The nature of labor contracts of affiliated enterprises should be observed based on the group as a whole (Taiwan)

Tiffany Hsiao

The Supreme Court rendered the 109-Tai-Shang-1156 Decision of June 30, 2020 (hereinafter, the “Decision”), holding that since a parent company has personnel management and decision-making powers over the guidance, supervision and transfer of the employees within the corporate group, the years in service, transfer or nature of work of the workers of its affiliated enterprises should be observed based on the group as a whole.

According to the facts underlying this Decision, both parties entered into an employment agreement (hereinafter, the “Employment Agreement at Issue”), under which the Appellee hired and sent the Appellant to Vietnam to provide training for stationary overhead cranes of steel mills, management of driving safety, prevention and handling of overhead crane accidents and management of drivers’ attendance, etc., at Company A, an affiliated company in Vietnam.  The Appellant asserted that since the work he had engaged in is continuous by nature, the provision on the term of employment in the Employment Agreement at Issue is invalid for violation of Article 9, Paragraph 1 of the Labor Standards Law (hereinafter, the “Law”).   However, the Appellee still informed the Appellant that the employment would not continue.  Since this was illegal termination of employment and did not give effect to the termination of the employment relationship, the Appellee is still obligated to pay salaries by month.  The Appellant sought a decision to declare the existence of the employment relationship between the parties and compel the Appellee to pay salaries by month and the overseas business travel cost until the day of Appellant’ reinstatement in accordance with Article 487 of the Civil Code and the provisions of the labor contract between the parties

According to the Decision, the parent company of a group has personnel management decision-making powers over the guidance, supervision and transfer of employees within the corporate group and the employees cannot refuse the personnel guidance of the parent company.  Therefore, the years in service, transfer or the nature of work of an employee should be observed and generally determined based on the enterprises within the group as a whole and should not be determined simply based on the juristic person that enters into a contract with the employee in order to prevent a corporate group from evading the provisions of the Law on such basis.

It was further indicated in this Decision that the Appellee’s parent company and Company A are both reinvested by Company B.  An observation of the Appellant’s employment process and the declaration signed by the Appellant shows that the Appellant was previously employed by Company B before changes were arranged by one employing party to have the Appellee, also an affiliated enterprise, pay the salaries, obtain insurance and enter into an employment contract with the Appellant.  In addition, the Appellant worked for Company A without interruption after he was employed, and it was agreed that the Appellant shall not refuse if he was transferred to serve another company affiliated with the corporate group.  In this connection, is the Appellant’s assertion that such transfer took place between affiliated enterprises acceptable?  This calls into question whether one can only rely on a formal observation of the business under the contract between the Appellant and the Appellee to determine if the Appellant’s work has specific characteristics, thus making the contract a fixed-term contract, or whether it is necessary to also consider the business nature of Company A, where the Appellant was actually employed.  Moreover, the Employee X also entered into a contract with the Appellee and was transferred to work at Company A, like the Appellant, before being changed into a formal employee on the ground that the company had needs for the continuation of his work.  Therefore, this also calls into question if the work engaged by the Appellant was not continuous in nature.  Without detailed exploration of such matters, the original trial court was rash when it jumped to the conclusion that the Appellant engaged in work of specific nature and further made a determination unfavorable to the Appellant simply on the ground that Appellee and Company A are different juristic persons with different nationalities, and that the Appellee had employed the Appellant to help the Appellee assist Company A, reinvested by its parent company, set up systems and train personnel for the Overhead Crane Section of the Kong Fu Factory.  Therefore, the original decision was reversed and remanded to the Taiwan High Court.