The Taiwan High Court rendered the 107-Lao-Shang-Yi-85 Civil Decision of October 24, 2018 (hereinafter, the “Decision”), holding that if a contract under which services are provided meets the criteria for subordination, it is still a labor contract under the Article 2, Subparagraph 6 of the Labor Standards Act even though it has characteristics of contractual or commissioned work.
According to the facts underlying this Decision, the Appellant asserted that she was a masseuse employed by the Appellee. When the Appellant was informed by the Appellee that she did not have to show up for work, she requested that the Appellee pay severance and overtime, issue a certificate of involuntary termination and compensate her losses for not obtaining labor insurance and the National Health Insurance and for not contributing to labor pension during a labor dispute mediation. However, since the Appellee refused to pay, the Appellant asserted that the labor contract had been terminated without prior notice. The original trial court rendered a decision unfavorable to the Appellant. Dissatisfied, the Appellant appealed.
According to the Decision, the Labor Standards Act (hereinafter, the “Act”) provides that a labor contract refers to a contract under which one of the parties provides labor on the job under the relationship of subordination to the other party in exchange for compensation from such other party. The so-called “subordination” consists of moral, economic and organizational subordination. Moral subordination shall mean that a worker provides services at the instructions of the employer, who decides the location, timing, quantities and process of services provided by the worker, who cannot freely dispose of his/her rest time, that the employer dictates the movement and personality of the worker to a certain extent in the course of dictating the services while the employee cannot affect his/her work in planned or creative manners, and that when the worker undermines the operation and order of the enterprise, the employer may impose a penalty. Economic subordination shall mean that a worker does not work for his/her own business operation but rather for the objectives of other people and his/her survival is completely reliant on the wages received in exchange for services to the employer; that although the worker is to a certain extent closely linked to the employer, still the enterprise’s risks are assumed by the employer, not by the worker; that the services cannot commence without production data from the employer; and that since the worker does not assume operating profits or losses, the employer is obligated to pay a compensation as long as the worker actually provides services pursuant to the labor contract. In contrast, organization subordination means that a worker provides services within the employer’s production organization system and collaborates with his/her co-workers through a division of labor. What is stressed is that the worker is not merely constrained by the employer’s directions or orders, but rather the worker is part of the employer’s operation and production teams and is required to comply with the internal rules or procedures of the teams and organization. To determine if the nature of a contract is a labor contract, it is necessary to focus on the actual contractual obligations and not to simply rely on the name of the contract. Even if the contract has characteristics of contractual or commissioned work, it is still a labor contract under Article 2, Subparagraph 6 of the Labor Standards Act.
It was further pointed out in this Decision that the Appellant provided services, was obligated to comply with the work rules set by the Appellee and could not carry out service items the Appellee did not agree. In addition, the Appellant was required by the Appellee to punch a time card when going to or off work and to wear a uniform. This shows that the location and timing for the provision of services as well as the quantity and process of services were decided by the Appellee, and the Appellant was required to go to work based on the shift arranged by the Appellee and could not adjust the shift on her own. The Appellant also could not control and decide specifics concerning the provision of services on her own. In case of any violation, the Appellee had the right to penalize the Appellant and deduct wage payment pursuant to the announced work rules. Therefore, the nature of the contract is still a labor contract under Article 2, Subparagraph 6 of the Labor Standards Act.
Moreover, according to the Decision, the Appellee asserted that both parties followed a business model adopted in the massage industry, that the Appellant had also agreed to a collaboration model where a commission-based system was adopted for the compensation, and that the true intent of both parties was to formulate a contractor’s agreement. However, if a contract on the delivery of services is formulated with characteristics of subordination, even though the contract has characteristics of contractual or commissioned work, it is still a labor contract. In addition, Article 2, Subparagraph 3 of the Act provides that wages may be paid by hour, day or piecework. Although the Appellant indeed was paid by percentage commission calculated based on the number of customers actually completed and the number of hours. Since this was the Appellee’s method to calculate and pay wages to the Appellant, it should not be concluded that the focus of the contractual relationship was on the completion of work simply because the wages were calculated and paid by piecework or by hour. Therefore, the Appellee’s above contention was not acceptable, the original decision was reversed and a decision partially favorable to the Appellant was rendered.