February 2024
Elizabeth Pai and Lilian Hsu
A collective agreement is a written contract signed by labor unions and employers or employer groups, formed through collective bargaining with the purpose of agreeing on labor-related matters (Article 2 of the Collective Agreement Act). Due to the rules of collective agreements enabling employees to negotiate with employers collectively, they are considered to have the function of improving labor conditions. Therefore, the Ministry of Labor keeps encouraging both labor unions and employers to sign collective agreements. This encouragement includes increasing certain incentive amounts for those who assist in concluding a collective agreement, as outlined in the “Guidelines on Rewarding Labor Unions for Signing Collective Agreements,” amended in September 2022[1].
Additionally, in June 2023, the Ministry of Labor also pledged through a press release that the Labor Pension Fund would consider the signing of collective agreements by listed companies as one of the factors in making investment decisions, aiming to enhance the willingness of listed companies to sign collective agreements[2].
In this context, both employers and employees need to have a basic understanding of the regulations on collective agreements. This article will focus on introducing the bargaining process, the effectiveness of the agreement, and considerations for drafting collective agreements as follows:
1. The Process of Concluding a Collective Agreement
(1) Preparation for Negotiation
The initiating party of collective bargaining procedures needs to i) designate representatives, ii) gather relevant information on issues related to collective bargaining, iii) draft a collective agreement, and iv) decide on negotiation strategies. After completing the preparation above, the party can formally notify the other party to schedule negotiations.
(2) Conduct of Negotiation Procedures
According to the interpretation of the Tribunal for Unfair Labor Practice Committee (Hereinafter “the Committee”), when one party delivers a notice of collective bargaining to the other party qualified for negotiation, it marks the opening of negotiations. During the negotiation period, both the union and the employer should conduct collective bargaining in good faith and may not refuse to negotiate without justifiable reasons (Article 6 of the Collective Agreement Act). If one party violates the obligation of good faith negotiation, and the Committee adjudicates it as improper labor conduct, a fine ranging from NT$100,000 to NT$500,000 shall be imposed (Article 32 of the Collective Agreement Act)[3].
(3) Formation of Consensus and Signing
The collective agreement can be signed after both parties reach a consensus through negotiations. The signed collective agreement should be submitted to the competent authority for recordation (Paragraph 1, Article 10 of the Collective Agreement Act). It should be noted that the union side must obtain the consent of its special majority before signing. That is, the union must (1) convene a general meeting of members (representatives), with over half of the members (representatives) attending and with agreement from two-thirds or more of those present; or (2) notify all members, with three-quarters or more of the members consenting in writing, before the collective agreement can be signed (Article 9 of the Collective Agreement Act). Furthermore, if one of the signing parties is a public-owned business entity, government agency, or public school, that party must obtain approval from its supervisory authority before signing (Paragraph 2, Article 10 of the Collective Agreement Act).
2. Effectiveness of Collective Agreements
(1) Priority and Inalienability of the Right Arise from the Collective Agreement
The labor conditions stipulated in a collective agreement constitute the content of the labor contract between the employer and employees under that collective agreement, and its effectiveness generally takes precedence over the original labor contracts and work rules (Article 19 of the Collective Agreement Act, Article 71 of the Labor Standards Act). Even if the term of the collective agreement expires and a new one has not been signed, the provisions regarding labor conditions in the original collective agreement continue to be part of the labor contract between the parties until a new collective agreement is agreed upon (Article 21 of the Collective Agreement Act). In addition, for the employees covered by specific collective agreements, it would be invalid for them to abandon the rights stipulated in the collective agreement during the term of their labor contract (Article 22 of the Collective Agreement Act).
(2) Distinction between Collective Agreements and General Group Agreements
It’s essential to distinguish between collective and general group agreements due to their distinct effects. In the court’s view, a collective agreement must objectively be signed according to the procedures stipulated in the Collective Agreement Act, and subjectively, both parties to the agreement must intend to conclude a collective agreement. Only agreements that meet the statutory requirements will be granted the special effect of a collective agreement, as mentioned above; otherwise, they are only general group agreements without the special effect.
3. Considerations for Drafting Collective Agreements
Considering that collective agreements have priority in shaping labor conditions, to avoid disputes arising from unclear or incomplete terms after signing, the Ministry of Labor issued the “Points to Note and Reference Cases for Drafting Collective Agreement Terms”[4] in November 2023. The key points are summarized as follows:
(1) The content of the collective agreement should specify the parties responsible for the obligations and the methods of fulfilling those obligations.
(2) If the collective agreement references the internal regulations of the enterprise, the full name and version of those regulations should be stated.
(3) Similar clauses in the collective agreement should be grouped in the same section.
(4) The language used in the terms of the collective agreement should be consistent with legal provisions, and attention should be paid to coordinating with the latest amended laws.
(5) The collective agreement may provide the consequences of a breach and the mechanism for dispute resolution.
To sum up, it is crucial to draft clear and mutually beneficial terms in the collective agreement that meet the needs of both parties. Employers and unions, when framing the content of collective agreements, may seek assistance from labor law experts or lawyers as necessary, in addition to referring to the precautions announced by the Ministry of Labor, to ensure the effectiveness of the agreement content and avoid future disputes.
[1] Ministry of Labor, measures to reward unions for signing collective agreements https://www.mol.gov.tw/1607/28162/28296/28314/28334/nodelist?mediaDL=true , last viewed on January 22, 2024.
[2] Press release from the Ministry of Labor on June 9, 2023, “The Ministry of Labor promotes listed companies to disclose the information regarding collective agreement and demonstrate the value of labor rights for sustainable corporate development”, https://www.mol.gov.tw/1607/1632/1633/61221/, last viewed on January 22 , 2024 .
[3] For the connotation of the obligation to negotiate in good faith and the legal effects of violation, please refer to “Overview of Taiwan’s Regulations on Collective Agreement (2) – the Duty to Bargain in Good Faith and Legal Risks”.
[4] Ministry of Labor, ” Points to Note and Reference Cases for Drafting Collective Agreement Terms “, https://www.mol.gov.tw/media/tb0jhbgu/%E5%9C%98%E9%AB%94%E5%8D%94%E7%B4%84%E6%92%B0%E6%93%AC%E6%A2%9D%E6%AC%BE%E6%B3%A8%E6%84%8F%E4%BA%8B%E9%A0%85%E5%8F%8A%E5%8F%83%E8%80%83%E6%A1%88%E4%BE%8B.pdf?mediaDL=true, last viewed on January 22, 2024.
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