Landmark decision on amalgamation and employee transfers

According to the Thailand's Civil and Commercial Code (CCC), the notion of amalgamation refers to the transfer of the rights, duties and the liabilities of amalgamated companies to a newly formed company. Specifically, the CCC requires the newly formed company to receive all rights, duties and liabilities from the amalgamated companies (which are to be dissolved) after the amalgamation. One could interpret that the said requirement refers also to the employees and that the newly formed company will be required to accept the transfer of employees from the amalgamated companies automatically. 
Once transferred to the newly formed company, if the employees are not happy with their new employer, i.e. newly formed company, the employees can then resign accordingly.
While the transfer of employees in the amalgamation case should be simple and straightforward as per the provision in the CCC, in reality, an issue often arises in the event where employees do not wish to be transferred.
The Supreme Court once ruled on this particular issue in 2002 (the 2002 case). The Supreme Court decided that employees of the amalgamated companies would be transferred automatically to the newly formed company, following the amalgamation as per the provision in the CCC. 
However, should any of the employees express clear intention not to be transferred to the newly formed company, their employment will not be transferred. The dissolution of the amalgamated companies would result in the employees’ employment being terminated, and the newly formed company having to provide severance pay and other termination payments to the employees due to the transfer of rights, duties and liability. 
Even though the amalgamation referred to in the 2002 case is not strictly the same as the amalgamation case prescribed by the CCC since it did not result in the formation of a new entity, this ruling has been adopted and applied by subsequent courts when dealing with an amalgamation occurred under the CCC. 
Only in 2017 did the Supreme Court have a chance to consider employee issues under an amalgamation occurred under CCC with the new entity formed and the dissolution of the amalgamated companies (the 2017 Case). 
In this 2017 Case, the employees submitted letters in vain to the employer stating their intentions not to join the newly formed company after an amalgamation. Despite having come to work for the new entity for a few days, they subsequently returned company properties to the new entity and refused to come to work since. 
They then brought the case against the former employer and also against the newly formed company to claim for termination payments, on the grounds their employment had been terminated as a result of their refusal to join the new entity. 
The Central Labour Court followed the precedent of the 2002 case and decided that since the employees refused to be transferred, their employment would not be transferred. The amalgamated company would be legally obliged to accept the transfer of duties and liabilities, including the liabilities to make termination payments. The Supreme Court firstly affirmed the 2002 case that employees would be transferred automatically after amalgamation as per the provision in the CCC. 
However, the Supreme Court subsequently reversed the Central Labour Court's decision and moved away from the precedent set by the 2002 Case by stating that in the event that the employees no longer wish to work for the new entity by returning the company properties, their action would be considered as resignation from the new entity, not a termination by the new entity. 
Therefore, no severance pay is required. 
Based on the ruling in 2017 case, we may conclude that, in the case of amalgamation, employees shall be automatically transferred to a new entity while a new entity shall be obliged to provide rights and benefits to them no less than what they previously received. 
No employee’s consent is required and if they refuse to work for a new entity, they would be considered as resigning and no termination payment would be required. However, we should still be cautious in drawing such a broad conclusion. This is because the Supreme Court also cited the fact the employees had gone to work for the new entity for a certain period after the amalgamation as one of the factors that the court had taken into consideration when reaching its decision. 
Should the employees have refused outright to be transferred and not worked for the new entity at all, it would be interesting to see how the court would decide in such a case. 

This article is co-authored by SURIYONG TUNGSUWAN, Partner, |BAKER McKENZIE ([email protected]) and Nam-Ake Lekfuangfu, Associate, |Baker McKenzie |([email protected])