Before signing a job contract, it’s important to know and to understand everything that it entails. For example, what could be a possible cause or reason for companies to dismiss or terminate workers? Likewise, what are the conditions in which an employee may terminate the contract and ask for severance pay?
In Taiwan, employers need to establish a “just cause” for dismissing employees. Moreover, there are cases where prior notice and severance pay must be given to the workers. This article takes a closer look what the Labor Standards Act (LSA) has to say when it comes to the termination of employment contracts.
Grounds for Termination of Employment Contract
Below is an overview of the process for handling termination cases in the workplace, as prescribed by the Labor Standards Act (LSA) of Taiwan.
Termination by Employer
An employer may terminate employees: (a) with prior notice and severance pay; or (b) without prior notice… based on these grounds:
Termination with Prior Notice and Severance Pay
According to Article 11 of the LSA, an employer may terminate workers with prior notice and severance pay if:
- The employer’s business has been suspended or transferred;
- The employer’s business has been suffering business contractions and/or operation losses;
- The employer’s business has been suspended for more than one month due to force majeure (unforeseeable circunstances);
- The nature of the employer’s business has changed, to the extent that it needs a reduction of workforce, and dismissed employees cannot be reassigned to other positions; or
- An employee is clearly not able to perform satisfactorily in the job that he/she signed up for.
Termination Without Prior Notice
On the other hand, the employer may terminate an employee without giving prior notice, based on these grounds stated in Article 12 of the LSA:
- The employee misrepresented a fact at the time of signing the job contract, thus misleading the employer and causing damage;
- The employee has been absent for three (3) consecutive days or a total of six (6) days in a month without good cause;
- The employee is in serious breach of the job contract or serious violation of work rules;
- The employee has committed a violent act or grossly insulted the employer, the employer’s agent or family, or fellow employees;
- The employee has deliberately damaged/abused the employer’s property or intentionally released the employer’s confidential information; or
- The employee has been sentenced to temporary imprisonment in a final judgment, and has not been granted a suspended sentence nor given an alternative to pay a fine instead.
NOTE: Except for the last one (employee sentenced to jail), dismissals based on the above grounds must be done within 30 days, starting from the date when the employer was made aware of the specific situation. Moreover, in these cases, the employer has no obligation — apart from issuing a certificate of service to the dismissed employee.
Termination by Employee
An employee may terminate his/her job contract through voluntary resignation and by giving prior notice to his/her employer.
Meanwhile, an employee may terminate his/her employment contract and ask for severance pay based on these grounds stated in Article 14 of the LSA:
- The employer made a misrepresentation at the time of signing the job contract, thus causing harm to the employee;
- The employer has failed to pay salaries or provided adequate work;
- The employer has been violating the job contract or applicable laws, thus infringing upon the employee’s rights:
- The employer or employer’s agent has been engaging in acts of violence or significant insult against the employee;
- The work has been detrimental to the employee’s health and the employer has failed to make improvements; or
- The employer or other employees have an infectious disease, which poses a significant threat to the employee’s health.
Process for Termination
As mentioned earlier, companies must establish a “just cause” for terminating employees and follow these procedures:
- Establish Ground for Termination. The dismissal must be based on the provisions described by Article 11 or Article 12 of the LSA.
- Give Prior Notice. Employers must give: (a) 10-day notice for employees with 3 months to less than 1 year of service; (b) 20-day notice for those with 1 year to less than 3 years of service; and (c) 30-day notice for employees with more than 3 years of service. If they decide not to give notice, they must pay wages instead.
- Give Severance Pay. Employers must pay severance in accordance with the provisions of the LSA.
- Give Paid Leave for Job Search. During the notice period, employees are entitled to paid leave (up to 2 working days per week) so that they can look for a new job.
- Pay Unused Annual Leave. The employer must pay for any unused annual leave of the employee.
Addressing Wrongful Termination Lawsuits
Employees may file a wrongful termination lawsuit if they believe that the employer has dismissed them without just cause. In these cases, if the court rules in favor of the employee, the company is obliged to reinstate the worker’s employment, and to pay him/her for loss of salary starting from the date of wrongful termination.
Collective Dismissals or Mass Redundancy
In the event where a company plans to dismiss several employees (10 or more) within 60 days, the “Act for Worker Protection of Mass Redundancy Act” applies. This means that aside from giving notice and severance pay, the company should follow certain procedures, including:
- Notifying affected employees, labor unions, and labor authorities at least 60 days in advance;
- Negotiating with employees and labor unions until an agreement is reached;
- Filing the agreement with the court;
- Facilitating employment services (e.g. vocational training, job placement assistance) for affected employees; and
- Giving severance pay and finalizing the redundancy based on the terms agreed upon.
Before dismissing or terminating employees, companies should ensure that they are complying with the provisions of the Labor Standards Act (LSA). Similarly, before terminating their job contract or filing any complaints, workers should see to it that they are abiding by the rules of the law. In any case, documentation is important for swift investigation and resolution of the matter.
Speaking of job contracts, these may be categorized as fixed-term or indefinite contracts. What’s the difference between the two? Read this article to know more about two types of job contracts in Taiwan.