Taiwan - Termination Of The Labor Contract By The Employer In Accordance With Article 11.

Legal News & Analysis - Asia Pacific - Taiwan - Regulatory & Compliance - Labour & Employment

3 February 2021

The Supreme Court rendered the 109-Tai-Shang-1516 Decision of August 13, 2020 (hereinafter, the “Decision”), holding that the termination of the labor contract by the employer in accordance with Article 11, Subparagraph 5 of the Labor Standards Law is permitted only if the employee is unable to achieve the economic purposes desired by the employer and this situation still cannot be improved after various means are employed.

According to the facts underlying this Decision, Appellants A and B asserted that they were both employees of the Appellee.  The Appellee unexpectedly terminated the labor contract with the Appellants in accordance with Article 11, Subparagraph 5 of the Labor Standards Law.  However, none of A and B was subject to the circumstance of incompetence for work as alleged by the Appellee, and the Appellee also elected to lay them off without protecting their work rights through means such as position transfer. Since the principle of last resort was not met, the termination of the labor contract was not lawful, and the employment relationship still existed.  Since the Appellee terminated the labor contract with an intent to refuse the services provided by A and B, they were not obligated to supplement the services, and the Appellee shall also pay the wages by month. Therefore, pursuant to the labor contract and Article 487 of the Civil Code, the Appellants sought a decision that confirms the existence of the employment relationship and compels the Appellee to pay wages to the Appellants.

The Appellee contended that A and B had ranked the lowest in KPIs in the past five years and were found several times that they failed to report excess cash pursuant to applicable requirements or did not verify seal specimens truthfully.  Their supervisor proposed a plan to improve their performance within a time limit and set targets they were supposed to achieve for items they had relatively lagged behind. However, they still failed to achieve the expected targets. Therefore, they were concluded to be incompetent for their work, and such evaluation was reported to the Personnel Management Committee, which subsequently adopted a resolution to lay them off pursuant to law.  The Appellee provided several opportunities before the layoff so they could be coached and improve. A and B were also asked if they were willing to be transferred to another position, but they both indicated that they were not willing to do so. Although A and B were willing to be transferred to be reserve tellers, but they did not have the professional certificates required of reserve tellers, not to mention that they were not interested in the position to which they were to be transferred. As a result, there was no appropriate placement for them. The labor contracts between the Appellee and the Appellants were both lawfully terminated since the principle that termination of employment should be the last resort was not violated.

According to the Decision, Article 11, Subparagraph 5 of the Labor Standards Law provides that if an employee is indeed incompetent for his/her work, the employer may terminate the labor contract with prior notice. According to the legislative purposes, in case the labor service provided by a worker fails to achieve the objective and reasonable economic purposes desired by the employer, regardless of whether the employee is objectively unable to perform the work based on his or her objective knowledge, ability, physical and mental condition, or is subjectively able but fails to perform the work, the employer shall be allowed to pay a severance and terminate the labor contract only if the situation cannot be improved after the employer resorts to all kinds of means in order to satisfy the “principle that termination of employment should be the last resort.”

It was further indicated that the Regulations Governing Required Qualifications for Legal Representatives and the Required Trust Expertise or Experience for Operations and Managerial Personnel of Trust Enterprises, the Regulations Governing the Insurance Solicitors and the Regulations Governing Insurance Brokers suggest that obtaining certificates or licenses by passing relevant trust or insurance examinations is a required qualification for the practitioners of such business. In addition, the Appellee implemented a plan to improve the performance of A and B so that they could achieve the required KPIs within a time limit with “personal loan and collaborated sale of points,” “fee income from referral to financial advisory service,” and “achieved rate of tellers holding certificates” being the major improvement items.  The original trial court held that A and B were indeed incompetent for their work, which is particularly reflected by their long-term undesirable KPIs and failure to obtain relevant trust or insurance certificates and to show improvement even after their supervisor’s performance improvement coaching for several times.  However, as asserted by A and B and stated by the witnesses, A was an accountant whose responsibility was to prepare vouchers, handle foreign exchange and acting as a teller, while B was a service representative or teller responsible for collection and payment  before they were discharged. They were both internal operation officers, not field operation officers. Therefore, as they stated, it seems that A and B did not engage in trust, insurance, lending or financial advisory services.  Therefore, it is questionable if A and B could be found incompetent for their work just because their failure to obtain relevant certificates and licenses and to achieve the performance requirements mentioned above made the Appellee unable to achieve the objective and reasonable economic purposes through the labor contracts.

Therefore, it was concluded in this Decision that without clarifying the original job duties and the scope of work of A and B, the original trial court was rash when it elected to conclude that the improvement items enumerated in the performance improvement plan were part of the business they were originally in charge of and could be used as the basis for determining if they were incompetent for their work, and further held that A and B were indeed incompetent for their work since they did not show any improvement after they were requested to obtain trust and insurance certificates and licenses with performance improvement coaching provided to them. In addition, the witnesses testified that A and B were not subject to any circumstance where they were incompetent for their work before they left their employment.  This certainly calls into question if they were actually incompetent for their work simply because they had failed to obtain the certificates and licenses or to meet their performance requirements.  Therefore, this portion of the original decision was reversed and remanded.


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