Labour & Litigation

June 17th 2017

Siam City Law Offices Limited (SCL) has recently won a landmark decision against the Social Security Office, under the Supreme Court’s decision no. 10770/2559, by representing the Plaintiff, who is a prominent hotel based in the heart of Bangkok, in a matter concerning the issue of whether the ‘10% service charge’ that was imposed by the hotel is to be considered as “wages”.

In this case, the Social Security Office interpreted the 10% service charge as part of “wages” and therefore issued a notice to the Plaintiff to make additional contributions towards the Compensation Fund and the Social Security Fund. The hotel initially appealed the decision of the Social Security Office Appellate Committee only for such committee to confirm its previous decision.

SCL advised the hotel that the 10% service charge is not to be considered as “wages” and that the hotel should consider taking legal action against the decision of the Social Security Office Appellate Committee by filing a claim with the Labour Court.

The hotel (the “Plaintiff”) initiated legal proceedings against the Social Security Office (the “Defendant”) by filing a complaint at the Labour Court requesting for the cancellation of the Social Security Office Appellate Committee’s decision, against the Social Security Office.

In the first instance, the Labour Court rendered a decision in favour of the Defendant, which the Plaintiff appealed against.

On 23 May 2017, the Supreme Court rendered its judgement in favour of the Plaintiff along the same line as SCL’s advice previously given to the Plaintiff; that the 10% service charges in this context do not amount to “wages”.

The Supreme Court does not concur with the Central Labour Court’s judgement, and viewed that the service charges collected by the Plaintiff from its customers, at the rate of 10 percent of the total service fees, in order to be divided and distributed to its employees every month – the amount of which fluctuates depending on the amount of service fees received – was not money of the Plaintiff, an employer, paid in consideration for the work performed by its employees. Rather, said service charges were the customers’ money that was paid to the employees. The Plaintiff was merely a middleman who collected such money from the customers in order to calculate, divide and distribute such to all employees in equal amounts. Furthermore, the Plaintiff did not guarantee the minimum amount of service charges to be received by the individual employees. Therefore, the service charges was not money paid by the employer to the  employees in consideration for the work performed by the employees and, thus was not wages according to Section 5 of the Social Security Act, B.E. 2533 (A.D. 1990). The Central Labour Court’s judgement is therefore reversed. This Supreme Court’s judgement is entered to revoke the Defendant’s order demanding the Plaintiff to pay an additional contribution together with the legal surcharge to the Social Security Fund; and to revoke the Appellate Committee’s Decision No. 196/2555 dated 8 March 2012.

This is a significant victory as there can now be a precedent set for future practice in the whole hotel/service industry, where payments for ‘service charges’ payment were made in the same manner as per the facts in this case.