COVID-19 and the Labor Law
Understanding the Legal Implications of “No Work No Pay”
The COVID-19 pandemic has had a devastating impact on workplaces in Thailand, forcing many employers to take drastic measures such as temporarily suspending operations in order to save their businesses. This situation is especially traumatic for affected staff, as, at present, there is no clear indication as to how long this crisis will last and there is uncertainty as to what the employees’ legal rights are in the event that their employment is suspended or terminated. This area of the law is not well settled, however, below is a summary of the current status “No Work No Pay” principle and another measure allowing employers to suspend employment of employees in crisis situations under Thai labor law.
- No Work No Pay
No Work No Pay is not specifically defined by statue, however, it is a recognized legal principle under Thai law, whereby, in certain extreme crisis circumstances employers are legally allowed to temporarily suspend the employment of staff without the legal obligation to pay those staff wages. One of the situations in which No Work No Pay applies is force majeure which is defined as situations that “excuse a party to a contract from not performing its contractual obligation that becomes impossible or impractical, due to an event or effect that the parties could not have anticipated or controlled.” Note here that force majeure is very seldom applicable because it is only allowed in the most extreme circumstances, however, the Thai government has recently announced that it may apply to businesses recently ordered closed by the government such as department stores, health clubs, theaters, spas, etc. in Bangkok metropolitan region, pursuant to a Declaration in accordance with Section 9 of the Emergency Decree of Public Administration in Emergency Situations (2005)(No. 1).
Accordingly, under the principle of No Work No Pay and force majeure, employers who have been required to close these types of businesses may order affected staff to cease work and such employers should not be required to pay wages to those employees until such time the government order is lifted.
For example, a health club closes pursuant to the above-mentioned government order and orders all staff at the health club to cease work. In this situation, the employer should not have a legal obligation to pay wages to the affected staff during such time of the government ordered closure.
- Section 75 of Labor Protection Act
For those businesses which have been materially affected by the COVID-19 crisis but do not currently qualify under force majeure, Section 75 of the Labor Protection Act allows employers under severe economic duress to temporarily suspend operations in certain situations, however, here employers are required to continue to pay employees at least 75% of their wages subject to the following conditions.
- The employer must inform a labor inspection officer, and the employees, three business days in advance of the intended cessation of operationsand make a required filing and the local distract office.
- There is a necessity and a significant cause for the employer to take this step, such as the employer’s business being unable to operate as usual.
- The employer elects to seek temporary cessation of operations on a whole or partial basis.
- The employer must pay employees throughout the entire period of cessation.
- The cessation period depends on the situation on a case-by-case basis. Once the previously cited reason for cessation of operations no longer exists, the employer must resume operations and employment.
For example, suppose a hotel operator is forced to suspend operations due to the fact that the current crisis has caused a severe reduction in travel and tourism and occupancy at the hotel had dropped to below 10%. In this situation the hotel operator should be legally entitled to suspend operations and order the affected staff to stop work until such time as the situation passes, however, will be required to pay the affected staff a minimum of 75% of their normal wages.
For example, the same hotel operator wishes to make employment suspension effective on Thursday, April 16. In order to accomplish this, the hotel operator would be required to make a written notification to the affected staff and make a filing at its local Labor Protection and Welfare Office by Friday, April 10th.
Note that both No Work No Pay and Section 75 both only allow employers to reduce or suspend wages on a temporary basis and, after the crisis period has past, they would be required to resume the payment of normal wages to all staff.
For example, the health club mentioned above suspends the employment of all staff pursuant to No Work No Pay / force majeure for one month after which time the government lifts the closure order for health clubs. As of the time that the government order is lifted, the health club will be required to resume paying all the employees who were suspended at their normal wage rate.
Also, note that the rules stated under No Work No Pay and the provisions of the above Section 75 only apply to the temporary suspension of work and do not apply to the situation where the staff’s employment is terminated.
For example, same situation as above but the hotel permanently closes and all staff whose work had been temporarily suspended are now laid off. Here the normal rules with respect to payment of severance and other termination compensation would apply (compensation calculated based upon employee’s period of employment, current wage rate, notice of termination requirements, etc.) unless the employer can demonstrate legal cause for the termination.
Mike Doyle is a US lawyer and Senior Partner with the Bangkok based law firm Seri Manop & Doyle. He may be reached at michael@serimanop.com .
