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Labour disputes in Taiwan often involve issues such as employment terms and conditions, employment termination, severance pay, wages and overtime payment. To address these disputes, in addition to existing regulations (e.g., the Code of Civil Procedure and the Act for Settlement of Labour-Management Disputes, or the ASLMD), the Labour Incident Act (LIA) took effect on 1 January 2020, stipulating the procedural requirements for litigation concerning employment-related disputes.

Under the LIA, all courts must establish a specialised court or department and appoint judges with expertise in labour law to facilitate effective dispute resolution and protect employees’ rights. The LIA also contains the following innovative provisions on labour dispute and resolution.

Court-appointed pre-trial mediation. The LIA stipulates that if the parties have not petitioned for labour mediation held by the labour authorities, a mediation committee consisting of one judge and two court-appointed mediators will be formed to oversee the mediation process before the judge formally hears the case. If the mediation yields no resolution and a lawsuit is subsequently initiated, the judge participating in the mediation process will continue to preside over the subsequent court proceedings.

Shifting the burden of proof. According to the LIA, compensation payments received by an employee are presumed to be the worker’s “salary” for the performance of work and should be included when calculating pension or severance pay, unless the employer can prove otherwise (e.g., a discretionary bonus that should not be treated as part of the wages). The work hours documented by the employee’s attendance records should be deemed the hours that this employee has worked under the employer’s approval, and thus should serve as the basis for calculating the salary and/or the overtime pay, unless the employer can prove otherwise.

Provisional injunctions. The LIA specifies several types of provisional injunctions. If the court grants an employee’s request for provisional injunction, the employee will be reinstated and continue working while receiving wages until a final court judgment is rendered.

Regarding wrongful termination, article 49 of the LIA stipulates that if the court deems that the employee is likely to receive a favourable judgment and the employer can continue employing the worker without material difficulty, the court may issue a provisional injunction requiring the employer to continue employing the worker and paying wages.

In cases of wrongful job transfer or adjustment, article 50 of the LIA states that if the court finds such an action is likely to violate relevant labour laws, regulations, collective agreements, work rules, labour management conference resolutions, employment contracts or labour norms, and the employer can continue to employ the employee in their original position without material difficulty, the court may render a provisional injunction requiring the employer to continue employing the worker and paying wages according to their original labour conditions (collectively known as a continued employment provisional injunction or CEPI).

Judicial CEPI views

Overview. Since the LIA took effect in 2020, it has become common practice for employees to apply for a CEPI before filing wrongful termination or transfer lawsuits. The public information published by the Judicial Yuan shows a more than 60% chance of the court approving the employee’s application for a CEPI. This has become a substantial risk that employers must take into consideration when deciding whether to transfer or terminate employees.

Statutory criteria. When reviewing CEPI petitions, the court will determine whether the employees’ petition meets the statutory criteria of “likelihood of receiving a favourable judgment” and “whether the job transfer or adjustment are against the law and contract” based on the surrounding facts on a case-by-case basis.

Regarding “material difficulty to continue employing” a worker, the court will consider the following factors: the financial condition of the employer; the scale of operation or the number of employees of the employer; whether the employer is still actively recruiting; and whether the trust between the employer and the employee has been damaged.

In practice, the more controversial issue is whether the employee’s financial conditions should be taken into consideration. In some judgments, the court compared the employee’s financial conditions with the employer’s capital or operating income, while some courts explicitly pointed out that the financial conditions of the employees should not be a factor when reviewing the employees’ petition.

Compulsory execution of CEPI. At a Taiwan High Court seminar on civil execution cases, it was concluded that “continued employment” in the context of compulsory execution of a CEPI means that the employer should accept the employees’ services according to the original job duties or the agreed content of continued employment. Therefore, if the employer intends to instruct the employee to be on standby and not provide services, and if this instruction is not clearly stated in the ruling granting the CEPI and not agreed on by the employee, it may still be considered a violation of the CEPI, and the employer will be subject to penalties.

Our experience. Lately, labour courts have been more lenient in reviewing CEPI petitions. For example, where an employee filed a wrongful termination or job transfer lawsuit and sought a CEPI under articles 49 and 50 of the LIA, many district-level courts ruled in favour of the employee without giving the counterparty (i.e., the employer) the opportunity to express its opinion or defend itself, which is quite unusual compared to similar cases before the LIA came into effect. These courts also pointed out that the employees should only bear the minimum burden of proof.

However, if an employer obtains professional assistance after receiving an unfavourable CEPI decision from the lower court, it may be possible to persuade the higher court to overturn the decision.

For example, in a Taiwan High Court ruling, the employee, a general manager assigned by his employer to oversee a subsidiary in mainland China, filed a wrongful transfer lawsuit. The employee argued that the employer relocated him in retaliation against him, as he was the whistleblower of potential incidents regarding the violation of the employer’s internal procurement policies. The employee filed a petition and sought a CEPI under article 50 of the LIA. The district court, without providing the employer with an opportunity to express its opinion, granted a provisional injunction and ruled that the employer should continue to employ the employee as the general manager and pay him a monthly salary of about NTD140,000 (USD5,316) (including his assignment allowance for working in an overseas subsidiary) until the end of the main wrongful transfer lawsuit.

After the employer appealed against the ruling, the Taiwan High Court overruled the CEPI judgment and dismissed the employee’s petition for the following reasons:

1. The trust was damaged as the subject employee had been accused of workplace bullying and corruption by other employees;
2. The board of directors had elected a new general manager to replace the subject employee; hence, continuing employment may adversely affect the employer’s operations, which presents material difficulties; and
3. Although the employee cannot receive his assignment allowance because he has been reassigned to Taiwan, his salary is 60% of what he earned as the general manager, which will not cause significant hardship for him.

Conclusions

The above highlights the following:

1. The lower court may grant a CEPI without notifying the employer or giving the employer an opportunity to express its opinion;
2. When applying for a CEPI, the lower court will reduce the employee’s burden of proof and tend not to make a decision on the merits; and
3. After receiving the CEPI ruling, a detailed written statement focusing on the statutory criteria under the LIA will be crucial in persuading the higher court to overrule the CEPI.

Since the implementation of the LIA, employees now have access to more effective judicial relief and advantages in court proceedings, leading to a rise in such disputes before the labour courts. While the Supreme Court and the High Court occasionally rule in favour of employers, the Taiwan courts generally lean towards protecting employees and are conservative when it comes to wrongful termination or job transfer cases. In response to this trend, it is crucial for employers in Taiwan to review their work rules and internal policies to ensure compliance with HR regulations. Practically, it is also advisable for employers to handle any employment termination and job transfer with sensitivity and careful planning.