Taiwan

In Taiwan, employment agreements are governed by the Labor Standards Act (LSA). The LSA provides strong protections for employees and outlines the legal framework for employment contracts. There are two primary categories of employment agreements recognized under Taiwanese law: Indefinite Term Contracts and Fixed-Term Contracts.

Indefinite Term Contracts

Indefinite term contracts, also known as open-ended contracts, are designed for ongoing, continuous work. These contracts are the most common type of employment agreement in Taiwan. They offer greater security for employees as there's no pre-defined end date for their employment.

Fixed-Term Contracts

Fixed-term contracts are used for temporary, short-term, seasonal, or specific project-based work. These contracts have a pre-determined end date outlined in the agreement. Some key points to remember about fixed-term contracts in Taiwan include:

• They can only be used for legitimate temporary work needs as defined by the LSA.
• Renewals of fixed-term contracts are strictly regulated. If the employer allows the employee to continue working after the contract expires without objection, the fixed-term contract automatically converts into an indefinite term contract.

Additional Considerations

While these are the two main categories of employment agreements, there are other factors to consider within each type of contract. For instance, the contract will specify whether the position is full-time or part-time.

Taiwan's Labor Standards Act (LSA) is the basis for employment contracts, but a well-drafted agreement goes beyond the minimum legal requirements and fosters a clear understanding between employer and employee. Essential clauses to consider include:

Basic Information

• Parties: The employer and employee should be clearly identified with their full legal names.
• Position: The job title, department, and a brief description of the employee's responsibilities should be specified.
• Effective Date: The start date of employment should be indicated.

Contract Type

• Fixed-Term vs. Non-Fixed Term: Fixed-term contracts are generally for temporary work under six months or specific projects with a defined timeframe. Non-fixed term contracts are the norm for ongoing employment and presumed if not explicitly stated.

Compensation and Benefits

• Salary: The gross monthly salary, payment schedule, and any allowances or bonuses should be outlined.
• Working Hours: The LSA's standard working hours should be adhered to: 8 hours per day and 40 hours per week. Overtime pay rates should be specified if applicable.
• Leave: Entitlement to annual leave, sick leave, and other forms of paid leave according to LSA regulations should be detailed.
• Benefits: Any additional benefits offered, such as health insurance, social security contributions, or housing allowances, should be listed.

Termination

• Grounds for Termination: Reasons for termination permitted by law, including those outlined in the LSA, should be enumerated.
• Notice Period: The required notice period for termination by either party, following LSA guidelines, should be defined.
• Severance Pay: Severance pay calculations based on LSA requirements should be outlined.

Confidentiality and Intellectual Property

• Confidentiality: Clauses protecting the employer's confidential information and trade secrets should be included.
• Intellectual Property: Ownership rights to any intellectual property created by the employee during their employment should be specified.

Dispute Resolution

• Governing Law: Taiwan's LSA should be established as the governing law for any employment-related disputes.
• Dispute Resolution Mechanism: The preferred method for resolving disagreements, such as mediation or arbitration, should be outlined.

Probationary periods are a common feature in employment agreements in Taiwan, offering employers a chance to assess new hires and employees the opportunity to determine if the role is a good fit. While there are some key differences compared to other jurisdictions, the following are the key characteristics and considerations of probation periods in Taiwan.

Key Characteristics of Probation Periods in Taiwan

• Not Mandatory: Taiwan's Labor Standards Act (LSA) does not explicitly mandate probationary periods in employment contracts. This means employers have the discretion to include them or not, and the terms can be negotiated between the employer and employee.
• Typical Duration: Although there's no legal maximum, the standard practice in Taiwan is for probationary periods to last for three months. This timeframe allows employers to evaluate an employee's skills, performance, and suitability for the position.
• Rights During Probation: Even though under probation, employees are still entitled to the same rights and benefits as regular employees under the LSA and other labor laws. This includes rights to minimum wage, overtime pay, and social insurance.
• Notice Periods for Termination: A key advantage of a probationary period is the flexibility in termination for both employers and employees. During this time, either party can terminate the contract with a shorter notice period compared to after the probation ends. The specific notice period may be outlined in the employment contract, but it typically falls between 10 and 30 days.

Additional Considerations

• Severance Pay: While severance pay is generally required by law in Taiwan upon termination, it may not be applicable during the probationary period, depending on the specific circumstances of the termination.
• Negotiation is Key: Since probationary periods are not mandatory and their terms are negotiable, it's important for both employers and employees to carefully review and discuss the details before signing an employment contract.

Understanding these characteristics and considerations can help employers and employees in Taiwan approach probationary periods in a way that benefits both parties.

In Taiwanese employment agreements, confidentiality and non-compete clauses are often included to safeguard an employer's legitimate business interests. However, these clauses must adhere to certain legal requirements to be enforceable.

Confidentiality Clauses

Confidentiality clauses prohibit employees from revealing an employer's confidential information during and after their employment. In Taiwan, these clauses are generally enforceable as long as the information being protected qualifies as a trade secret or other confidential information.

Defining Confidential Information

The Labor Standards Act (LSA) in Taiwan does not provide a specific definition of confidential information. However, based on court rulings, it can include:

• Trade secrets
• Customer lists
• Technical know-how
• Business plans
• Unpublished information with economic value

The scope of confidential information must be clearly defined in the employment agreement.

Non-Compete Clauses

Non-compete clauses limit an employee's ability to work for a competitor after their employment ends. These clauses are subject to stricter scrutiny in Taiwan compared to confidentiality clauses.

Enforceability of Non-Compete Clauses

For a non-compete clause to be enforceable under the LSA, it must meet the following criteria:

• Legitimate Employer Interest: The employer must have a legitimate business interest to protect, such as trade secrets or unique customer relationships.
• Employee Access to Confidential Information: The employee must have had access to the confidential information that the clause seeks to protect.
• Reasonable Scope: The restrictions on the employee's post-employment activities must be reasonable in terms of:
  • Duration: The non-competition period cannot exceed two years or the life cycle of the protected information (whichever is shorter).
  • Geographic Area: The restricted geographic area should be limited to where the employer has legitimate business interests.
  • Scope of Activities: The restricted activities should be limited to those that would directly compete with the employer's business.
• Compensation: The employer may be required to provide reasonable compensation to the employee during the non-competition period.

Consequences of Non-compliant Clauses

If a non-compete clause fails to meet any of these criteria, it may be declared null and void by a court. This means the clause will be unenforceable, and the employee will be free to work for a competitor.