Thailand

In Thailand, employment agreements fall into two main categories, differentiated based on the nature of the employment relationship and its duration.

Contracts of Service vs. Contracts for Work

Contracts of Service are the most common type of employment agreement, establishing a traditional employer-employee relationship. The employee receives a regular salary, benefits, and is subject to the employer's direction and control. These contracts offer greater protection to the employee under Thai labor law, including minimum wage requirements, working hours, and severance pay.

On the other hand, Contracts for Work are suited for independent contractors who are hired for specific projects or tasks. Unlike employees, contractors are not entitled to employee benefits and have more autonomy in how they complete the work. However, Thai labor law still offers some protections against unfair treatment, ensuring contractors receive the agreed-upon compensation.

Fixed-Term vs. Indefinite-Term Contracts

Within the category of Contracts of Service, there are two main types based on the duration of employment:

Fixed-Term Contracts specify a start and end date for the employment period. They are commonly used for project-based work or seasonal positions. The contract automatically terminates on the expiry date without requiring notice.

Indefinite-Term Contracts, often referred to as permanent contracts, do not have a predetermined end date. They signify an ongoing employment relationship and provide greater job security to the employee. Termination of such contracts requires following specific procedures outlined in the Labor Protection Act.

An employment agreement in Thailand safeguards both employers and employees by clearly defining expectations and responsibilities. Here are some essential clauses to consider:

Parties to the Agreement

The full names and addresses of both the employer and the employee should be clearly stated.

Job Details and Responsibilities

The employee's job title, position, and a detailed description of their duties and responsibilities should be defined. This provides clarity on performance expectations.

Contract Duration

It should be specified whether the contract is indefinite or fixed-term.

Compensation and Benefits

The employee's base salary, bonus structure, and any allowances should be outlined. Benefits offered, such as health insurance, social security contributions, and provident fund contributions should be detailed.

Working Hours and Overtime

The standard working hours per day and week should be clearly defined. Guidelines for overtime pay and its calculation should be established.

Leave Entitlements

The various types of leave the employee is entitled to, including annual leave, sick leave, maternity leave, and public holidays should be enumerated. The duration and eligibility criteria for each leave type should be specified.

Termination Clauses

The grounds for termination by either party, following Thai labor laws, should be outlined. Required notice periods for termination by both employer and employee should be established. Any severance pay entitlements based on the reason for termination and employment duration should be specified.

Confidentiality and Intellectual Property

Clauses protecting the employer's confidential information and intellectual property rights should be included. The ownership of any inventions or creations made by the employee during their employment should be defined.

In Thailand, the probationary period serves as a trial period for both employers and employees to assess suitability for the role. It's important to note that Thai labor law doesn't mandate a probationary period, but employers can include it in employment contracts. There's no legal maximum duration; however, most employers set it at 119 days to avoid triggering severance pay obligations.

Benefits of a Probationary Period

The probationary period allows employers to evaluate an employee's skills, performance, and cultural fit. It also enables employees to assess if the job aligns with their expectations and career goals.

Termination During Probation

During the probationary period, either party can terminate the employment without needing an extended notice period. However, it's advisable to follow any termination procedures outlined in the employment contract.

Severance Pay and Probation

If an employee is terminated after 120 days, they may be entitled to severance pay based on Thai labor law provisions.

Employment agreements in Thailand often incorporate confidentiality and non-compete clauses to safeguard the employer's legitimate business interests.

Confidentiality Clauses

Confidentiality clauses are designed to protect the employer's confidential information and trade secrets from unauthorized disclosure or use by employees. These clauses typically outline what is considered confidential information, which can include a wide variety of elements such as:

• Business structure and operations
• Supplier identities
• Pricing strategies
• Marketing techniques
• Customer lists
• Product formulas and manufacturing processes

The Thai Civil and Commercial Code imposes a legal obligation on employees to maintain the confidentiality of information entrusted to them during their employment. This duty extends beyond the termination of employment. In addition to the Civil and Commercial Code, a well-drafted confidentiality clause in an employment agreement or a separate Non-Disclosure Agreement (NDA) can further reinforce the employer's position in the event of a breach by an employee.

Non-Compete Clauses

Non-compete clauses limit an employee's ability to work for a competitor or start a competing business for a certain period after leaving the company. The purpose of these clauses is to prevent former employees from using their knowledge of the employer's confidential information or trade secrets to gain a competitive advantage for themselves or a new employer.

Unlike some jurisdictions where non-compete clauses are heavily restricted, Thai courts generally recognize their validity. However, enforceability depends on reasonableness. Courts will consider factors such as:

• Employee's seniority and level of access to confidential information: Clauses are more likely to be upheld for senior employees with greater access to sensitive information.
• Scope of restrictions: The geographical area and duration of the non-compete clause should be reasonable and not excessively restrict the employee's ability to earn a living. Thai courts uphold the constitutional right to freedom of occupation.
• Specificity of competing business or activity: The clause should clearly define the types of businesses or activities the employee is restricted from engaging in.