[February 2019] Employment Conflict Management: To outsource when there is a potential conflict or risk if managed in-house

By Florian Maier, Managing Director and Phi Ploenbannakit, Director – Antares Advisory, part of Antares Group

Outsourcing is a solution utilized to allow a company’s personnel to focus on their main tasks when heavy workloads threaten mainstream production or service. In addition, outsourcing can minimize exposure in terms of legal liability towards third parties. Outsourcing passes on the responsibility to the contractor whose role and influence on the day-to-day operation is less to none when compared with the company’s employees. The relationship between the contractor and the company’s staff is loosely attached, given the fact that they do not work under the same roof or share direct interest, which could affect a fair decision.

According to our experience as external counsel, we discover in many instances colleagues cover for each other because of close relationships and at the same time can harm the ones they dislike due to bias. The former would likely cause greater damage to the company in case of occupational fraud organized via a chain of command.

As such, employers or their human resources representatives including stakeholders are advised to consider passing on the responsibility to external counsel when a conflict is foreseeable in the following circumstances.

  1. Employment contract and work rules drafting

The task seems simple and many templates are available over the Internet and the validity and enforceability of the legal term can be verified by the in-house counsel or an experienced human resources officer. However, it can become complex for high-ranking positions when specific terms are classified. These would include salary packages, applicable key performance indicators, non-compete conditions, stock options, golden parachute clauses, etc.

In addition, general terms and conditions in the contract and work rules are not always applicable to all positions. For instance, overtime payment on working days and holidays are exempted for management staff whose positions may exercise power on behalf of the company against other staff members to review salaries and employ or dismiss staff. The same rule is extended to the sales staff that is paid commission including onsite staff whose nature of work is time flexible.

Misinterpretation of terms in favor of a staff member regardless of intention, even if, they were not entitled to such overtime payment, would be irrevocable and constantly applied by default, unless each staff’s written consent is obtained.

  1. Disciplinary procedure and actions

Disciplinary procedure is normally outlined in the work rules. Actions to be taken are clearly described as punishment and must be applied equally and without prejudice to all staff including the management.

Normally, the complaint is initiated by the staff member or raised by the auditor. Then, the matter is passed through the command chain for investigation. If the accused is found guilty, the superior in his or her line will impose the penalty and the decision shall be deemed final. In many companies the role is given to the HR manager or HR director. However, the decision may become vague in view of the authorities should there be any legal claim by the staff due to the lack of an appeal process which would allow the accused to plead to the board.

An investigation would be a dilemma when the judges themselves turn to be the accused and whose job position by default allows access to or can cause any change to sensitive information. Hopefully, the evidence will still exist by the time they are exposed. Thus, the investigation can be surely classified when it is limited to an independent auditor who can freely act without undue influence.

  1. Labor dispute resolution

In the legal context a labor dispute means any argument related to working conditions e.g. working hours, wages, benefit, etc. The issue may be initiated either by the company or the staff. An example of a typical reoccurring case would be a work strike at the end of a fiscal quarter by the production staff to press a demand for extra bonuses and salary increases. On the other hand, it could be a case that the company reduces overtime or ordinary working hours so that the staff is paid less.

The situation can become complicated, if a labor union is involved. Dispute resolution between the company and the labor union must comply with procedures as described by the Labor Relations Act. Disputes initially require an attempt at resolution by a tri-parties forum comprised of a representative from the union, one from the company, and a government appointed mediator.

The law allows both sides to retain a licensed labor relation counsel as a legal advisor to assist with negotiations. Upon being nominated, the labor relation counsel plays an important role in representing the interest of their side. If the dispute cannot be resolved within a certain period as stipulated by law, the parties by recommendation from their labor relation counsel must elect an arbitrator and form a forum to decide the case.

In many companies, the HR staff or in-house counsel have the labor relation counsel license, which qualifies them to represent the company. Alternatively, an independent labor relation counsel could be retained to avoid a conflict when the internal counsel is wearing two hats at the same time, one as the de-facto staff, and the other of the company per se. This can also prevent confidentiality leaks and probable collusion.

  1. Employment termination

Employment termination is simple and straightforward in the event of voluntary resignation by the employee or retirement according to the work contract. However, dismissal regardless of due cause is likely to initiate a legal claim and court actions by the employee, given the fact that the labor law and enforcement authorities are favorable to the employee’s side.

Dismissal without due cause under the law is considered unfair dismissal. The unfair dismissal claim will expose the company to additional compensation including a 15% weekly surcharge and a 15% annual default interest accrued on the withheld statutory payment and overdue wages.

A common dismissal cause is misconduct, which seems to be acceptable. However, the law requires the company to be specific on the degree of severity case by case. There is not a fixed formula since due cause is varied on circumstances including the role and responsibility of each staff member. For instance, having an alcoholic drink or being intoxicated during working hours is totally prohibited for onsite staff in heavy industry for the purpose of safety. A single violation of such could be deemed a severe misconduct and allow immediate dismissal without pay. However, the same criteria may not apply to office staff in the same company, as dismissal may not occur without an initial warning or probation.

A dismissal that is well prepared from the early stage of a disciplinary procedure and actions without undue influence will increase the leverage and the chance of success in a case to be filed against or by the company.

  1. Occupational fraud reporting

Issue reporting is passed from the bottom to the top of the ordinary command chain and by hierarchy, then controlled by internal and ad-hoc audits. Regular procedures seem fine, but still leave a loophole due to lack of checks and balances upward from the ground level. A bypass over a superior’s head somehow is not very inspiring when the whistleblower feels unsafe without any idea where he or she will end up.

An independent reporting channel with a transparent process and identity protection for the reporter against the interested person would more or less encourage honesty and help to limit or even prevent damage before it gets out of control.

This model is used by multi-national organizations with their subsidiaries; especially those located at distance from the headquarters to ensure they receive the right message without any distortion through the layers. It is also the required mechanism in many jurisdictions where the legal implication is extended beyond the boundary for offenses committed in foreign states i.e. bribery, data protection, tax evasion, etc.

Caution & Disclaimer

This publication is intended to highlight an overview of key issues for ease of understanding, and not for the provision of legal advice. Please note that this publication might be subject to further amendment without notice.

We highly advise you to read this publication in conjunction with appropriate advice from your legal counsel to determine the legal implications this might have on your business and how to mitigate exposures as much as possible.

If you have any questions about this publication, please contact to contact us.

Florian is the Managing Director of Antares Advisory. He joined Antares in 2014. Prior to that, Florian has been working for a German-owned law firm in Bangkok and, subsequently, for 5 years for a law firm in Stuttgart, Germany, advising mid-sized German companies with respect to international contract law.
He speaks German, English and French and he has an extensive experience in all legal matters, including tax law.
He can be reached at florian@antaresgroup.com or +66 (0) 83 669 0834.
Phi is the Director of Antares Advisory. He holds a LL.B. and subsequently a LL.M. in Business Laws, program held in English, from Thammasat University. He is a member of the Lawyers Council of Thailand and the Thai Bar Association. Phi is a Thai licensed lawyer and Notarial Services Attorney.
His area of practice covers corporate & commercial law, M&A, legal due diligence, labor law, property law, family law, litigation and arbitration. He has extensive experience in assisting corporate and individual clients in identifying the root cause, finding the best solutions and alternatives to mitigate the exposure and take the right decision.
He can be reached at phi@antaresgroup.com or +66 (0) 98 824 4186.
Company website: www.antaresgroup.com

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