Can a Thai Employee Be Dismissed Immediately for Serious Work Errors?

A Thai Supreme Court case explains why a "justified termination" does not always mean “no severance pay”

A customer rejects an entire piece of work because of an employee’s mistakes.

The company suffers damage. Management calls a meeting to identify what went wrong and how the problem should be resolved. During the meeting, the employee argues with a director who has authority to act on behalf of the company. The director then tells the employee to leave.

Can the employee terminated immediately?

And if the termination is justified, does that mean the company does not have to pay any compensation?

The answer under Thai labour law is more complicated than many foreign employers expect.

What happened in this case?

In Thai Supreme Court Judgment No. 6594/2560 (2017), an employee’s incorrect performance caused the employer’s customer to reject the work in its entirety, resulting in damage to the employer.

A meeting was subsequently held to investigate the cause of the problem and consider possible solutions. During that meeting, the employee argued with an authorised director of the employer, after which the employment was terminated.

The Court considered the real reason behind the termination—not merely the argument that occurred during the meeting.

The underlying reason was that the employee had performed the work incorrectly, caused damage to the business and created a situation in which the employer could no longer reasonably trust the employee to continue performing the job.

The Court therefore held that the employer had sufficient grounds to terminate the employment without advance notice. The termination was also not considered unfair.

As a result, the employer was not required to pay:

• Payment in lieu of advance notice; or

• Compensation for unfair dismissal.

However, the employer was still required to pay statutory severance.

Why was severance still payable?

This is where foreign employers often misunderstand Thai labour law.

Thai law does not treat all termination payments as one single entitlement. Each payment must be considered separately.

Payment in lieu of advance notice

An employee engaged under an indefinite-term employment contract will normally be entitled to advance notice or payment in lieu of that notice.

However, certain conduct may justify immediate termination without notice under the Civil and Commercial Code.

In this case, the employee’s performance, the damage caused and the resulting loss of trust were sufficient to relieve the employer from the obligation to provide advance notice.

Statutory severance pay

Statutory severance is governed separately by the Labour Protection Act.

An employer may refuse to pay severance only where the employee’s conduct falls within one of the specific grounds prescribed by Section 119, such as dishonesty, intentional damage, gross negligence causing serious damage, or certain serious or repeated disciplinary violations.

Although the employer in this case had sufficient grounds to terminate the employment immediately, the employee’s conduct did not fall within the statutory exceptions that would eliminate the right to severance.

The employee therefore remained entitled to statutory severance based on the applicable period of employment.

Compensation for unfair dismissal

Unfair dismissal is another separate issue.

Under Section 49 of the Act Establishing the Labour Courts and Labour Court Procedure, the Labour Court may consider whether the reason for termination was genuine, reasonable and proportionate in the circumstances.

Here, the Court found that the employer had a genuine and sufficient reason for the termination. The dismissal was therefore not unfair, even though statutory severance was still payable.

The important lesson for foreign employers

A lawful or justified dismissal does not automatically mean that every termination payment can be withheld.

The same termination may produce three different legal outcomes:

Type of payment	Result in this case
Statutory severance	Payable
Payment in lieu of advance notice	Not payable
Compensation for unfair dismissal	Not payable

This distinction is particularly important for foreign directors who may be accustomed to the employment laws of another jurisdiction.

Under Thai law, the company must analyse the facts against the legal requirements for each payment separately.

Poor performance alone is not always enough

This judgment should not be interpreted as meaning that any employee who makes a mistake may immediately be dismissed without notice.

The employer should be able to demonstrate matters such as:

• What duties were assigned to the employee;

• What instructions or working standards applied;

• The nature and seriousness of the mistake;

• The actual impact on the customer or the business;

• Whether the employee had previously made similar mistakes;

• Whether training, warnings or an opportunity to improve had been provided;

• How the employee explained or responded to the incident; and

• Why the employment relationship could no longer reasonably continue.

A minor mistake, an unclear instruction or an isolated error causing no material damage may lead to a very different result.

What should the company do before terminating an employee?

Before deciding on immediate termination, the company should:

1. Preserve the relevant evidence, including emails, customer complaints, rejected work, internal communications and records of financial loss.

2. Conduct a fair investigation and allow the employee to explain the incident.

3. Compare the conduct with the employment contract, job description, work rules and previous written warnings.

4. Determine whether the issue involves ordinary poor performance, negligence causing serious damage, intentional misconduct or breach of a lawful work instruction.

5. Analyse statutory severance, advance notice and unfair-dismissal exposure separately.

6. Prepare a termination letter stating the genuine factual reasons for the dismissal.

7. Calculate all final payments correctly, including outstanding wages, unused annual leave where applicable and any contractual benefits.

Where an employer intends to rely on Section 119 to withhold statutory severance, the factual grounds must be properly identified and communicated at the time of termination. A company may be prevented from introducing a new termination ground only after a dispute has arisen.

Do not let frustration make the termination decision.

When a customer has rejected important work or the business has suffered significant damage, an immediate emotional response is understandable.

However, a statement made during a heated meeting – such as “leave the company immediately” – may itself constitute an effective termination and create legal consequences before the company has investigated the facts or calculated the employee’s entitlements.

A short legal review before dismissal will often cost substantially less than defending a Labour Court claim later.

LIBOTHAI Law Firm assists foreign-owned and international companies in Thailand with employee investigations, disciplinary procedures, termination risk assessments, severance calculations, termination notices, settlement negotiations and Labour Court proceedings.

This article provides general legal information only. The legal consequences of termination depend on the specific facts, evidence, employment documents and circumstances of each case.