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Termination Clauses: Labor Laws in Three ASEAN Countries

Termination Clauses: Labor Laws in Three ASEAN Countries

A termination clause is a crucial part of an employment contract; it states how much notice of termination an employer is required to provide an employee. The employer can provide working notice of termination or pay instead of providing a working notice, but almost all employers provide termination pay instead of a working notice.

However, a termination clause that is poorly written will likely face difficulty holding up in court. If the clause cannot be enforced, then the employee is often entitled to a lengthier notice period—or more termination pay. And, as virtually every country outside of the United States does not practice at-will employment (that is, an employer can terminate an employee without reason), termination clauses are integral to protecting both employees and employers in these countries.

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Outside of the United States—where at-will employment is practically unheard of—probationary periods are important components of the employment contract. Every country has its own rules that set the maximum probationary period, as well as stipulations for renewals. China, for example, enforces a six-month probationary period for open-term contracts—but requires only one month for contracts that are good for under one year. In many other Asian nations, termination may be seen as dishonoring the individual, making it highly important that legislation is followed to avoid lawsuits for wrongful termination.

Employee Termination in The Philippines

The employer is required to give the employee two written notices and a hearing once grounds for just cause have been given, as noted under Article 282 of the Philippines labor Code. The termination notice must cite the reason(s) the employer is seeking termination, and the hearing is an opportunity for the employee to present their case against these grounds. If the hearing is unsuccessful for the employee, the employer must present a second written notice of termination, as well as give both the employee and the Department of Labor and Employment written notice 30 days prior the termination date.

Once the employee is dismissed, the employer must provide separation pay. If an employer fails to dismiss an employee without just cause, the employee may be reinstated without losing any seniority rights, back wages, and any other privileges they may have earned while working under the employer.

Employee Exploitation Protection in Thailand

While Thailand’s Labor Protection Act outlines minimum working standards in order to protect employees from employer exploitation, it is still a fairly simple process for dismissing an employee. Thai law states that employers are under no legal restriction to terminate an employee—unless that employee is a member of an employee committee.

These committees are similar to labor unions in the United States in that are designed to protect employees from exploitation. Should a Thai employer wish to dismiss an employee, they must first receive permission from a Thai court. Employees who are not a part of an employee committee, are easier to terminate; they can be fired without just cause. However, Thai law states that the employer must pay full compensation the terminated employee.

Indonesia: Let the Courts Decide

Before terminating an employee, Indonesian employers are required by law to use all efforts to avoid terminating an employee. An employer must receive an agreeable decision from the Industrial Relations Court in order to terminate the employee. However, if the employer seeks to terminate the employee during the probationary period, they can do so without the approval of the Court.

But terminating an employee in Indonesia can be a lengthy process; Indonesian law states that all industrial relations disputes should be resolved through bipartite negotiations. But if an agreement cannot be reached, mediation/conciliation should be utilized in an attempt to reach consensus. If a consensus cannot be reach, the mediator will provide a letter of recommendation that, if not agreed upon by both parties, will then bring the case to the Industrial Relations Court. If this proves unsuccessful, the next and final step would bring the case to the Supreme Court.

As each country sets its own laws by which employment contracts and termination must abide, ensuring your contracts are in line with local labor law is a must. Get in touch with Velocity Global today to learn more about how we can help you with your global expansion.