【Legal Life】Ch26 Labor Standards Act? Not Your Turn Yet!

After graduation, Yü-ling joined a medium-sized electronics company as a human resources manager. Having experienced deeply unforgettable bullying during her college part-time jobs (EP16&EP17), Yü-ling was no longer her former naive self.

Upon taking office, Yü-ling immediately had all electronic engineers in the company sign a work-type agreement. It stated that the relationship between the company and the engineers was one of承攬 (independent contractor), and therefore the Labor Standards Act did not apply. Although the engineers complained that humanities majors loved making mountains out of molehills, they all agreed and signed.

Because the contract stated that the Labor Standards Act did not apply, Yü-ling assumed these techies spent all day glued to their computers without any discernible work output, and thus reduced the engineers' overtime pay, while requiring those who worked on holidays to receive only half-pay extra. Although confident this approach was foolproof, Yü-ling's past part-time job experiences in college had taught her the harsh realities of society; just to be safe, she destroyed the company's payroll ledgers following this restructuring.

Yü-ling's final step was to establish a dense web of work regulations, stipulating that any violation by an engineer—regardless of severity—would result in direct deductions from their salary. Subsequently, a routine labor inspection uncovered the aforementioned facts...

How to Determine Whether an Employment Relationship Exists

According to Article 3, Paragraph 3 of the current Labor Standards Act, the Act applies in principle to all employer-employee relationships, with exceptions where the Ministry of Labor may make special announcements for special circumstances—such as night market fried chicken stalls, teachers at various school levels, and doctors. Therefore, if an employment relationship exists, the Labor Standards Act applies in principle between the parties. The question is: how to determine whether an employment relationship exists?

Legal theory and judicial practice in Taiwan hold that this should be judged by whether the worker possesses "subordination," categorizing subordination into personal, economic, and organizational criteria.

Personal subordination examines whether the worker is obliged to obey the employer's orders, reflecting a state of subordination and attachment. In practice, personal subordination is often assessed comprehensively through factors such as: whether the employer holds the power of command and supervision (just do as you're told, why so much chatter?), the power of performance evaluation or disciplinary action (don't want your year-end bonus next year?), whether the worker must personally perform the labor (doing it yourself instead of passing it to others?), whether the worker has the right to refuse labor (get lost if you don't want to do it?), and whether they must comply with work rules or all internal regulations formulated by the employer?

Economic subordination emphasizes that the worker is in a relatively disadvantaged financial position, relies on wages paid by the employer for survival, and labors not for their own business but under the control of and for the purpose of another, without bearing the employer's operational risks;

Organizational subordination focuses on whether the worker belongs to the employer's production operation as a member integrated into the enterprise production system, cooperating with other workers.

Judicial practice has traditionally adopted a relatively lenient stance on determining whether someone is a worker; the existence of an employment contract is generally recognized as long as partial subordination is established.

Labor and Management Cannot Agree to Exclude the Application of the Labor Standards Act

If it is determined that the aforementioned characteristics of subordination are met, because the Labor Standards Act is a fundamental law regulating the "minimum standards" of various working conditions, its provisions serve as the minimum standard for the content of the employment contract and possess the character of mandatory regulations. Parties cannot agree to exclude its application by mutual consent; even if agreed upon, such an agreement is void.

Introduction to Overtime Pay Systems in the Labor Standards Act

Article 24 of the Labor Standards Act stipulates that for overtime within two hours (i.e., the 1st and 2nd hours of overtime), overtime pay shall be calculated by adding at least one-third more than the ordinary hourly wage; for additional overtime within another two hours (i.e., the 3rd and 4th hours of overtime), it shall be calculated by adding at least two-thirds more than the ordinary hourly wage. As for working even more overtime (i.e., the 5th hour of overtime and beyond...), sorry, the Labor Standards Act does not permit working more than 12 hours a day (8 regular hours + 4 overtime hours is already the limit), and working beyond that incurs penalties.

Furthermore, pursuant to Articles 36 to 38 of the Labor Standards Act and Article 23 of the Enforcement Rules of the Labor Standards Act, workers are entitled to one day of rest every seven days, known as a regular leave (例假); days designated for holidays by the competent authority are called holidays (休假, commonly referred to as national holidays, which have been the focus of recent debates); and workers who have worked for the same employer for a certain period are additionally entitled to special leave of varying lengths based on their tenure.

Moreover, pursuant to Article 39 of the Labor Standards Act, an employer may only have an employee work on a holiday or special leave day with the employee's consent, and must pay double wages. The legislative intent is similar to Article 24 of the Labor Standards Act: by increasing overtime pay to raise the employer's personnel costs, stingy bosses are discouraged from constantly demanding overtime from workers.

What Are the Consequences of an Employer Violating the Labor Standards Act by Failing to Pay Overtime?

If an employer violates the aforementioned provisions of Articles 24 and 39 of the Labor Standards Act, the worker may file a complaint with the local competent authority. Pursuant to Article 79, Paragraph 1, Subparagraph 1 of the Labor Standards Act, the competent authority will impose an administrative fine ranging from NT$20,000 to NT$300,000 on the employer; pursuant to Article 80-1, Paragraph 1 of the Labor Standards Act, the competent authority shall also disclose the name of the business entity or employer and the name of the person-in-charge.

Additionally, when a worker has indeed worked overtime or worked on national holidays and special leave days, but the employer illegally fails to grant overtime pay or double wages in accordance with the Labor Standards Act, the worker may not only file a complaint with the competent authority to correct the employer's illegal behavior through administrative penalties, but may also file a civil lawsuit for payment in civil court, demanding the employer pay the unpaid overtime or wages. Once a favorable judgment is obtained for this payment, it will produce executory force. If the employer fails to perform voluntarily, the worker may use the judgment to apply to the court for compulsory execution.

What is the Company's Obligation to Preserve Payroll Ledgers?

Because an employment contract is a continuous obligation relationship, disputes between parties may have arisen long before, and workers simply refrain from immediately disputing due to personal connections or livelihood considerations. However, as time passes, various evidentiary materials may fade or be lost, putting workers at a severe disadvantage in proving their case in litigation.

Nevertheless, the Labor Standards Act explicitly stipulates the employer's obligation to preserve payroll ledgers. In addition to serving as evidence in future litigation, these are also reference documents required when the competent authority inspects business entities. Pursuant to Article 23, Paragraph 2 of the Labor Standards Act, employers must prepare payroll ledgers recording matters such as wage disbursements, wage calculation items, and total wage amounts, and must preserve them for five years. Employers who violate this provision shall be fined NT$20,000 to NT$300,000 pursuant to Article 79, Paragraph 1, Subparagraph 1 of the Labor Standards Act, and the competent authority shall publish the name of the business entity or employer and the name of the person-in-charge.

Can a Company Arbitrarily Set Off Claims Against Workers Against Their Wages?

Because wages are the source of funds upon which workers depend for survival, to prevent employers from arbitrarily deducting wages under various pretexts, Article 22, Paragraph 2 of the Labor Standards Act stipulates that, except where otherwise provided by law or agreed upon by the parties as stipulated in the proviso of the same paragraph, wages shall be paid to workers in full and directly as a principle, and employers may not arbitrarily claim deductions (set-off) using other claims.

If there are special provisions in the law, they may serve as exceptions to the principle of full wage payment. For instance, Article 26 of the Labor Standards Act stipulates that employers shall not "advance" withhold workers' wages as liquidated damages or compensation. According to the interpretation of the competent authority, liquidated damages or compensation here include both facts that have not yet occurred and facts that have occurred but whose contents are uncertain; all are encompassed by the principle prohibiting the advance withholding of wages.

In other words, if an employer's claim for liquidated damages or compensation against a worker is fully ascertained and undisputed by either party, the employer may then assert a set-off and deduct it from the worker's wage claim. Since this is no longer "advance withholding," Article 26 of the Labor Standards Act becomes a statutory exception to the full-payment principle of Article 22, Paragraph 2 of the same Act. Conversely, if the worker disputes the amount or content of the compensation or liquidated damages, according to the competent authority's interpretation, the employer may not claim set-off or deduction.

Related Statutory Provisions

Article 22, Paragraph 2 of the Labor Standards Act
"Wages shall be paid directly and in full to workers. However, where otherwise provided by law or agreed upon by both employer and employee, this restriction shall not apply."

Article 23, Paragraph 2 of the Labor Standards Act
"Employers shall prepare payroll ledgers recording matters such as wage disbursements, wage calculation items, and total wage amounts. Payroll ledgers shall be preserved for five years."

Article 36 of the Labor Standards Act
"Workers shall have at least one day of rest every seven days as a regular leave."

Article 37 of the Labor Standards Act
"Memorial days, labor days, and other holidays designated by the central competent authority shall be granted leave."

Article 38 of the Labor Standards Act
"Workers who work continuously for the same employer or business entity for a certain period shall be granted special leave annually in accordance with the following provisions:
1. Seven days for those who have worked for one year up to less than three years.
2. Ten days for those who have worked for three years up to less than five years.
3. Fourteen days for those who have worked for five years up to less than ten years.
4. One additional day for each year for those who have worked for ten years or more, up to a maximum of thirty days."

Article 39 of the Labor Standards Act
"Wages shall be paid by the employer for regular leave stipulated in Article 36, holidays stipulated in Article 37, and special leave stipulated in Article 38. If an employer obtains the consent of a worker to work on a holiday, wages shall be doubled. The same applies if work continues with the consent of the worker or labor union due to the necessity of rushing work on account of seasonal reasons."

Article 79, Paragraph 1, Subparagraph 1 of the Labor Standards Act
"A fine of not less than NT$20,000 and not more than NT$300,000 shall be imposed for any of the following acts:
Violating the provisions of Article 7; Article 9, Paragraph 1; Article 16; Article 19; Article 21, Paragraph 1; Articles 22 to 25; Article 28, Paragraph 2; Article 30, Paragraphs 1 to 3, Paragraph 6, and Paragraph 7; Article 32; Articles 34 to 41; Article 46; Article 49, Paragraph 1; Article 56, Paragraph 1; Article 59; Article 65, Paragraph 1; Articles 66 to 68; Article 70; or Article 74, Paragraph 2."

Article 80-1 of the Labor Standards Act
"Where an employer violates this Act and is fined by the competent authority, the competent authority shall publish the name of the business entity or employer and the name of the person-in-charge, and order them to improve within a prescribed time limit; those who fail to improve upon expiration shall be fined consecutively.
When imposing a fine, the competent authority may take into consideration the number of workers affected by the violation, the cumulative number of violations, or the amount of unpaid wages as criteria for determining the severity of the penalty."