement.

Employee Warranties
Most employment agreements should have certain employee warranties to protect the legal interests of the employer, however certain employment agreements should have more of these depending on the role of the employee, especially for senior staff who have specialized skills or knowledge on their employer’s business. For example, general warranties which most employment agreement should contain are as follows:
     • The employee will carry out their work in a professional manner and will use their skills and knowledge to effectively, efficiently and professionally carry out their assigned work;
     • The Employee will devote their working hours to perform their duties;
     • The Employee will be responsible for taking care of and managing the employer’s property and goods which are in their possession or under their responsibility.

Confidentiality and Non-Disclosure
If the role of an employee shall give them access to confidential information or trade secrets of their employer then it is advisable to include a Confidentiality and Non-Disclosure Clause in their employment agreement which basically prevents them from revealing their employer’s or its clients’ confidential information to unauthorized third parties. This type of clause should also be clear on whether it shall continue to operate (survive) after the employment relationship is over so that the employer’s confidential information can be protected thereafter.

Termination & Resignation
For most employment agreements used in Thailand it is advisable that they contain a section covering termination and resignation so that the employer can better safeguard itself in case the employee is terminated or resigns from their job. This type of clause should cover various matters such as:
     • Grounds which an employer can terminate an employee such as retirement or for cause;
     • Obligations of an employee upon their termination or resignation such as returning all documents/ materials containing confidential information to their employer and no longer holding themselves out as an employee;
     • Advance notice requirements in the case of termination or resignation.

Intellectual Property
If the employee’s work shall give them the scope to make, discover or participate in the making or discovery of any letters patent, trademarks, service marks, designs, copyrights, inventions, drawings, computer programs, know-how, relating to or capable of being used in the business of the employer then it is advisable that the employer should ensure that the employee’s employment contract contains a suitable intellectual property (IP) clause which depending on the policy of the employer could give the employer various rights/ ownership over such IP. It is also advisable for such clause to be clear on whether such IP rights shall survive the employee’s termination or resignation.

Writer: Ryan Crowley – Foreign Services Manager
Dharmniti Law Office Co., Ltd.
2/2 Bhakdi Building 2nd Floor, Witthayu Road, Lumphini, Pathumwan, Bangkok 10330
Tel: (66) 2680 9777
Fax: (66) 2680 9711
Email: ryan@dlo.co.th or pongkans@dlo.co.th