Precautions for the Implementation of the Labor Incident Act (Taiwan)

Teresa Huang and Sean Tsou [1]

I. Summary of major changes reflected by the Labor Incident Act

The Labor Incident Act, which is referred to as the most “palpable judicial reform” by the media and cleared through three legislative readings on November 9, 2018, came into effect on January 1, 2020 after a one-year transitional period.  This law is praised for being palpable because of its significant impact on the procedure for handling labor disputes.  The “seven major reforms” reflected in the law as proclaimed by the Judicial Yuan are briefly introduced in the table below:

(1) Professional review All levels of courts shall set up a specialized court or department and appoint people with labor law expertise and experience as labor judges on a prioritized basis.
(2) Expanded scope of labor incidents Disputes between cooperative education participating students and co-operative institutions and between job seekers and recruiters are included in the scope of labor incidents.
(3) Compulsory pre-trial labor mediation Basically, labor incidents should go through a mediation procedure with the mediation committee consisting of one labor court judge and two committee members with labor expertise or experience.  The mediation committee may ex officio propose appropriate solutions to resolve disputes.  If the parties are not dissenting, the mediation should be deemed established; and if the mediation is not established, the judge who participated in the labor mediation will continue to preside over the litigation procedure.
(4) Reduction of barriers to labor litigation It is specifically provided that workers are free from the restriction of consensual jurisdiction under the labor contract and may directly bring suit in the court of the place where labor is provided and the filing fee and enforcement fee on the workers may be reduced or temporarily exempt.  Further, in the course of litigation, a worker may be assisted by an assistant assigned by the labor union the worker is affiliated with.  In addition, the Labor Incident Act especially increases the burden of proof on the employer and reduces the burden of proof on the worker with respect to the substantiation of facts such as wages and work hours.
(5) Quick process It is specifically stipulated that labor mediation shall be concluded on three dates within three months, and that labor litigation shall be concluded in one debate, and the first instance trial should be concluded in six months
(6)  Enhanced collective dispute resolution function It is specifically stipulated that workers who have a common interest in the same facts may consolidate their complaints, file additional complaints, file counterclaims or seek mediation.  If the employer has acted against the interest of the majority of the workers, the union with which the workers are affiliated with may file an inaction litigation against the employer who has acted against the interest of the majority of its members.
(7)  Timely and effective preservation of rights The burden on a worker to provide an explanation and security for his/her application for a preservation measure is reduced, and the criteria for temporary measure are concretized.  In addition, when the court rules in favor of the worker, it shall ex officio declare the provisional execution or exempt the execution.

II. Recommendations concerning how to accommodate changes reflected by the Labor Incident Act

Based on the above introduction, it can be concluded that the changes to the labor dispute litigation procedure as a result of the Labor Incident Act are too great to be ignored, and it is also possible that the rights and interests between the employer and the employee may be substantively adjusted as a result.  Therefore, the following suggestions are provided in this article for the reference of relevant interested parties such as enterprises and workers:

1. An enterprise shall clarify the nature of all kinds of compensation payment and its overtime system.

For disputes over wages and work hours, the Labor Incident Act adopts  presumptions in favor of workers, including: for disputes over wages between an employer and an employee, if it is substantiated that a payment is received by the employee from the employer out of the employment relationship, such payment shall be presumed to be compensation received by the worker for the work rendered; and for the attendance time recorded in the attendance records, the worker shall be presumed to perform his/her duty during that time with the approval of the employer.  The employer who has an opposite assertion is still required to produce evidence to overcome the presumption.  Per the saying ” burden of proof and defeat go hand in hand”, employers are advised to further clarify the nature of all kinds of compensation and their overtime system to accommodate the new system where the burden of proof is shifted in favor of workers.  In regard to the determination of wages, detailed records should be kept to reflect which payment items are classified as “regular payments” and which items are classified as “gratuitous payments,” or even separate payments of different nature, so as to prevent them from being determined as part of the wages due to the inability to distinguish their payment nature.  Regarding work hours, it is recommended that the procedure for a worker’s overtime application should be clearly stipulated in the labor contract or work rules, and written proof should be kept in order to prevent the unfortunate situation of having no way to prove the case in the face of litigation in the future.

2. Employer shall maintain required statutory documents such as a payroll roster, work hour records, etc., to accommodate the provisions on spoliation of evidence.

In the past, employers may be more negligent in maintaining statutory documents related to the Labor Standards Act, such as worker rosters, payroll rosters, work hour records, since most of them merely involve administrative fines.  However, pursuant to the provisions of the Labor Incident Act, if the holder of a document does not comply with a court order without justified reasons, the court may, in addition to a fine of up to NT$30,000, elect to conclude that the fact to be substantiated by such document evidence is true based on the court’s inner conviction.  Therefore, in order to avoid the adverse consequences of spoliation of evidence if an enterprise is unable to fulfill the obligation to produce the above documents or evidence as the holder in the event of labor disputes in the future, it is recommended that employers should regularly maintain the relevant statutory documents in accordance with the law in case of emergency.

3. Corporate employer is advised to review the provision on jurisdiction in a labor contract as soon as possible.

In practice, it is common for an employer and an employee to enter into a labor contract in which the local court of the place where the company’s headquarters is located in Taiwan or the foreign court of the place where the parent company of a multinational corporation is located shall be the competent court with jurisdiction for litigation relating to labor relations.  However, after the effective date of the Labor Incident Act, the law has specifically provided that the court of the place where the labor is provided shall also have jurisdiction, and in the event of unfairness in the consensual jurisdiction provision of the contract, the worker may file a lawsuit directly with another competent court.  When the jurisdiction stipulated in the contract cannot bind a worker, the practical effect of a similar jurisdictional provision will be greatly diminished.  In order to understand in advance the proportion of labor relations that may be subject to the jurisdiction of Taiwan courts, the employers are advised to review all existing labor contracts with respect to jurisdictional provisions in order to assess the need to re-sign the contract or to consult a Taiwan lawyer regarding legal issues in advance.

4. Both the employer and the employee should pay attention to the labor mediation procedure to avoid affecting the outcome of subsequent litigation.

Given that the current labor mediation procedure will be personally conducted by a labor court judge, and the same judge will hear subsequent litigation proceedings if they subsequently take place, this is different from the previous labor mediation procedure, which was conducted entirely by county or city mediation committee members.  Therefore, compared to the past, when both the employer and the employee may have a perfunctory attitude towards the mediation procedure, the mediation procedure after the implementation of the Labor Incident Act needs to be handled more cautiously to avoid the judge presiding over the mediation to form unfavorable inner conviction in advance.  Although the Labor Incident Act expressly provides that in the mediation procedure, any advice given by the labor mediation committee members or judge, and any adverse statements or concessions made by the parties, shall not be used as the basis for adjudicating the litigation after the mediation is not established.  However, since the judge presiding over the mediation is the same person as the judge presiding over the litigation proceedings, if the parties are unable to present new evidence to persuade the judge to change his or her inner conviction at the time of the subsequent litigation proceedings, there is a substantial risk that the success or failure of the litigation will have been decided in the mediation procedure.

5. Financial cost and confidential document control mechanisms should be planned to cope with the temporary measure for continued employment.

In the past, it was oftentimes not easy for workers to apply to the court for a temporary measure for continued employment, since it was often difficult for workers to explain the “material harm or imminent danger” they were experiencing.  However, the Labor Incident Act expressly provides that in cases where confirmation of the existence of an employment relationship, invalid transfer or reinstatement is sought, the workers may apply for a temporary measure to request the company to continue the employment and pay wages, and the threshold for the worker’s explanation is further reduced. To wit, the worker can meet the application criteria by merely explaining that the worker “has a chance to prevail ” or the employer is “likely to have violated labor laws, group agreements, work rules, labor-management conference resolutions, labor contracts or labor norms ” and that the employer obviously does not have significant difficulties in continuing to employ the worker.  As noted above, in the event of a termination or transfer dispute in the future, the employer may be faced with the prospect of a court case against an employee who continues to work in the office until a decision is rendered.  With this said, in addition to reassessing the financial cost of litigation, the employer should also consider whether to terminate the employment relationship with the employee by consensual termination of the contract, and strictly protect the company’s confidentiality through a document control mechanism to avoid threats or violation of the company’s interests during the transition period by employees who have already had disputes with the company.

III. Conclusions

In conclusion, the Labor Incident Act has been regarded as the “most palpable judicial reform” by the media due to the significant reform of many dispute resolution procedures.  The current provisions of the Labor Incident Act may still have room for improvement, but this still does not undermine the attainment of the goal to have professional trial of labor disputes in Taiwan, and it is also expectable that after the effective date of the law, the accumulation of practical cases will make the legal system for handling labor disputes more comprehensive in Taiwan.  As for the advice to the relevant parties, especially corporate employers, it is advisable, as mentioned above, to review contracts or internal rules of the company as soon as possible in the light of the above changes and, if necessary, the assistance of a professional lawyer should be sought to avoid unwitting exposure to legal risks.

[1] The authors are lawyers at Lee, Tsai & Partners.  However, the contents of this article merely reflect personal opinions and do not represent the position of this law firm.