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Mass layoffs in Taiwan: A guide for employers

When an employer needs to dismiss a certain amount of its Taiwan workforce over a defined period of time, the employer must comply with the provisions of the Act for Worker Protection of Mass Redundancy (the “MRA”). Any employer who does not follow the procedures under the MRA may be subject to administrative fines of up to NT$500,000. Mass layoffs are quickly becoming a prominent issue in Taiwan, with a total of 4,357 employees reported to the Ministry of Labor having been laid off during the period of January to April 2016 alone.

As Taiwan is not an at-will termination jurisdiction, any termination must comply with the Labor Standards Act (the “LSA”). Any employee termination in Taiwan must be made pursuant to one or more of the specific causes set forth under Article 11 and 12 of the LSA, and the employer must provide advance notice (or an amount in lieu thereof), severance pay, and any outstanding payments or benefits where an employee is terminated for any of the causes stipulated under Article 11. The most commonly used causes for termination under the LSA are where the employer’s business suffers operating losses or business contractions, where the employer’s business is transferred, or where there is a change in the nature of the business which necessitates a reduction of workforce.

The Ministry of Labor has the power to restrict the representatives or responsible persons of an employer from leaving Taiwan if the employer does not meet its obligations under the MRA. While the LSA sets statutory entitlements for all employees in Taiwan, the MRA must be followed where an employer intends to terminate a significant portion of its workforce over a defined period of time.

Whether the MRA applies to the employer’s intended layoff plan hinges on the number of employees[1] the employer intends to lay off at each separate office location or work site (each, a “Site”). The employer will be subject to the provisions of the MRA when the number of employees to be laid off at any particular Site exceeds any one or more of the thresholds set out in the table below. These thresholds are based on (i) the number of employees at each Site and (ii) how many of these employees the employer intends to lay off either (a) in a single day, or (b) over the course of sixty days.

No. of Employees at Site Time Period No. of Employees to be Laid Off
< 30 60 days > 10 employees
30 – 200 1 day > 20 employees
60 days > 1/3 of workforce
200 – 500 1 day > 50 employees
60 days > 1/4 of workforce
> 500 1 day > 80 employees
60 days > 1/5 of workforce
Any Number 1 day > 100 employees
60 days > 200 employees



If the number of employees that an employer intends to lay off for any given Site exceeds the applicable single day or sixty day threshold set forth above, then the MRA will apply.  Pursuant to the MRA, the employer must create a mass layoff plan (a “Plan”) for each Site where the thresholds are exceeded. Each Plan must include:

  • the cause of the mass layoff;
  • the department(s) of the business entity affected by the mass layoff;
  • the scheduled effective date of the mass layoff;
  • the number of employees to be laid off;
  • the criteria for selecting the employees to be laid off;
  • the method for calculating severance pay; and
  • whether the employer will provide any job transition assistance to affected employees.

The Plan must provide the affected employees with at least their minimum statutory entitlements upon termination as set out under the LSA.

An employer seeking to implement a Plan must notify the relevant authorities/agencies or personnel in the following order:  (i) local labor authority; (ii) labor union/ labor representatives; (iii) the employees to be laid off.  Actual notification requirements for each of these three groups are set forth below:

  1. Local labor authority. The employer must firstly submit the Plan to the relevant local labor authority. The relevant local labor authority is typically the Department of Labor of the local government nearest the Site.
  2. Labor union/ labor representatives. If a labor union exists within the business entity at the Site, then the employer must first notify the relevant labor union of the Plan. Absent a labor union, the employer must notify the labor representatives of the labor management committee or conference (the “LMC”).
  3. Employees. If the Site has no applicable union or LMC, the employer must deliver the Plan to the employees in the department(s) of the Site affected by the Plan. Delivery to these employees must be made publicly, and can be done via email or by posting a visible notice and copy of the Plan at each Site.

The above groups must be notified of any Plan at least 60 days prior to the proposed first termination date. Once notification has occurred, the affected employees and employer must enter into negotiations within 10 days from the start of this 60-day period. An employer cannot dismiss or transfer any of the employees involved in the mass layoff during this negotiation period.

If an agreement between the employer and employees is not reached within 10 days from the commencement of negotiations, the relevant local labor authority will invite the employer and employees to form a negotiating committee to finalize the terms of the Plan. This committee is chaired by a representative of the relevant local labor authority and typically meets every two weeks until an agreement is reached. Where a negotiating committee is formed, the local labor authority will dispatch consulting, employment services and vocational training personnel to the Site to assist affected employees. Employers must set times for such personnel to provide assistance.

At the expiry of the 60-day period, the employer can implement the Plan, provided the laid-off employees are provided all their statutory entitlements under the LSA.

While employers can offer more generous severance packages than that mandated under the LSA, it is not necessary to do so.  If an employer seeking to implement a Plan believes that their legal basis for the layoff under the LSA is not strong enough or there is insufficient evidence to support the cause for termination, a more generous package that the statutory minimums offered under the LSA can be provided to the affected employees in order to facilitate a more efficient mass layoff process and reduce the risk of future disputes arising.  Generally speaking, Taiwan employees are acutely aware of their minimum entitlements and are likely to try to negotiate for better terms of their termination.

For more information on Taiwan employment matters, please email Christine Chen at cchen@winklerpartners.com or call +886 (0) 223112345 ext. 307.


[1] For the purposes of the MRA, “employees” does not include foreign employees working under work permits or employees on fixed-term contracts.

WP recognized for our diversity efforts

Winkler Partners has been recognized for our diversity efforts in Asian Legal Business’ 2016 Diversity List. Only ten law firms with an Asia presence were included in the list. According to Asian Legal Business (ALB), the list aims to “highlight firms in Asia that have developed a solid strategy when it comes to fostering diversity and inclusion, currently have programs in place to back up this strategy, and have made measurable progress in this regards”.

We were noted for our high ratio of both female and LGBT colleagues (over 50% and 9% respectively) as well as our commitment to providing continuing legal education opportunities to all staff. We were also praised for our “flat organizational structure that encourages coordination in place of management and discussions in which each member’s voice is valued”. According to ALB, we have “innovative programs aimed at championing women in the workplace”.

You can read about the ten firms on the 2016 Diversity List here.

A door opens: alternative remedies in Taiwan trademark squatting cases

In cases involving trademark squatters, the main remedies available to brand owners are filing an invalidation or opposition action against the squatter with the Taiwan Intellectual Property Office (“TIPO”) in an attempt to cancel or revoke the registration.

However, the statute of limitations bars a brand owner from filing an invalidation or opposition if five years have elapsed since registration of the mark. It is often the case that a brand owner does not discover the squatted mark soon enough and it is left without an administrative remedy.

A relatively recent judgment (2014) issued by the Taiwan Intellectual Property Court (the “IP Court”) held that Taiwan’s Civil Code and Fair Trade Act provide causes of action sounding in tort against a person who registers a trademark in bad faith. Min Gong Su Zi No, 5 (102). While the judgment does not create a precedent and was not appealed, it is significant because the statute of limitations in a tort action is two years from discovery of the harm or ten years from the time of the injury.

In other words, the door is open to seek alternative relief under the Civil Code and Fair Trade Act  even after the statute of limitations for an invalidation or cancellation has run.

In the instant case, a mark was registered in Taiwan and 16 other  jurisdictions despite having been registered for decades in leading European and North American jurisdictions. This conduct was held to be a intentional tort offending against good morals (Civil Code §184(1)) because it violated the Fair Trade Act’s catch-all prohibition against deceptive or obviously unfair conduct that interferes with the proper functioning of the market (Fair Trade Act §25).

The IP Court held that “the filing of these applications (by the Defendant) seems an attempt to free ride on the hard-won reputation of the Plaintiff’s mark for economic benefit and thus has adversely affected the trading order. This conduct violates business competition ethics and constitute violations of Article 24 of the Fair Trade Act.[1] The IP Court further held that the Defendant’s prior knowledge of the brand, and the effort and resources spent by the Plaintiff in attempting to cancel the registrations in multiple jurisdictions constituted dishonest commercial practice that caused the Plaintiff to suffer economic injury.

As a result, the IP Court awarded the plaintiff brand owner compensatory damages and issued an order directing the defendant to abandon its rights to the mark in Taiwan.

For more information on trademark enforcement matters in Taiwan, please contact Gary Kuo at gkuo@winklerpartners.com or +886 223112345 ext. 534.


[1] After February 2015 amendments to the FTA, Article 24 became Article 25.

WP to attend INTA Annual Meeting

From 21-25 May, 2016, Winkler Partners intellectual property team members will attend the 138th Annual Meeting of the International Trademark Association (INTA) in Orlando, Florida. According to the event website, this year’s meeting will include more than 300 educational events, workshops, talks by regional trademark offices, courses on international trademark law and advanced mediation training. Over 9,000 attendees are expected to attend.

Winkler Partners’  Peter Dernbach will be co-chairing this year’s annual meeting, with Turner Broadcasting System’s Rick McMurty. Peter was elected to the Board of Directors at INTA in 2015, and will serve through 2017.

Peter heads our IP practice and has substantial experience assisting clients in obtaining, enforcing and licensing their intellectual property rights. Other than his involvement with INTA, Peter is a member of the Marques China Team, has served as a panelist under ICANN’s UDRP system in more than 60 domain name disputes and co-chairs the IP & Licensing Committee at the American Chamber of Commerce Taipei.

Partners Christine Chen and Gary Kuo will also be attending along with members of our IP practice, Jason Yan, Mark Brown and Mark McVicar.

Christine Chen is an IP litigator and oversees our employment practice. Christine is noted for winning the largest payout in a trademark infringement case in Taiwanese legal history and regularly advises clients on employment and immigration matters pertaining to Taiwan.

Gary Kuo is an IP litigator focusing on anti-counterfeiting and competition law. He has also worked with the Taiwan Intellectual Property Office to revise Taiwan’s IP laws to better protect rights holders.

Jason Yan specializes in trademark clearance, prosecution and registry dispute issues. He manages trademark portfolios for some of the world’s leading brands, advising clients in a broad range of industries including beverage and food services, Internet providers, health and beauty products, and pharmaceuticals.

Mark Brown supports our intellectual property team with a particular focus on alcohol beverage trademarks. He has worked on several cases for some of the world’s largest alcohol and beverage companies on brand protection, geographical indications, enforcement, lobbying and regulatory matters, administrative and fair trade actions, and compliance in advertising and promotions.

Mark McVicar manages the trademark portfolios of multinational clients in a variety of industries including chemical, personal care, information technology, gaming, fashion and pharmaceuticals. Mark will also be running a session at this year’s INTA annual meeting on Cultural Intelligence.

If you are attending INTA this year, please don’t forget to introduce yourself. Full event details can be found here.

Chen Hui-ling contributes article to Privacy Laws & Business

Partner Chen Hui-ling has contributed an article on Taiwan’s Personal Information Protection Act (PIPA) to Privacy Laws & Business‘ International Report. Privacy Laws & Business provides an independent privacy laws information service to many of the world’s largest companies, specialist lawyers and has over 2000 clients in 53 countries since its founding in 1987.

In her article, Hui-ling explains that the amendments that came into force on 15 March 2016 are a weakening of what some have called ‘the strictest privacy law in the world’, and go some way to striking a balance between data privacy and reasonable use. The amendments included the addition of several new types of sensitive information such as medical records that are not allowed to be collected, processed or used and outline ways in which consent may be granted by the data subject. She concludes by stating that while Taiwan’s recent amendments show that Taiwan is committed to meeting international standards,  it is doing so cautiously and not taking the opportunity to innovate.

You can read the full article here.

For more information on data privacy matters in Taiwan, please contact Chen Hui-ling at hchen@winklerpartners.com or +886 223112345 ext. 555.

Peter Dernbach recognized as IP leader

Head of our intellectual property practice Peter Dernbach has been included in World Intellectual Property Review’s WIPR Leaders 2016. The WIPR Leaders list features “1408 individuals worldwide recognized by their peers as the best and the brightest in IP private practice”.

In order to complete the list, over 15,000 in-house counsel and private practice attorneys were surveyed with further research carried out examining notable cases and practice history, speaking engagements and involvement in the global IP community.

Peter has been with Winkler Partners since 2003 and currently serves on the Board of Directors for the International Trademark Association (INTA). Peter will also be co-chairing INTA’s Annual Meeting between 21-25 May 2016. In addition to his involvement in INTA, Peter serves as a domain dispute panelist under ICANN’s UDRP system, is a member of the Marques China team and co-chairs the Intellectual Property & Licensing Committee at the American Chamber of Commerce Taipei.

WP recognized as Employer of Choice

Winkler Partners has been named by Asian Legal Business Magazine as an Employer of Choice for 2016, the second year in a row. Only three law firms in Taiwan were given the award this year.

The report was conducted by surveying employees at law firms across Asia for their opinion on salaries, firm reputation, work life balance, career advancement opportunities and a variety of other criteria. Asian Legal Business notes that a Winkler Partners’ colleague stated, ‘I enjoy coming to work. My colleagues care about each other and our clients. Bottom line: I can have it all: high-quality clients and colleagues, and quality of life’.

We were previously recognized as the sole Employer of Choice in 2015 and before in 2010. You can view the entire article here.

Peter Dernbach interviewed on IP Fridays podcast

Head of our IP Practice Peter Dernbach was recently interviewed on IP Fridays, a weekly podcast covering intellectual property topics hosted by Ken Suzan, of counsel at Barnes & Thornburg LLP in Minneapolis, USA, and Dr. Rolf Claessen, partner at Patent Attorneys Freischem in Cologne, Germany.

In the twenty minute interview, Peter discussed the upcoming International Trademark Association (INTA) Annual Meeting being held in Orlando 21-25 May, which Peter will be co-chairing together with Rick McMurtry of Turner Broadcasting. Peter said he is most excited about the substantive programming, as he knows how much work went into planning it and is confident that a range of diverse topics will be on offer to interest the nearly 10,000 trademark professionals expected to attend. Peter was also asked about the issues facing trademark lawyers and brands in recent years, and said that while progress has been made on several fronts, intellectual property rights in the digital world remains a significant challenge.

You can listen to the full podcast here.

Successor liability in asset purchases in Taiwan

This article briefly explores under what circumstances a Buyer involved in a corporate asset purchase might be subject to successor liability in Taiwan. This question would obviously be relevant to any foreign Buyer purchasing Taiwan corporate assets, whether in a one-off transaction or as part of a larger global acquisition.

Anyone that has been involved in an asset purchase in the United States has likely heard of successor liability. The doctrine of successor liability in the US derives generally from common law (both state and federal) and in a few specific areas from statute. For the more adventuresome soul, there are academic articles of over one hundred pages in length devoted to the myriad variations of successor liability. However, stated simply, successor liability refers to the body of judge-made law and statutes that creates exceptions to the general rule of no successor liability in the context of asset acquisitions. This simple definition will suffice for the purposes of this short article.

As a threshold matter, it is important to note that Taiwan is a civil law jurisdiction. Therefore, most law related to successor liability is derived from statute. Apart from this distinction, the analysis in Taiwan begins, as it does in the US, with the general doctrine that no liability is transferred to Buyer in an asset acquisition.

Again, as in the US, there is the obvious exception that liabilities may be transferred to Buyer if Buyer has assumed such liabilities. Although Taiwan courts have decided cases on the express assumption of liabilities, the courts offer little guidance on the exact contractual language which would specifically disclaim the transfer of such liabilities.

Theoretically, Taiwan also has successor liability based on a de facto merger rule. Taiwan’s Civil Code provides that a court may re-characterize an asset purchase transaction as a merger if the court determines that despite taking the form of an asset purchase, the substantive result of such transaction is a merger of Buyer’s and Seller’s businesses. If a de facto merger is deemed to have occurred, Buyer would inherit all liabilities of Seller. However, to date Taiwan courts have not heard a related case.  It is unclear what factors would be instructive as to whether an ostensible asset purchase rose to the level of a de facto merger.

In addition to rules related to express assumption of liabilities and de facto mergers, Taiwan has a number of statutory provisions in its Civil Code designed to provide relief to any person (“Creditor”) (i) originally owed an obligation (financial or otherwise) by Seller and (ii) who has been denied the ability to enforce such obligation due to a spurious or disingenuous asset sale, i.e. a fraudulent transfer. It is important to note that the definition of Creditors for the purposes of Taiwan law in this area is very broad. It is not limited to financial creditors, but would include a wide range of persons who have valid claims to enforce monetary or performance obligations against Seller, e.g., employees who are owed back pay or pension amounts, product liability claimants, etc.

In addition to the general anti-fraud provisions of Taiwan’s Civil Code, Taiwan’s Business Mergers and Acquisitions Act (“BMAA”) contains a procedural mechanism to inhibit fraudulent transfers. Pursuant to the BMAA, any Seller intending to transfer all or substantially all of its assets must notify its Creditors of such transfer. Seller must then allow Creditors thirty days to object to the transfer. If Seller fails to provide notice and allow sufficient time for Creditors’ response or does not otherwise provide for the settlement of obligations owed to its Creditors, the asset sale would be invalid with respect to later objecting Creditors. Such Creditors could theoretically enforce their rights against the purchased assets, even after such assets were transferred to Buyer. Any such enforcement action would likely encounter a considerable number of substantive and procedural difficulties but is theoretically possible. Again, there exist no Taiwan judicial opinions on point in this area.

In short, Taiwan statutes provide a theoretical basis for successor liability in Taiwan. However, there is limited judicial guidance as to specific application. Under these circumstances, Buyers would do well to foreclose the possibility of inadvertently acquiring unwanted liabilities by (i) conducting thorough legal diligence to identify potential unwanted liabilities; (ii) entering into well-drafted purchase agreements pursuant to which (A) Seller makes adequate representations and warranties with respect to, and (B) Buyer expressly excludes the assumption of, any such liabilities; (iii) refraining from conduct that would indicate Buyer’s assumption of any excluded liabilities; (iv) ensuring that Seller properly notifies all of its Creditors of any proposed sale of all or substantially all of its assets; (v) having Seller make adequate indemnifications; and (vi) if possible, providing for an escrow fund against which indemnification obligations may be claimed.

For more information on mergers, acquisitions, and foreign investment matters in Taiwan, please contact Gregory Buxton at gbuxton@winklerpartners.com or +886 223112345 ext. 548.

Amendments to Taiwan data protection law take effect

Amendments to Articles 6-8, 11, 15, 16, 19, 20, 41, 45, 53, and 54 of Taiwan’s Personal Information Protection Act (“PIPA“) took force on 15 March 2016. The most important change is that Taiwan now has enhanced protection for special categories of sensitive data. At the same time, compliance with Taiwan’s data protection rules has been made easier by relaxing the consent requirement for ordinary personal data and reducing the risk of criminal liability for violations of the PIPA.

Sensitive Personal Data

The legislative rationale for enhanced protection of sensitive personal data is that “unregulated collection, processing, and use of certain types of personal data…[is likely to]… give rise to social disquiet and cause irreparable harm to the data subject.” PIPA §6 Legislative Comment (1). For purposes of this overview, processing will be used as a collective shorthand for the collection, processing, and using personal data although it should be kept in mind that the PIPA defines each of these acts separately. A data subject simply means the natural person who is identified by the personal data. PIPA §2.

Categories of Sensitive Data

Article 6 enumerates the following special categories of sensitive data:

  1. medical records,
  2. medical treatment [data],
  3. genetic data
  4. sexuality,
  5. health examination results, and
  6. criminal records.

Precise definitions of these terms are given in the Enforcement Rules of the Personal Information Protection Act (the “Enforcement Rules“). For example, ‘sexuality’ means sexual orientation and practices. Enforcement Rules §4.

Processing these six categories of sensitive data is prohibited and subject to criminal and civil liability unless an exception applies.

Permitted Exceptions

The PIPA permits the following exceptions to the general prohibition on the processing of sensitive personal data:

  1. another law expressly permits processing,
  2. there is a statutory duty or obligation to process sensitive personal data,
  3. voluntary disclosure by the data subject or other lawful disclosure, or
  4. for purposes of medical, public health, and criminology research by government agencies or academic institutions
  5. assisting in a statutory duty or obligation to collect, process, or use the sensitive personal data, and
  6. valid written consent by the data subject. PIPA §§6(1)(1)-(6).

PIPA §6(1)(5) and §6(1)(6) are new exceptions. PIPA §6(1)(5) is best understood as complementing §6(1)(2). Under §6(1)(2), a public agency’s statutory authority and duties may make it necessary for the agency to process sensitive personal data. For example, municipal health authorities have a duty to assess the risk of domestic violence under §8(9) of the Domestic Violence Prevention Act. To carry out this duty, a municipal health authority may collect and process medical treatment records obtained from a hospital pursuant §6(1)(2). The hospital may assist the municipal health authority in carrying out this duty by providing the medical treatment records under §6(1)(5).

Sensitive data may now be processed with written consent from the data subject. Consent is not valid if the processing of the sensitive data exceeds the scope of the consented purpose or if obtained under duress. §6(1)(6) Written consent may be in the form of an electronic record. Enforcement Rules §14. With the addition of a consent exception for the processing of sensitive data, Taiwan’s rules for sensitive data are more consistent with those found in leading European jurisdictions such as Germany.

Ordinary Personal Data

Previously written consent was required to collect ordinary personal data. As of 15 March 2016, any “declaration of assent” to an initial processing of data is valid so long as the data subject has been informed of the purpose of the data processing and their rights under the PIPA. In other words, written, oral, or even implied consent to the initial processing of data is valid. PIPA §7(1).

Similarly, written consent is no longer required for processing data for a new purpose beyond the original purpose so long as the data subject has been informed of the new purpose and the possible consequences of not consenting. This consent must however be given in an independent declaration. PIPA §7(2).

Presumption of Consent

One of the most important new changes to the PIPA is the creation of a presumption of consent to an initial processing of data where:

  1. the data controller has informed the data subject of the purpose of the data processing and their rights under the PIPA
  2. the data subject does not reject the request to process the data subject’s personal data
  3. the data subject nonetheless provides their personal data to the data controller. PIPA §7(3).

No such presumption arises to extended processing of ordinary personal data beyond the scope of the initial purpose.

Although the relaxed consent requirements and the presumption of consent should make it easier for data controllers to comply with the PIPA, it should be noted that the burden of proof with respect to consent remains with the data controller at all times. §7(4)

Criminal Liability

Finally, criminal liability no longer attaches for processing personal data in violation of the PIPA where the data controller or processor merely has general intent with respect to the prohibited conduct. Previously, a data controller or processor who generally intended to collect, process, or use personal data in violation of the PIPA could face up to two years in prison. Now the data controller or processor must have a specific intent in the form of an unlawful purpose or to harm the rights and interests of another to trigger criminal liability (up to five years’ imprisonment).

 

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