December 2018
When a company suspends its business operation due to financial difficulties with outstanding severance pays, pensions and wages for untaken special leave owed to the employees, it is not true that the company's representative and the company shall be jointly and severally liable (Taiwan)
2018.8.21
Teresa Huang
The Taiwan High Court rendered the 107-Lao-Shang-Yi-23 Civil Decision of August 21, 2018 (hereinafter, the "Decision"), holding that when a company suspends its business operation due to financial difficulties with outstanding severance pays, pensions and wages for untaken special leave owed to the employees, it is not true that the company's representative and the company shall be jointly and severally liable.
According to the facts underlying this Decision, the Appellant filed a complaint alleging that he had been employed by Defendant Company A. Since Company A suspended its business operation due to financial difficulties and owed a severance pay to the Appellant, the Appellant claimed payment from Defendant Company A and its representative in accordance with Paragraph 2 of Article 23 and Article 28 of the Company Act and the last sentence of Paragraph 1 and Paragraph 2 of Article 184 of the Civil Code.
According to the Decision, the circumstances under Article 23 of the Company Act where a company's representative injures another person due to his/her execution of the company's business in violation of laws and regulations shall mean that the representative of the company illegally undermines the rights of others willfully or out of negligence during the execution of the company's business or deliberately impairs the rights of others in manners which violate good social morals. The so-called "business" refers to corporate affairs handled by a company's representative. It is the company that is obligated to pay severance, pensions and wages for untaken special leave to an employee. If the company fails to make such payment, the employee only has the right of claim over the company, and it is not true that the company's representative shall be jointly and severally liable with the company. In addition, whether an employee's claim can be satisfied depends entirely on the company's solvency, and the company's property is the general security for the employee's claim. If the company suspends its business operation due to financial difficulties, it is still difficult to conclude that the company's representative has engaged in any act that violates any law or regulation or willfully, negligently or illegally undermined the employee's right to receive severance pay, pensions or wages for untaken special leave. Therefore, the employee's claim that the company's representative should be jointly and severally liable with the company in accordance with Paragraph 2 of Article 23 of the Company Act and Paragraph 2 of Article 184 of the Civil Code is groundless.
Therefore, it was pointed out in this Decision that although Defendant Company A should have paid severance to the Appellant, still it is difficult to conclude that the representative of Defendant Company A intended to undermine the Appellant's right to claim the severance pay when selling the machinery and equipment and vehicles of Company A, which should fall within the scope of the liquidation duty, as part of his responsibility as the subsequent liquidator of the company to implement a liquidation procedure for terminating the current business of the company, repaying debts, distributing earnings or offsetting against losses, and distributing remaining assets. Therefore, the complaint alleging that Defendant B should be jointly and severally liable for the severance pay owed by Company A was groundless, and the Appellant's appeal pertaining to this portion was dismissed.
Teresa Huang
The Taiwan High Court rendered the 107-Lao-Shang-Yi-23 Civil Decision of August 21, 2018 (hereinafter, the "Decision"), holding that when a company suspends its business operation due to financial difficulties with outstanding severance pays, pensions and wages for untaken special leave owed to the employees, it is not true that the company's representative and the company shall be jointly and severally liable.
According to the facts underlying this Decision, the Appellant filed a complaint alleging that he had been employed by Defendant Company A. Since Company A suspended its business operation due to financial difficulties and owed a severance pay to the Appellant, the Appellant claimed payment from Defendant Company A and its representative in accordance with Paragraph 2 of Article 23 and Article 28 of the Company Act and the last sentence of Paragraph 1 and Paragraph 2 of Article 184 of the Civil Code.
According to the Decision, the circumstances under Article 23 of the Company Act where a company's representative injures another person due to his/her execution of the company's business in violation of laws and regulations shall mean that the representative of the company illegally undermines the rights of others willfully or out of negligence during the execution of the company's business or deliberately impairs the rights of others in manners which violate good social morals. The so-called "business" refers to corporate affairs handled by a company's representative. It is the company that is obligated to pay severance, pensions and wages for untaken special leave to an employee. If the company fails to make such payment, the employee only has the right of claim over the company, and it is not true that the company's representative shall be jointly and severally liable with the company. In addition, whether an employee's claim can be satisfied depends entirely on the company's solvency, and the company's property is the general security for the employee's claim. If the company suspends its business operation due to financial difficulties, it is still difficult to conclude that the company's representative has engaged in any act that violates any law or regulation or willfully, negligently or illegally undermined the employee's right to receive severance pay, pensions or wages for untaken special leave. Therefore, the employee's claim that the company's representative should be jointly and severally liable with the company in accordance with Paragraph 2 of Article 23 of the Company Act and Paragraph 2 of Article 184 of the Civil Code is groundless.
Therefore, it was pointed out in this Decision that although Defendant Company A should have paid severance to the Appellant, still it is difficult to conclude that the representative of Defendant Company A intended to undermine the Appellant's right to claim the severance pay when selling the machinery and equipment and vehicles of Company A, which should fall within the scope of the liquidation duty, as part of his responsibility as the subsequent liquidator of the company to implement a liquidation procedure for terminating the current business of the company, repaying debts, distributing earnings or offsetting against losses, and distributing remaining assets. Therefore, the complaint alleging that Defendant B should be jointly and severally liable for the severance pay owed by Company A was groundless, and the Appellant's appeal pertaining to this portion was dismissed.
