September 2018
In case of an employee's future damages liabilities to another party due to the performance of his/her job duty under Article 756-1, Paragraph 1 of the Civil Code, including the termination of the employment contract, a non-performance liability to the employer shall be assumed, and this is not subject to the constraint that the amount of damages should be uncertain, either (Taiwan)
2018.6.28
Angela Wu
The Supreme Court rendered the 107-Tai-Shang-287 Civil Decision of June 28, 2018 (hereinafter, the "Decision"), holding that in case of an employee's future damages liabilities to another party due to the performance of his/her job duty under Article 756-1, Paragraph 1 of the Civil Code, including the termination of the employment contract, a non-performance liability to the employer shall be assumed, and this is not subject to the constraint that the amount of damages should be uncertain, either.
According to the facts underlying this Decision, the Plaintiff filed a complaint alleging that Defendant A had invited Defendants B and C to serve as joint guarantors for the employment contract at issue, which required that employment shall continue for a specific number of years or a compensation shall be paid for the cost of the training conducted during employment along with the payment of the default penalty. Since Defendant A was in default when he subsequently terminated the employment contract before the years in service under the contract expired, a complaint was filed to seek joint and several payment of the default penalty and training cost from the Defendants. The Defendants contended that since the employment contract at issue was an employment guarantee without a determined term of guarantee, it should have expired three years after the establishment of the employment contract at issue pursuant to Article 756-3 and Article 756-4 of the Civil Code, and that Defendants B and C were no longer liability for the guarantee. The original decision was rendered in favor of the Plaintiff on the ground that if the parties agree that in the event of nonperformance of the debtor of the other party and such party performs on behalf of the debtor, this would be an ordinary money-related debt guarantee under Article 739 of the Civil Code, and the details about the debt are ascertained when the contract is executed. Therefore, this was not an employment guarantee, and was not under the constraint of the statute of limitations hereof. Therefore, Defendants A, B, and C were ordered to make joint and several payment. Dissatisfied, the Defendants appealed.
According to this Decision, Article 756-1, Paragraph 1 and Article 756-3, Paragraphs 1 and 3 of the Civil Code provide that an employment guarantee is a contract whereby the parties agree that one party shall be bound to make compensation when the employee of the other party is liable to compensate such other party for the performance of his duties in the future. In addition, the term of an employee guarantee contract shall not exceed three years. If such term exceeds three years, it shall be reduced to three years. If a term is not set for the employment guarantee, the employment guarantee shall be valid for a term of three years after it is established. The damages payable by an employee to the other party for the performance of his/her duties include the damages liability of the employee to the employer for nonperformance due to the termination of the employment contract and are not constrained by the legal requirement that the amount of damages should be uncertain.
It was further pointed out in this Decision that Articles 2 through 5 of the employment contract at issue stipulate that Defendant A shall serve 20 years after the effective date of the contract and will absolutely not resign during such a period. In case of any violation, Defendant A shall agree to compensate for his training cost and to pay a default penalty equivalent to six months' pay for regular work before the termination. Therefore, there was room for exploring whether the guarantee contract executed by Defendants B and C was not governed by relevant legal requirements because it was not an employment guarantee contract. The original decision finding this contract was not an employment guarantee contract and containing rulings against Defendants B and C was unlawful. Therefore, this portion of the original decision was reversed and remanded.
Angela Wu
The Supreme Court rendered the 107-Tai-Shang-287 Civil Decision of June 28, 2018 (hereinafter, the "Decision"), holding that in case of an employee's future damages liabilities to another party due to the performance of his/her job duty under Article 756-1, Paragraph 1 of the Civil Code, including the termination of the employment contract, a non-performance liability to the employer shall be assumed, and this is not subject to the constraint that the amount of damages should be uncertain, either.
According to the facts underlying this Decision, the Plaintiff filed a complaint alleging that Defendant A had invited Defendants B and C to serve as joint guarantors for the employment contract at issue, which required that employment shall continue for a specific number of years or a compensation shall be paid for the cost of the training conducted during employment along with the payment of the default penalty. Since Defendant A was in default when he subsequently terminated the employment contract before the years in service under the contract expired, a complaint was filed to seek joint and several payment of the default penalty and training cost from the Defendants. The Defendants contended that since the employment contract at issue was an employment guarantee without a determined term of guarantee, it should have expired three years after the establishment of the employment contract at issue pursuant to Article 756-3 and Article 756-4 of the Civil Code, and that Defendants B and C were no longer liability for the guarantee. The original decision was rendered in favor of the Plaintiff on the ground that if the parties agree that in the event of nonperformance of the debtor of the other party and such party performs on behalf of the debtor, this would be an ordinary money-related debt guarantee under Article 739 of the Civil Code, and the details about the debt are ascertained when the contract is executed. Therefore, this was not an employment guarantee, and was not under the constraint of the statute of limitations hereof. Therefore, Defendants A, B, and C were ordered to make joint and several payment. Dissatisfied, the Defendants appealed.
According to this Decision, Article 756-1, Paragraph 1 and Article 756-3, Paragraphs 1 and 3 of the Civil Code provide that an employment guarantee is a contract whereby the parties agree that one party shall be bound to make compensation when the employee of the other party is liable to compensate such other party for the performance of his duties in the future. In addition, the term of an employee guarantee contract shall not exceed three years. If such term exceeds three years, it shall be reduced to three years. If a term is not set for the employment guarantee, the employment guarantee shall be valid for a term of three years after it is established. The damages payable by an employee to the other party for the performance of his/her duties include the damages liability of the employee to the employer for nonperformance due to the termination of the employment contract and are not constrained by the legal requirement that the amount of damages should be uncertain.
It was further pointed out in this Decision that Articles 2 through 5 of the employment contract at issue stipulate that Defendant A shall serve 20 years after the effective date of the contract and will absolutely not resign during such a period. In case of any violation, Defendant A shall agree to compensate for his training cost and to pay a default penalty equivalent to six months' pay for regular work before the termination. Therefore, there was room for exploring whether the guarantee contract executed by Defendants B and C was not governed by relevant legal requirements because it was not an employment guarantee contract. The original decision finding this contract was not an employment guarantee contract and containing rulings against Defendants B and C was unlawful. Therefore, this portion of the original decision was reversed and remanded.
