Employer of Record arrangements under Thai Labour Law

In essence, the EOR serves as the official employer on record for administrative and legal purposes, despite not necessarily being the entity that directly supervises or controls employees’ daily work activities. 

Under Thai labour law, the employer is the company or person who has both authority over the employee and the duty to pay wages to the employee. Thus, the question arises as to who shall be held responsible as the employer under Thai labour law in an EOR arrangement. 

Supreme Court Ruling No. 4970/2552 addressed this issue. In this case, the defendant, which acted as the EOR, was a party to the employment agreement with the plaintiff, and sent the plaintiff to work with a third party. The court ruled that the plaintiff had to follow the orders and management of the third party, as the defendant delegated some of its managerial authority to that third party, to ensure that the contract between the defendant and the third party was fulfilled. However, the court also ruled that the authority to terminate the plaintiff’s employment continued to reside with the defendant, and that the defendant had not lost any of its managerial authority over the plaintiff. Therefore, the court ruled that the defendant was the employer of the plaintiff. 

This arrangement was seen as a business relationship between the two defendants rather than the second defendant acting solely as an intermediary. Therefore, the Appeals Court amended the decision of the Labour Court, holding both the first defendant and the second defendant jointly liable to the plaintiff for compensation, in addition to the judgments already made by the Labour Court. 

In practice, when a foreign company does not have a branch, subsidiary, or legal entity in Thailand as defined in Thai law, an EOR arrangement can make it easier to hire the employees needed. 

However, when such cases are brought to court, the EOR service provider often becomes the sole defendant in labour disputes, as can be seen in Supreme Court Ruling No.4970/2552 mentioned above. The Labour Court typically considers the challenges of enforcing a judgment against a company that lacks a legal presence in Thailand. Therefore, it is unlikely that the Labour Court would rule that the EOR service provider is not the employer, as there would be no other party within Thailand from whom the employee could seek redress. 

Conclusion  

As the Appeals Court views any arrangement between an EOR service provider and its client as a business agreement, both parties must ensure that the EOR service agreement contains detailed information about the scope of services and who is responsible for compensation and any damages that may be incurred. Even though both the EOR and the employer are very likely to be held jointly responsible to the employee, the EOR service agreement should clarify who will be responsible for any compensation to which an employee may be entitled under the labour law.