Sub-contracting arrangements have often been favoured by business operators in Thailand to address fluctuating workforce needs and reduce labour costs. In 2008, following a string of complaints by outsourced workers alleging exploitation at the hands of business operators, a new section 11/1 was introduced into the Labour Protection Act B.E. 2541 (LPA) to clarify the rights of outsourced workers and the responsibility of business operators. The purpose of the 2008 amendment was to provide clarity for outsourced workers and business operators alike; however, it generated further questions in respect of the scope of business operators’ responsibilities to outsourced workers. Despite an interpretative Thai Supreme Court decision in 2012 on section 11/1, business operators using outsourced workers continue to operate in an uncertain environment, without clear guidance on how to comply with their section 11/1 obligations.
The Section 11/1 Amendment
In 2008 section 11/1 was introduced into the LPA. Prior to the amendment, businesses in Thailand using outsourced workers often avoided their duty to protect the rights of outsourced workers, and correspondingly, outsourced workers had little means to protect their rights against business operators. Business operators often neglected to provide minimum employment entitlements to outsourced workers, including any period of notice upon termination, leave entitlements, statutory payments or rest periods. Consequently, outsourced workers were often exploited, working in unfavourable conditions. Business operators were able to justify their actions using a loophole in the LPA which did not clearly provide that business operators had an obligation to protect the rights of outsourced workers, whereas in contrast, the LPA clearly stated that business operators must protect the rights of employees.
After the introduction of section 11/1 into the LPA, business operators hiring outsourced workers1 through an outsourcing company were lawfully deemed the employer of the outsourced worker in addition to the outsourcing company, who was directly employing the outsourced worker. Further, as an employer of outsourced workers, business operators were now required provide outsourced workers minimum statutory employee rights required by the LPA, including leave entitlements, statutory payments and rest periods.
Importantly, section 11/1 created an obligation on business operators to ensure that “fair benefits and welfare without discrimination” were provided to outsourced workers who have the same job descriptions as the directly hired employees. Failure to comply with section 11/1 could lead to the imposition of a fine not exceeding THB 100k.
Initially, the precise scope of the term “fair benefits and welfare without discrimination” in section 11/1 was unclear, with no definition being provided for in the LPA. Outsourced workers argued that that it meant they were entitled to equal benefits and welfare as the directly hired employees with the same job descriptions. Business operators, however, contended that, while benefits and welfare had to be provided to both employees and outsourced workers, the benefits themselves could vary according to experience and skills.
In response to the differing views and practices of business operators attempting to comply with the section 11/1, the Department of Labour Protection and Welfare (Labour Department) issued an explanation on the section 11/1 amendment (the “Explanation“) to clarify the meaning of the terms “fair benefits” and “welfare without discrimination”.
The Explanation stated that “Benefits” and “Welfare” included wages, overtime pay, active payment, shift payment, food allowance, living allowance, dormitory, entitlement to increase in holidays based on years of service, entitlement to bonus or other special pays, employer-arranged transportation, or employer-provided uniform. The Explanation further stated that “Fair, Without Discrimination” required that outsourced workers and employees could not be treated differently or discriminated against based on whether they were an employee or outsourced worker, without reasonable
ground. This meant that business operators were required to ensure that directly hired employees and outsourced workers undertaking like for like duties received like for like benefits, without discrimination. While not binding law, the Explanation was an authoritative instrument of interpretation business operators were encouraged to follow.
2012 Decision Of The Thai Supreme Court – Clarity And Ambiguity
In 2012 the Thai Supreme Court handed down a decision which gave further clarity to the Explanation. The case was brought by outsourced workers against business operators and outsourcing companies alleging non-compliance with section 11/1.
The Supreme Court in its decision reinforced the Explanation, and held that section 11/1 required business operators treat outsourced workers as their directly hired employees.
The Supreme Court further held that where outsourced workers receive some benefits and welfare from the outsourcing company (their direct employer), but such benefits and welfare were not equivalent to those granted to the business operator’s directly-hired employees, the business operator must provide the shortfalls to such outsourced workers.
The Supreme Court also pointed out that the benefits and welfare must be given to the outsourced workers in accordance with the same conditions and criteria used with the directly-hired employees. The Court further held that this duty is imposed solely on the business operator, not on the outsourcing company.
The 2012 Supreme Court decision provided useful guidance to business operators hiring outsourced workers. However, business operators using outsourced workers in Thailand still function in an uncertain environment as there are many aspects of section 11/1 which have not been clarified either by the Labour Department or the Supreme Court.
It is still not clear how business operators can apply the same criteria to determine benefits for employees and outsourced workers alike. For example, if a business operator uses duration of service as a method to determine the award of certain benefits, how should length of service of the outsourced worker to the business operator be measured? It could be the date that the outsourced worker commenced providing services with the business operator. It could also be calculated from the date the outsourced worker commenced his or her relationship with the outsourcing company. What if the outsourced worker completes several short periods of work over the course of a year with the business operator; is the full year counted toward duration of service, or only the periods of time that the outsourced worker was engaged in service to the business operator?
Further there has been no determination by the Supreme Court or published explanation by the Labour Department on whether a business operator who violates section 11/1 is liable to a fine for each outsourced worker denied equal benefits, or for each benefit not provided fairly without discrimination.
Uncertain Future
Although section 11/1 was incorporated into the LPA over 7 years ago, business operators utilising outsourced workers, do so without clear guidance on how to ensure compliance with the equal benefits and fair protection and without knowing the extent of their liability should be found to have failed to comply with section 11/1.
End Notes:
1 The outsourced worker must be engaged to undertake work in the production process or for the business which is under the control of the hiring business operator.
