In the past, some business operators opted to engage outsourcing companies to supply workers instead of directly hiring their own employees. As the outsourced workers were hired by the outsourcing company, there was no employment relationship between the business operator and the outsourced workers. This means operators were not obligated to care whether these outsourced workers were accorded sufficient rights and benefits under labour laws.

To deal with this problem and provide better protection to outsourced workers, in 2008 Section 11/1 was amended to the Labour Protection Act of 1998. Paragraph 1 of the new section stipulates outsourced workers are deemed employees of operators, in addition to the outsourcing company being a direct employer of these workers. Thus, business operators must ensure the outsourced workers are provided with minimum rights and benefits under the Labour Protection Act, including minimum wage, other statutory payments, and entitled leave.

More interestingly, paragraph 2 of Section 11/1 mandates the business operator shall arrange fair benefits and welfare without discrimination against the outsourced workers, who have the same job descriptions as directly hired employees. Given the opaque wording of "fair benefits and welfare without discrimination", there have been many arguments regarding its actual meaning and scope.

Some believe the outsourced workers are entitled to equal benefits and welfare as directly hired employees, while others hold that benefits and welfare can vary according to available justifications, such as experience, skills, and so on. Business operators who fail to comply with Section 11/1 are subject to a fine not exceeding 100,000 baht.

In 2012, the Supreme Court shed some light on the issue in a case concerning a complaint brought by outsourced workers against business operators and outsourcing companies. The Supreme Court ruled that Section 11/1 applied in this case as the outsourced workers were sent to work in the operator's main business, so the operator must treat the outsourced workers the same as direct hires. This means the operator must arrange benefits and welfare for the outsourced workers in accordance with its regulations, without discrimination.

Note the Supreme Court emphasised that the "benefits and welfare" must cover all the benefits and welfare provided to directly hired employees, regardless of the basis of such benefits and welfare, such as work regulations, an employment agreement, or even a collective bargaining agreement.

If outsourced workers receive some benefits and welfare from the outsourcing company (their direct employer), but such benefits and welfare are not equivalent to those granted to the operator's directly hired employees, the business operator must cover the difference.

The Supreme Court also pointed out the benefits and welfare afforded outsourced workers shall be given with the same conditions and criteria used for directly hired employees. If outsourced workers do not qualify under the business operator's conditions and criteria for such benefits and welfare, they are not entitled to them. The court added paragraph 2 does not apply to the outsourcing company.

The decision still falls short of clarifying other important issues, such as in cases where the length of service is part of the business operator's criteria for consideration of benefits and welfare, how is the outsourced workers' length of service calculated? Does service start from the day the operator engaged the outsourcing company, when the outsourced worker was sent to work for the operator, or when the worker was hired by the outsourcing company?

One takeaway from the ruling is outsourced workers will receive benefits and welfare arising from a collective bargaining agreement, but the operator's own employees who did not sign up to such an agreement will not.

Another question is if the business operator violates Section 11/1, how will the maximum 100,000-baht fine be imposed? Is it 100,000 baht per outsourced worker, per each type of benefit and welfare, and/or per instance the payment is made?

It seems outsourcing company need only provide rights and benefits under the law to their own outsourced workers, while benefits and welfare beyond legal requirements are handled by the business operator.

While more practical issues concerning Section 11/1 require further clarification by the court, what is certain is operators wishing to engage outsourced workers must treat them in an equivalent manner to their own directly hired employees. This may lead companies to insert an indemnity clause in outsourcing agreements with the outsourcing company.

Suriyong Tungsuwan is a partner and Nam-Ake Lekfuangfu and Pinpairoh Dhiranetra are associates at Baker & McKenzie Ltd in Bangkok. They can be contacted at:
suriyong.tungsuwan@bakermckenzie.com
nam-ake.lekfuangfu@bakermckenzie.com
pinpairoh.dhiranetra@bakermckenzie.com