Minimum statutory terms
Termination of employment
Discrimination and harassment
Occupational health and safety
Regulation of outsourcing and contracting
Industrial relations

Acknowledgment

This Guide was prepared by the Workplace Law & Advisory – Asia practice of Freehills International Lawyers, with assistance from the following firms:

Contacts:

George Cooper
Practice Leader
+65 6236 9941 begin_of_the_skype_highlighting              +65 6236 9941 
george.cooper@freehills.com

Celia Yuen
Senior Associate
+65 6236 9972 begin_of_the_skype_highlighting              +65 6236 9972 
celia.yuen@freehills.com

Note:     This Guide:

• is current to 31 March 2010;
• contains general introductory information only, without an assumption of a duty of care by Freehills or the other firms listed;
• does not contain legal advice; and
• is not intended to be, nor should it be relied on as, a substitute for legal or other professional advice.

If employers have workplace relations issues or requirements in particular jurisdictions, then Freehills Workplace Law & Advisory - Asia can assist, working with local counsel.

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Minimum statutory terms

Key statutes
A multitude of Acts and Regulations relate to employment in Taiwan. A selection of some of the key statutes is set out below:

• Labour Standards Act (LSA)
• Labour Safety and Health Act
• Labour Inspection Act
• Labour Insurance Act
• National Health Insurance Act
• Labour Pension Act
• Employment Services Act
• Employee Welfare Fund Act
• Labour Union Act
• Settlement of Labour Disputes Act
• Massive Layoff Protection Act, and
• Gender Equality in Employment Act.

The LSA is the most significant law concerning employment terms and conditions in Taiwan. Certain industries and occupations are excluded from the operation of the LSA. The Civil Code governs individual contracts that are not covered by the LSA.

Although it is not a common law jurisdiction, judicial and administrative interpretations are nevertheless important sources of regulation in Taiwan.

Employer work rules
An employer with 30 or more employees must have work rules in Chinese registered with the local labour authority having jurisdiction over the registered office of the employer. The work rules must address the matters in Article 70 of the LSA, such as regular working days, hours and rest time, holidays, salary, overtime pay, benefits, safety and health, compensation for occupational hazard, termination of employment, severance and retirement.

Probationary period
Probationary periods are not provided for under the LSA. Pursuant to the rulings issued by the Council of Labour Affairs and some court opinions, even if the parties agree to a probationary period, when the employer discharges the employee during the probationary period or at the end of the probationary period, the requirements regarding statutory cause, advance notice and severance pay for a lay-off shall still apply to the termination.

Minimum wage
The ‘basic wage’, which applies as a minimum wage across all industries in Taiwan, is determined by the Basic Wage Commission of the Council of Labour Affairs and submitted to the Executive Yuan for approval.

Remuneration structure
The LSA simply defines wages as the ‘payment one receives for one’s labour’. A portion of wages may, by mutual agreement between employer and employee, be paid in goods and services (for example, food, residence, utilities).

Working hours
Hours of work— A work day is considered to be up to eight hours per day, though it is possible to extend this in certain circumstances by agreement with the labour union or the Labour-Management Conference if there is no labour union. Regular work hours must not exceed 84 hours in every two weeks.

Rest periods— Employees must be given at least one day off with pay every week under the LSA. The LSA contemplates that salary will be paid for all seven days in a week, even though the employee will be resting on one or more of those days.

An employee is entitled to 30 minutes rest for every four consecutive hours of work, except where a shift system is adopted or the work is of a continuing or urgent nature.

Overtime— An employer covered by the LSA may request its employees to work overtime upon obtaining the consent of the labour union, or the Labour-Management Conference, if there is no labour union. The total hours of employment (normal hours plus overtime) must not exceed 12 hours per day. In addition, no more than 46 overtime hours may be worked per month.

An employer is required to pay overtime wages. For the first two hours of overtime on a normal working day, the overtime rate is 133% of the ordinary pay rate. For the second two hours of overtime on a normal working day, the overtime rate is 166% of the ordinary pay rate.

Public holidays
An employee is entitled to time off with pay on all official public holidays listed under the LSA (around 19 days).

Paid annual leave
Employees are entitled to paid annual vacation days, based on their years of service, in accordance with the following table:

Other types of leave
Sick leave— An employee is entitled to ordinary sick leave of 30 days per annum (for non-work related illnesses and injuries) which is paid at half pay. In addition, if an employee is hospitalised, they are entitled to unpaid sick leave of up to one year in any two years. Total sick leave (ordinary and hospitalised) cannot exceed one year in every two consecutive years.

Effective from 6 May 2010, an employee may take sick leave for receiving outpatient services because of carcinoma in situ, and a female employee may take sick leave because of tocolysis needs during pregnancy. In either case, such sick leave should be counted as sick leave requiring hospitalisation.

If an employee has not recovered after taking all his/her ordinary and (if applicable) hospitalised sick leave, annual leave and personal leave, he/she may apply for an additional leave of absence of up to one year without pay.

Menstruation leave— Female employees are entitled to one day of menstruation leave per month, which is part of their sick leave entitlement.

Maternity leave— Female employees are entitled to maternity leave before and after childbirth for a combined period of eight weeks. If the employee has more than six months service, she is entitled to full pay during her maternity leave. If she has been working for less than six months, she is entitled to half pay.

An employee who suffers a miscarriage after being pregnant for at least two but less than three months is entitled to one week’s leave. For a miscarriage after being pregnant for less than two months, five days leave must be granted. The amount of salary for leave due to a miscarriage may be decided by the employer.

Paternity leave— Male employees are entitled to three days paid paternity leave when their wife gives birth.

Parental leave— Male and female employees with more than one year’s service, who have a child under the age of three, are entitled to parental leave. This is unpaid leave for a maximum of two years. Pursuant to the Employment Insurance Act, male or female employees who take unpaid parental leave may apply for the parental leave allowance of 60% of the insured person’s average insured monthly salary in the six months immediately before the unpaid parental leave commenced. An insured person on unpaid parental leave may receive such an allowance for up to six months per child. If there are two or more children requiring care at the same time, the allowance will be granted for only one child. When both parents are covered by the employment insurance and take parental leave between the two of them, they can apply for the allowance for only one child and must submit the applications separately.

Military leave— An employer must provide paid leave to employees called in for reserve military duty.

Wedding leave— An employee is entitled to eight days of paid leave for the purposes of celebrating their own marriage.

Funeral leave— An employee is entitled to paid funeral leave upon the death of a relative, of either three, six or eight days, depending on the closeness of the relative.

Personal leave—An employee is entitled to up to 14 days unpaid personal leave per annum.

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Termination of employment

Legal requirements
The circumstances in which termination of employment is permitted are restricted under the LSA.

Termination with notice and severance pay
An employer may terminate employment only in the following circumstances, provided that notice and severance pay entitlements are met:

• The employer is ceasing business or the ownership of the employer is transferred.
• The employer suffers a loss or curtails business operations.
• The operations of the employer are suspended for more than one month due to force majeure.
• The business nature of the employer is altered, a reduction in the number of employees is necessary, and there are no other suitable job openings for the redundant employees.
• The employee is proved to be incapable of carrying out the work assigned to them.

Immediate termination without severance pay
An employer may terminate employment with immediate effect and without payment of severance pay in the following circumstances:

• The employee misrepresents facts at the time of signing the employment contract, thereby misleading the employer.
• The employee commits violence against or insults the employer or fellow employees.
• The employee seriously breaches the employment contract or violates the work rules.
• The employee is sentenced to imprisonment by a court of final judgment and is not given a suspension of punishment or allowed to commute the imprisonment to a fine.
• The employee wilfully causes damage to machinery or other property of the employer, or intentionally discloses technological or business secrets of the employer.
• The employee is absent from work for three consecutive days, or for six days within one month, without justifiable reasons.

Resignation by an employee
An employee may resign from his/her employment by giving prior notice to the employer.

An employee may also resign immediately in the following circumstances, without giving prior notice, and will be entitled to severance pay upon resignation under these circumstances:

• The employer misrepresented any fact at the time of signing the employment contract, thereby misleading the employee.
• The employer commits violence against or severely insults the employee.
• The work specified in the employment contract is detrimental to the employee’s health and the employer has not improved the situation after receiving notice of the danger.
• The employer fails to pay remuneration as prescribed in the employment contract.
• The employer breaches the employment contract or the labour laws in such a way that might cause damage to the employee.

Notice periods
Where an employer or an employee is required to give notice of termination of non-fixed term employment, the following notice periods apply:

• for an employee with more than three months but less than one year’s service, 10 days notice
• for an employee with more than one year but less than three years service, 20 days notice, and
• for an employee with more than three years service, 30 days notice.

An employee is entitled to paid leave of up to two working days per week during the notice period for the purpose of finding a new job.

An employer may elect to make payment in lieu of the notice period.

Restrictions on the ability to terminate employment
Pursuant to the Employment Services Act, an employer may not dismiss an employee on the basis of race, class, language, beliefs, religion, political party, place of origin, place of birth, sex, sexual orientation, age, marital status, appearance, facial features, physical or mental disability or membership of a labour union. Furthermore, a female employee must not be dismissed during maternity leave, in accordance with the Gender Equality in Employment Act.

Pursuant to the Occupational Accident Labour Protection Act, an employee must not be dismissed if they are recovering from an occupational injury or illness, unless certified as being mentally or physically incapable of work.

Remedies
An employee who has been dismissed for legitimate reasons, but without appropriate notice or severance pay, may file a claim for payment in respect of the notice period and severance amount.

An employee who has been dismissed without a legitimate reason may pursue a claim for unlawful termination. If successful, the court may order reinstatement and back pay.

Severance payments
Severance payments must be made within 30 days of termination of employment. Any purported agreement by an employee to forego their severance payment is invalid and unenforceable.

An employee’s severance payment will depend on whether or not the employee is a participant in the pension scheme under the Labour Pension Act, which took effect on 1 July 2005. Hence, employees may be divided into two categories:

• Labour Pension Act Employees— This will include all local employees hired on or after 1 July 2005, as well as all employees who were hired prior to 1 July 2005 and who elected on or after 1 July 2005 to transition over to the new pension scheme under the Labour Pension Act.
• Non-Labour Pension Act Employees— This will include all foreign employees (as foreigners are not eligible to participate in the new pension scheme), as well as all employees who were hired prior to 1 July 2005 and who have not elected to transition over to the new pension scheme under the Labour Pension Act.

For Labour Pension Act Employees, severance pay is calculated as follows:

• one month’s pay per year of service, for each year of service (if any) rendered with the employer prior to commencing participation in the new pension scheme (no maximum cap applies to this component), plus
• one half month’s pay per year of service, for each year of service rendered with the employer after commencing participation in the new pension scheme (up to a maximum cap of six months pay).

For Non-Labour Pension Act Employees, severance pay is calculated as one month’s pay per year of service for each year of service rendered with the employer (no maximum cap applies).

Specific requirements applicable to redundancy
The Massive Layoff Protection Act sets out additional obligations that apply to employers proposing to implement mass redundancies, as defined in the legislation. Where the legislation applies:

• 60 days advance notice and public announcements must be given to the labour union, the Labour-Management Conference or the affected employees in relation to the redundancies
• the redundancy plans must be presented to the government authorities by the employer, and
• the employer must engage in consultations with the employees/unions within 10 days from submission of the redundancy plan to the government authorities.

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Discrimination and harassment
Taiwanese labour laws contain extensive anti-discrimination obligations, prohibiting employment discrimination on grounds including race, class, language, beliefs, religion, political party, place of origin, place of birth, sex, sexual orientation, age, marital status, appearance, facial features, physical or mental disability or membership of a labour union. 

Sexual harassment is also prohibited, and employers are required to actively take steps to prevent sexual harassment in the workplace. For employers hiring over 30 employees, measures for preventing and correcting sexual harassment, related complaint procedures and punishment measures must be established. All these measures must be openly displayed in the workplace.

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Occupational health and safety
A multitude of laws and regulations deal with workplace health and safety and workplace inspections. Most of these laws are industry-, machine- or material-specific.

In general, employers are required to maintain a safe workplace, including complying with any specific laws that apply to their industry and cooperating with any inspection. Employers must also protect employees from hostile work environments and sexual harassment.

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Regulation of outsourcing and contracting
Independent contractors fall outside the scope of the LSA. However, if a purported ‘independent contractor’ is in substance an employee, then the courts will deem that the worker is covered by the LSA. In deciding whether a worker is in substance an ‘employee’, the court will examine whether the principal was empowered to decide the time, place and intensity of services provided by the worker, and the degree of control or supervision exercised over the worker. The greater the degree of control or supervision exercised by the company, the more likely it is that the court will find a deemed employment relationship. If the court finds that the worker had a great discretion as to how to perform their work, they are more likely to be an independent contractor. In this case, the relationship between the parties will be governed by the Civil Code.

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Industrial relations

Legislation in brief
The three key statutes regulating industrial relations matters in Taiwan are the Labour Union Act, the Settlement of Labour Disputes Act and the Collective Agreement Act. In addition, there are a number of rules, regulations and notices that apply to industrial relations matters.

Role of trade unions and collective agreements
Organised labour union action has not been a major social force in Taiwan in the past. Unions are generally subject to extensive government oversight and intervention.

Currently, only one industrial or occupational union can organise in a single factory or single geographic area. A union is constituted when there are more than 30 members—all members must be employed in the same factory or work in the same area or occupation.

Note however that amendments to the Labour Union Act were passed at a meeting of the Council of Labour Affairs on 20 March 2009. At the time of writing, these amendments had not been submitted to the Legislative Yuan for ratification.

The Collective Agreements Law provides for collective bargaining but does not mandate it. All agreements must be submitted to the government for approval. Collective bargaining occurs at the enterprise level and is generally limited to large enterprises. The percentage of workers covered by a collective agreement in Taiwan is small.

Industrial action and disputes
Disputes are normally resolved through conciliation rather than the formal mediation and arbitration processes provided for in the Settlement of Labour Disputes Act. Note however that amendments to the Settlement of Labour Disputes Act were passed at a meeting of the Council of Labour Affairs on 20 March 2009. At the time of writing, these amendments had not been submitted to the Legislative Yuan for ratification.

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