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In-depth treatment of selected topics in Taiwan law for legal professionals

Diez consejos en cuanto a relaciones laborales en Taiwán

This is a Spanish translation of our English article “Ten tips for Taiwan employment contracts”, which you can find here.
Esta es la traducción al español de nuestro artículo en inglés “Ten tips for Taiwan employment contracts”, el cuál se encuentra disponible aquí.

El ámbito laboral se ha convertido en un tema de suma importancia en Taiwán dado que el número de demandas laborales iniciadas por empleados ha incrementado significativamente en años recientes. En este artículo presentamos una lista de diez consejos a tener en cuenta toda vez que un empleador se encuentre negociando o elaborando un contrato de trabajo en Taiwán. Pese a no proporcionar una lista exhaustiva, este artículo contiene información vital para los contratos de trabajo a ser implementados en Taiwán para evitar los problemas que vemos de forma regular en nuestra práctica laboral.

1. Uso de un contrato de trabajo escrito

Taiwán no tiene leyes o regulaciones que específicamente regulen los contratos de trabajo y por tanto, los empleadores gozan de cierta flexibilidad con respecto al formato de sus contratos de trabajo. Pese a que no existe una ley explícita que requiera contratos laborales escritos, para asegurar claridad y evitar potenciales disputas con los empleados en el futuro, es recomendable que los empleadores usen contratos laborales escritos en Taiwán.

2. Uso de un manual del empleado / reglas de trabajo

Empleadores que contraten 30 o más empleados deben tener un manual del empleado o reglas de trabajo. Aunque no se llegue al límite de 30 empleados, muchas empresas eligen tener de forma separada, un manual del empleado o reglas de trabajo que también formen parte del contrato laboral. Tener un documento separado (pero vinculante) que detalle elementos de la relación laboral como los derechos de propiedad intelectual, disciplina y convenios restrictivos, otorga a los empleadores mayor seguridad respecto a los derechos y obligaciones mutuas emergentes del contrato de trabajo.

3. Establecer claramente el término del contrato

Los contratos laborales en Taiwán son de término indefinido a menos que se especifique un término fijo. Los empleados empiezan a gozar de todos los derechos laborales otorgados bajo ley en cuanto comienza la relación laboral. Mientras que los periodos de prueba pueden existir en los contratos laborales, éstos son de uso limitado en Taiwán. Esto se debe a que la terminación de la relación laboral en Taiwán no puede ser a mera voluntad del empleador, sino que dicha terminación debe cumplir siempre con los requisitos especificados bajo la Ley de Normas Laborales (“LSA” por sus siglas en inglés).

4. Protección a la propiedad intelectual

Entre las buenas prácticas en contratos laborales está la clara definición de los derechos de propiedad y creación en relación a toda propiedad intelectual ya existente y futura que se encuentre dentro del alcance de las funciones del empleado. La protección puede ser reforzada haciendo referencia en el contrato laboral al manual del empleado o cualquier otro acuerdo escrito que detalle con especificidad los derechos de propiedad intelectual relevantes.

5. Definir claros convenios restrictivos

De forma similar a los derechos de propiedad intelectual, describir claramente los derechos y obligaciones de los empleados durante y después de terminada la relación laboral con respecto a secretos comerciales, información confidencial, y restricciones a la competencia y solicitación, es un aspecto crucial en cualquier contrato de trabajo en Taiwán. El alcance de los convenios restrictivos con respecto a la no competencia y solicitación deben ser razonables. Por ejemplo, el término de duración de la prohibición a la competencia no puede ser más de dos años, el empleador debe tener un interés legítimo a proteger, las funciones laborales y la posición del empleado que se retira deben ser suficientes para otorgarle acceso al interés legítimo que el empleador pretende proteger, y el empleado debe recibir compensación razonable por cualquier pérdida ocasionada por aceptar el convenio de prohibición a la competencia. Si la cláusula no se ajusta a los principios antes mencionados, es muy probable que las cortes de Taiwán no la consideren válida y ejecutable.

6. Cumplir con leyes relacionadas a la transferencia / despido de empleados

Todo empleado despedido a raíz de un proceso de restructuración o cambio de propietarios de la empresa tiene derecho a indemnización y preaviso bajo la ley. La LSA especifica las circunstancias en las que un empleado puede ser despedido legalmente en Taiwán con preaviso e indemnización, como en el caso de transferencia de propiedad o suspensión de actividades de la empresa. Existen muy pocas circunstancias en las que un empleador puede despedir a un empleado sin preaviso o indemnización. Ejemplos de estas limitadas circunstancias son el grave incumplimiento del contrato laboral o la divulgación de secretos comerciales de la empresa por parte del empleado.

7. Elegir el idioma correcto

Las cortes de Taiwán reconocen los contratos de trabajo redactados en chino o inglés. En el caso de existir un contrato laboral en ambos idiomas, es recomendable especificar en el contrato, cual versión rige en caso de un conflicto entre ambas versiones. Es bueno tomar en cuenta, que muchas veces las cortes en Taiwán deciden que la versión que rige es la del idioma chino.

8. Definir jurisdicción y mecanismos de resolución de disputas

La vía de mediación es disponible a los empleados ya que cada gobierno local en Taiwán tiene una oficina que ofrece mediación y apoyo legal sin costo a empleados que tengan disputas con sus empleadores. Las cortes de Taiwán tienen divisiones especializadas en manejar casos relaciones a temas laborales. Es común que los contratos laborales, particularmente aquellos que implican a entidades o empleados extranjeros, contengan una cláusula que indica que la ley aplicable en caso de disputa es la de la República de China (Taiwán) y que las partes deben  usar sus mejores esfuerzos para llegar a un acuerdo mutuo mediante consultación o mediación antes de iniciar un litigio.

9. Especificar beneficios requeridos por ley

Las leyes de Taiwán establecen que los empleadores que tengan una entidad legal constituida en Taiwán deben aportar al Seguro Nacional de Salud y al Seguro Laboral de cada empleado. Estos y otros beneficios, los cuales deben ser pagados por el empleador, no pueden ser alterados por parte del empleador de forma desfavorable en el contrato laboral.

10. Evitar cambios a las condiciones laborales

Existen restricciones impuestas a empleadores que pretendan cambiar las condiciones laborales del empleado (como el lugar de trabajo) en un contrato de trabajo. Por ejemplo, muchas empresas transnacionales desean poder decidir el lugar de trabajo de sus empleados arbitrariamente; sin embargo, nuevas modificaciones a la LSA establecen que los empleadores que pretendan hacerlo deben cumplir con algunos principios generales o sino estarían incumpliendo el contrato laboral y la LSA. Los principios generales incluyen: (a) el cambio debe ser por las necesidades de la empresa y por un propósito justificable; (b) no pueden hacerse cambios desfavorables en cuanto a salario u otras condiciones de trabajo; (c) los cambios deben ser adecuados a las habilidades especificas del empleado; (d) los empleadores deben proporcionar asistencia a los empleados si el lugar de trabajo es inconveniente; y (e) los empleadores también deben poner en consideración los intereses de los familiares del empleado.

Tomando en cuenta los diez consejos arriba mencionados al redactar sus contratos de trabajo puede ayudar a evitar potenciales disputas laborales de forma preventiva. Para más información sobre temas laborales en Taiwán, favor contáctese con Christine Chen cchen@winklerpartners.com o +886 (0) 223112345 externo 307.

Personal information concerns when conducting due diligence

Transactional attorneys are intimately familiar with due diligence requests (“DDR”). A prospective buyer (“Buyer”) will typically deliver to a target company (“Target”) a DDR which includes a section requesting information related to a Target’s employees and the circumstances of their employment. In Taiwan, we advise Buyers to take steps to ensure they do not inadvertently collect such employees’ personal information, thus violating Taiwan’s Personal Information Protection Act (“PIPA”).[1]

PIPA permits personal information to be collected and processed only in situations where there exists: (i) a specified purpose for such collection and processing; and (ii) one or more of six qualifying conditions.

Purpose

Although the specified purpose must be reasonable, the data collector or processor is largely left free to determine the purpose for collecting or processing any personal information. There is no indication that due diligence associated with an acquisition transaction would not be considered a reasonable purpose for the collection or processing of personal information under PIPA.

Qualifying Conditions

Unlike the purpose requirement, the list of qualifying conditions is strictly limited to the specific conditions delineated in the statute. In the context of an acquisition transaction, the relevant qualifying conditions would likely be one or more of the following:

  1. a contractual or contract-like relationship between data processor or collector and the data subject; or
  2. the data subject’s consent.

Contract or contract-like relationship

In an acquisition context, a Buyer, as data collector, is not in direct privity of contract with Target’s employees; therefore, no direct contractual relationship exists between the data collector and the data subject. However, PIPA and related regulations allow for a less formal contract-like relationship to suffice as a qualifying condition for personal data collection. Such relationships are typically found to exist in pre-contract negotiations or contract formation processes. For example, a contract-like relationship would exist between an employer and a potential employee during the hiring process, prior to any contract actually being signed. Given that Buyers normally do not negotiate with a Target’s employees during the pre-signing phase of a transaction, it is extremely doubtful that any contract-like relationship would be found to exist which would justify the collection of Target employees’ personal information.

We note that this reading of the PIPA creates a slight tension with Taiwan’s Business Merger and Acquisition Act (“BMAA”) pursuant to which a Buyer may negotiate with a Target to determine which of Target’s employees will be retained post-closing. However, the intention of the BMAA to allow such negotiations is not a basis to find that a Buyer has a contract-like relationship with a Target’s employees sufficient to justify collection of their personal information.

Consent

If there is neither a contractual nor contract-like relationship between the Buyer and Target’s employees, the only remaining qualifying condition that would allow for the collection of the employees’ personal information would be receipt of consent from the employees themselves. In the vast majority of cases, this is both impractical and undesirable as Buyers normally wish to keep transactions as confidential as possible.

Personal information

Absent a clear cut path to the legal collection of Target employees’ personal information, we encourage prospective Buyers to take steps to ensure that no personal information is collected from Taiwan data subjects.

In Taiwan, personal information is defined as any information that can directly or indirectly identify a natural person. Buyers should, therefore, request any Target to redact employees’ names, national identification numbers, addresses, and any other information that could identify an employee from all employment agreements before disclosing such agreements. Similarly, payroll information can be disclosed only if employees’ names and other identifying information are redacted.

We recommend that any DDR sent by a Buyer to a Taiwan Target clearly request that any and all employee information to be provided pursuant to such a DDR must not contain employees’ personal information. For more information on data protection and privacy matters in Taiwan, please contact Chen Hui-ling at hchen@winklerpartners.com and Daniel Chen at dchen@winklerpartners.com.


[1] It is important to note that a Buyer’s liability extends to the acts of its agents and professional advisors. So, a Buyer would remain liable even if a DDR were sent out on its behalf by its lawyers or other professional advisors.

Regulations amended to strengthen border control measures protecting trademarks

The Taiwan Customs Administration, Ministry of Finance, amended the Regulations Governing Customs Measures in Protecting Rights and Interests in Trademarks (“the Regulations”) on 30 December 2016. The amendment is aimed at providing more complete protection for the rights of trademark holders and strengthening border control measures by Taiwan Customs against trademark-infringing goods. It also is designed to harmonize with Taiwan’s policies of promoting e-government and streamlining administrative procedures. The amended Regulations entered into full force from 1 January 2017.

Below are some key points of the amendment:

1. The amended Regulations provide for protection on a per-registration rather than per-design basis

Among the protective measures under the Regulations are a mechanism for trademark rights holders to apply, by a notice to Customs, for protection of registered trademarks (“protection-upon-notice”), and a mechanism for rights holders to file complaints with Customs about specific goods suspected of infringing trademark. In the past, applications for protection-upon-notice of registered trademarks were required to be submitted on a per-design basis, with the result that multiple registrations of a single trademark design would be bundled into a single protection-upon-notice case. But as different registrations may have different protection periods and scopes of protection, a need to differentiate between registrations was recognized. The amended Regulations, in Article 3.1, therefore expressly require trademark rights holders seeking protection to apply on a per-registration rather than per-design basis and to separately record with Customs the information for each trademark registration number.

2. The protection-upon-notice period is lengthened, and renewal procedures are simplified

Before the amendment, Customs would grant approval for protection-upon-notice for a one-year term only, and trademark rights holders were required to apply for renewal annually. To simplify matters, Article 4.1 of the amended Regulations revises the protection-upon-notice period to “from the date of approval by Customs to the expiration of the trademark rights term”, eliminating the need for annual renewal applications. A trademark rights owner who applies for and obtains renewal of an expiring trademark now needs merely to present Customs with documentary proof of the renewed trademark term to update the information on record with Customs and renew the protection of the registration.

3. The amendment specifies the obligation of the trademark rights holder or agent to cooperate with Customs, and allows Customs to terminate the protection period if unable to contact the rights holder or if an offshore rights holder no longer has a Taiwan agent

To strengthen the obligation of trademark rights holders or their agents to cooperate in trademark protection, the amendment newly provides, in Article 5, that Customs may terminate the protection-upon-notice period early in either of the following circumstances: (1) Customs is unable to contact the trademark rights holder or the rights holder’s agent using the information submitted in the application for protection-upon-notice; (2) a trademark rights holder without a domicile or place of business or no longer has an agent in Taiwan because its relationship with its agent has been terminated or is extinguished by some other cause.

4.   When a trademark rights holder files a complaint against specific import or export goods suspected of infringement, Customs is now required to notify the trademark rights holder of the acceptance of the complaint or the reasons for non-acceptance of the complaint.

When a trademark rights holder takes the initiative to file a complaint against import or export goods suspected to infringe the holder’s trademark rights, under Article 6.2 of the amended Regulations, Customs is required to notify the trademark rights holder of whether the complaint is accepted, and when Customs declines to accept a complaint, it is further required to specify the reasons for non-acceptance.

5.   The amendment permits Customs, upon application, to provide photographs of suspected infringing items to trademark rights holders to help them assess whether products are genuine or counterfeit, to expedite handling procedures

To help trademark rights holders judge more quickly whether to proceed to Customs to assess suspected infringing goods, Article 7.5 of the amended Regulations permits Customs, upon application, to provide photographs of suspected infringing items to trademark rights holders. Rights holders may not, however, base their determination of whether there is infringement simply on photographs of import or export goods provided by Customs.

6. A trademark rights holder who lacks a domicile or a place of business in Taiwan is required to designate an agent to act on the rights holders’ behalf in exercising the trademark protections under the Regulations

In principle, a trademark rights holder may choose at its own discretion whether to designate an agent to act on its behalf to exercise the protections under the Regulations. The exception is a trademark rights holder who has neither a domicile nor a place of business in Taiwan. Under the amended Regulations, such a rights holder is required to appoint an agent to liaise with and carry out infringement assessments at Customs, and receive service of documents or notices from Customs.

7. The amendment newly provides that a recorded exclusive licensee has standing equivalent to a trademark rights holder

The amended Regulations provide, in Article 15, that a recorded exclusive licensee is entitled to enjoy, in the licensee’s own name, the border control measures implemented by Customs for trademark protection under the Regulations, and is further entitled to exclude applications by third parties for those protective measures. This amendment brings the Regulations into harmony with the provisions of the Trademark Act concerning exclusive licensees.

In addition to lengthening the period of protection in cases of protection-upon-notice, the amended Regulations offer greater convenience to trademark rights holders by allowing them to use electronic means to apply for protection-upon-notice and to query information related to their applications. Rights holders nevertheless should remain mindful, as the expiration of a trademark term approaches, to present Customs with documentary proof of trademark term renewal, in order to renew the term of the protection and ensure that their trademark rights remain safeguarded. Foreign holders of Taiwan trademark rights who do not have a domicile or place of business in Taiwan should also pay special attention to the new provisions regarding the compulsory use of an agent when such rights holders apply for protections under the Regulations.

For more information on trademark and IP protection and enforcement matters in Taiwan, please contact Gary Kuo at gkuo@winklerpartners.com.

This is a translation by Paul Cox, of the original Chinese article found here.

Exemptions to Taiwan’s work permit requirements: the Consultation Mechanism

Taiwan’s work permit requirements may appear to be inflexible but little-known exemptions are readily available for two requirements: minimum employer capitalization/revenue and minimum post-graduate work experience.

The Basic Requirements

Most foreign professionals in Taiwan other than teachers are employed in Class A professional and technical work.

To hire a foreign professional for Class A work, the foreign job candidate’s prospective employer must apply for a work permit from the Ministry of Labor’s Workforce Development Agency (the “WDA”).

In general, four basic requirements must be met:

  1. the capitalization/revenue requirement for the employer
  2. education/experience requirements for the employee
  3. the job must be a professional or technical job, and
  4. a minimum monthly salary of NT $47,971

Exemptions are available for the capitalization/revenue requirement and the work experience requirement. No exemptions are available for jobs that do not fall within the scope of professional and technical work. There are also no exemptions to the minimum monthly salary of NT$47,791 for foreign professionals who hold a non-Taiwan degree.

Capitalization/revenue requirement

To hire a Class A foreign professional, the employer must be a new business with NT$5 million in registered capital or an existing business with NT$10 million in revenue in the preceding year (or average NT$10 million revenue over the past three years).

Education and Experience Requirement

To be hired, a foreign professional must generally have a college degree and two years of related post-graduate work experience.

Exemptions

Exemptions are available through what the Ministry of Labor calls the “Consultation Mechanism.”[1]

If an employer does not meet the capital/revenue requirement, the employer should attach this form (in Chinese) to the work permit application.

If the job candidate does not have two years of post-college work experience relevant to the job, the employer should attach this form (in Chinese) to the work permit application.

Please note that foreign job candidates generally cannot apply for work permits or exemptions on their own. Their employer must apply for permission to hire the job candidate.

High Approval Rates

Exemptions under the Consultation Mechanism have been available since 2010. Partial statistics from the WDA show that exemptions are granted in response to most applications. Between 2010 and 2015, 176 employers applied for exemptions to minimum capital/revenue requirements. 156 (89%) of these applications were approved. Similarly, 50 employers applied for exemptions to the two year work experience requirement during the same period. 47 of the applications were approved, yielding a 94% approval rate.

While approval rates are high, the number of applications is strikingly low. This is probably explained by the fact that until recently the WDA did not have clear guidance on the Consultation Mechanism either in English or Chinese.

EZ WORK Taiwan: Information on Consultation Mechanism and Work Permits in General

In late 2016 however, the WDA added a new section to its excellent EZ WORK Taiwan website that gives comprehensive information about the Consultation Mechanism in both Chinese and English. Foreign professional job candidates can familiarize themselves with the Consultation Mechanism in English here. Since HR departments at Taiwanese companies are unlikely to be familiar with the Consultation Mechanism, job candidates can refer prospective employers to the same information in Chinese here.

More generally, the EZ WORK Taiwan website provides comprehensive information in both English and Chinese for Class A professional and technical work permits as well as bilingual information about other types of professional work permits including those for teachers, artists, and performers. Again, referring prospective employers to the Chinese side of the site can be very useful especially if you are the first foreign hire at a given company.

Special Rules for Graduates of Taiwanese Universities and Qualified Startups

It should be noted that special rules apply to foreign graduates of Taiwanese universities and to employees at qualified startups. These special rules are outside the scope of this article but more information about the Points System for foreign graduates of Taiwanese universities can be found here. Employees of qualified startups are not subject to the two year experience requirement.


[1] 會商機制 (huishang jizhi)

Amendments to Labor Standards Act passed

After lengthy discussion and public debate, amendments to the Labor Standards Act (“LSA”) were passed after its third reading on 6 December 2016. The main changes that employment law practitioners, human resource managers, employers and employees must be aware of include:

Changes to annual leave

The qualifying threshold for taking paid annual leave has been reduced from one year of service to six months of service. Employees earn additional annual leave based on years of service up to a maximum of 30 days per year. Minimum annual leave allowances as of 1 January 2017, when the new rules go into effect, are:

  • More than six months but less than one year; 3 days
  • More than one year but less than two years; 7 days
  • More than two years but less than three years; 10 days
  • More than three years but less than five years; 14 days
  • More than five years but less than ten years; 15 days and
  • Over ten years; one extra day of annual leave per year up to a maximum of 30 days.

Unused annual paid leave days must be cashed out by the end of each year of service. Failure to do so may lead to an administrative fine of between NT$20,000 and NT$1 million (approximately US$630 and US$31,500).

Elimination of national holidays

Seven national holidays have been eliminated for private sector workers. This is to make up the difference in time away from work when Taiwan switched from a 48 hour workweek to a 40 hour workweek earlier this year. When remaining national holidays occur on rest days (usually a weekend), employers must provide another day off for employees. The national holidays which have been eliminated include:

  • The day after the Founding Day of the Republic of China (January 2);
  • Revolutionary Martyrs’ Day (March 29);
  • Confucius’ Birthday (September 28);
  • President Chiang Kai-shek’s Birthday (October 31);
  • Taiwan’s Retrocession Day (October 25);
  • Dr. Sun Yat-sen’s Birthday (November 12) and
  • Constitution Day (December 25).

Implementation of a five-day work, two-day rest week

The changes provide for two rest days in seven, an increase from one rest day in seven. This brings the rest of the private sector into line with the public sector and most office-based industries. Of the two rest days, one is a mandatory day off; the other is flexible. An employee cannot agree to work on the mandatory rest day. The employee may agree to work on the flexible rest day but higher overtime rates will apply.

Overtime on flexible rest days

Employees and employers need to be aware of the new overtime calculations for flexible rest days:

  • Between 0 and 2 hours; 1.34 times regular hourly wage
  • Between 3 and 12 hours; 1.67 times regular hourly wage

Actual time worked will now be calculated at the top end of three four-hour periods. Less than 4 hours worked will be counted as the employee having worked four hours; between four and eight hours will count as eight hours and between eight and twelve hours will count as twelve hours. In other words, if an employee agrees to work on a flexible rest day and only works one hour, she must be paid for four hours at the increased overtime rate.

The above amendments will come into force once they are promulgated by the President. The changes to annual leave and elimination of national holidays will come into force on 1 January, 2017.

For more information on employment law matters, please contact Christine Chen at cchen@winklerpartners.com.

Egyptian Goddess lives on in Taiwan

In Taiwan, when deciding design patent infringement cases, the Intellectual Property Court (IP Court) will refer to the Directions for Determining Patent Infringement issued by the Taiwan Intellectual Property Office (TIPO). These Directions were recently amended to expressly incorporate the holding of the Egyptian Goddess, Inc. v. Swissa, Inc. decision handed down by the United States Court of Appeals for the Federal Circuit.

The amended Directions include the following significant changes to factors to be considered in determining design patent infringement:

  • Design patent infringement should now be assessed taking into consideration only the perspective of the “ordinary observer.” Prior to the amendment, the “point of novelty” was also considered in determining infringement;
  • The ordinary observer is defined as someone who is reasonably familiar with the patented product as well as with the prior art; and
  • The analysis of the similarity between the patented design and the accused product now adds the “three way comparison test” (i.e. comparison based on visual analysis of the prior art, the patented design and the accused product).

In the past, it was challenging for design patent holders to succeed in their infringement lawsuits (from 2008 to the present, only 30% of design patent infringement cases resulted in a determination of infringement) because minor differences between the patented design and the accused product would often be deemed to constitute a point of novelty. The existence of a point of novelty in the accused product led to a determination of no infringement. This was sometimes the case even if, from the ordinary observer’s perspective, the patented design and the accused product looked extremely similar or nearly identical.

The point of novelty issue was extensively discussed and ultimately abolished by the US Court of Appeals for the Federal Circuit in the Egyptian Goddess case. The same standard has now been adopted in Taiwan, which shows that the TIPO continues to monitor international developments and trends in intellectual property to see where modifications may be needed.

We are confident that the incorporation of Egyptian Goddess into the determination of design patent infringement in Taiwan will result in more consistent decisions handed down by the IP Court and a more predictable scope of protection for design patent holders.

For more information on patent matters, please contact Peter Dernbach at pdernbach@winklerpartners.com or Betty Chen at betty@winklerpartners.com.

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.

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.

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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