含羞草社区

In Taiwan, the Code of Civil Procedure is the main law governing civil court proceedings on the island. The Code of Civil Procedure governs the proceedings for general commercial disputes, personal affairs and labour law matters.

In addition to general court proceedings, the Code of Civil Procedure also provides general rules on provisional measures and judgment enforcement. The details of the execution procedure are provided under the Law of Compulsory Enforcement.

Supplemental regulations play a crucial role in civil court procedures, complementing the above-mentioned codes noted above. For instance, the Enforcement Rules of the Code of Civil Procedure, the Notes for Civil Procedure, and the Guidelines for Handling Civil Actions promulgated by the Judicial Yuan serve as important guides, ensuring a secure and well-guided legal process.

According to the Code of Civil Procedure and court precedents, the plaintiff in civil litigations should bear the initial burden of proof. This means that the plaintiff, as the person who brings in the case, must first present sufficient evidence to convince the court that all of his/her claims are affirmative and based on such evidence.

Only then, can the burden of proof be shifted to the defendant to rebut the plaintiff’s claim. This process, while seemingly favouring the defendant initially, is designed to ensure fairness and is very similar to the concept of prima facie evidence in common law.

In addition to the above-mentioned existing regulations, the Labour Incident Act (LIA) took effect on 1 January 2020. The LIA was enacted to facilitate the effective resolutions of labour disputes, protect employees’ rights in dispute resolution proceedings, and ensure information symmetry and an equal footing for both employees and employers.

The LIA stipulates the procedural requirements for litigation concerning employment-related disputes. The LIA adopts several innovative mechanisms for labour disputes and resolutions, including: (1) court-appointed pre-trial mediation; (2) provisional injunctions; and (3) shifting the burden of proof.

From the employer’s perspective, shifting the burden of proof can be said to be the most impactful change in the LIA. The authors provide first-hand observations on two of the most important practical issues – wages and working hours – with respect to shifting the burden of proof.

Work hours

The work hours documented by the employee’s attendance records should be deemed the actual hours that this employee has worked under the employer’s approval, and thus should be the basis for calculating the salary and/or the overtime pay, unless the employer can prove otherwise (article 38 of the LIA).

Taiwanese courts have been consistently lenient when reviewing issues related to work hours, from even before the LIA came into effect. For example, in a 2019 judgment, the Supreme Administrative Court in Taiwan held that employers must ensure the accuracy of attendance records on a monthly basis.

Furthermore, if an employer finds inconsistencies between the attendance records and an employee’s actual attendance, the employer must promptly consult the employee and correct the inconsistencies before the next agreed payday.

Failure to do so will result in the employer being required to recognise that the employees worked the extra hours indicated in the attendance records and make overtime payments, even if the employee was working extra hours without prior approval.

Alternatively, the employer may face administrative fines for refusing to compensate for overtime.

Therefore, after the implementation of the LIA, the authors expect the civil courts to take into account the opinions of the administrative courts and interpret the working hours in attendance records more leniently. In this regard, employers must consider the following two matters.

Proactively prevent employees from working overtime without prior permission or duly filled applications. To avoid paying excessive overtime, employers should regularly review and correct attendance records. If employers become aware of unauthorised overtime, they may need to take active measures, such as turning off the lights, cutting electricity, shutting down workstations, or ordering employees to leave immediately under direct orders from management.

Occupational disasters. Overtime is also considered working hours as stipulated in the Labour Standard Act (LSA). Therefore, if employees work overtime, any occupational hazards that may occur during that time will be the responsibility of the employer.

This means that if an employee is injured in an accident while working unauthorised overtime in the workplace, or while commuting to or from working overtime, the employer may be liable for statutory compensation or damages for tort.

Benefits contributions

According to article 37 of the LIA, any payments received by an employee as compensation are presumed to be the employee’s salary for the work performed as defined in the LSA.

Therefore, all regular payments received by the employee for work, regardless of the payment name, should be taken into account when calculating the average monthly salary for determining their statutory labour benefits, premiums and contributions, including the labour insurance premium, national health insurance premium and pension contributions under the New Pension Scheme.

Moreover, when calculating severance pay, overtime payment, payment in lieu of advance notice, and encashment of accrued but unused annual leave, these regular payments should also be considered, unless the employer can prove otherwise (e.g., a discretionary bonus that should not be treated as part of the wages). On their attitude towards overtime issues, Taiwanese courts tend to adopt a narrow interpretation of a regular payment and payment received for work. Whether a payment meets these two criteria is subject to the court’s strict scrutiny.

Article 37 of the LIA expressly stipulates that in a dispute, an employer will bear the burden of proof to convince the court that a payment is not a regular payment, and should thus be excluded from the calculation of the average monthly salary in the event of a dispute. The authors believe that the court’s attitude towards the following two traditionally controversial issues is worth observing.

Guaranteed year-end bonuses as salaries. Historically, judicial precedents have established that guaranteed year-end bonuses differ from other annual bonuses, which are not paid regularly and are at the employer’s discretion to award (i.e., the annual bonuses stipulated in article 10 of the Enforcement Rules of the LSA).

Rather, guaranteed year-end bonuses are considered regular payments and must be included when calculating an employee’s average monthly salary.

An example would be if an employer had agreed to pay the 13th-month bonus to its employees, regardless of their performance, or the employer’s overall financial performance.

The courts and the competent authority would be likely to deem this fixed year-end bonus a regular payment/payment received for work that should be included in the calculation of the average monthly wage, the labour insurance premium, national health insurance premium, and pension contributions under the New Pension Scheme.

Post-employment non-competition compensation. According to article 9-1 of the LSA and article 7-3 of the Enforcement Rules of the LSA, a post-employment non-competition clause will be enforceable only if the employer has provided reasonable compensation that meets all of the following requirements (this will be subject to judicial review on a case-by-case basis if it is challenged by the employee): (1) at least 50% of the employee’s monthly average salary; (2) is sufficient to maintain the employee’s living expenses during the non-compete period after termination; and (3) is commensurate with the loss suffered by the employee in terms of the duration, region, scope of professional activities, and any employment opportunities lost for complying with the non-compete agreement.

Therefore, to determine the exact amount of the monthly average salary and the corresponding reasonable post-termination compensation, employers should – under the lenient definition of the court precedents and the burden of proof prescribed by the LIA – consider any additional regular payments that the employee received in the six months immediately preceding the termination of their employment.

In response to the trend described in this article, it is crucial for employers in Taiwan to review their internal HR policies to ensure compliance with relevant laws and regulations.