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The Supreme Court's Latest View on Principle of Labor Dependency
Subparagraph 6 of Article 2 of the Labor Standards Act defines a "labor contract" as "an agreement that establishes an employee-employer relationship with dependency ". Therefore, "dependency" constitutes the key feature of a labor contract. However, as the Labor Standards Act does not specify ways to identify "dependency", the scope of ""dependency"" can only be made more specific or concrete through relevant interpretations in judgments.
The supreme courts holds the view that "dependency" should include features of "personal dependency", "economic dependency" and "organizational dependency", as known from the following view in Supreme Court Judgment 96-Tai-Shang-2630 (2007):
"In accordance with the provisions in the Labor Standards Act, a labor contract means an agreement under which a party provides labor force in a dependent relation to the other party and who pays the remuneration thereof. In its essence, the dependency between the worker and its employer usually (1) has a personal dependency, namely the employee submits himself/herself to the employer's authority within the corporate organization of the employer and is obligated to accept the employer's discipline or sanction; (2) is performed in person and forbids the use of an agent; (3) has an economic dependency, namely the employee, rather than working for his/her own business, works in subordination to other person for other person's purpose; and (4) has an organizational dependency, namely the employee is incorporated into the employer's production system and works in cooperation with his/her colleagues with a due division of labor. Such features are widely different from those of a mandate contract, under which the mandatory handles matters for a specific purpose and has independent discretion over such matters."
With respect to a case concerning whether the contract between a truck driver and the moving company he works for is a labor contract or a contract for work, the Supreme Court holds the following view in Supreme Court Judgment 110-Tai-Shang-90 (2021) dated April 22, 2021: "…However, in accordance with the provisions in the Labor Standards Act, a labor contract means an agreement under which a party provides labor force in a dependent relation to the other party, who pays the remuneration thereof, which can be seen in Subparagraphs 3 and 6 of Article 2 of the Labor Standards Act. The employee in a labor contract is usually in a personal, economic and organizational dependency to the employer. On the other hand, in a contract of work, the parties agree that one of them shall complete a definite work for the other party, who pays remuneration after the completion of the work, as specified in Paragraph 1 of Article 490 of the Civil Code. The parties in a contract of work seek the results from the completion of services, and the undertaker is only required to complete a definite work within the agreed timeframe and is not in a dependent relation to the proprietor. Therefore, a labor contract and contract of work are different in nature. As the Labor Standards Act is enacted to protect service providers, except where the parties expressly enter into a contract of work, or there is obviously no relevance to the nature of employment relationship, for the purpose of protecting the workers, the identification of the nature of a contract should be made favorable to the service provider. A partial dependency alone will be sufficient to establish a labor contract relationship."
The latest Supreme Court judgment cited above indicates that in addition to reiteration of the features of a labor contract including personal dependency, economic dependency and organizational dependency, the Supreme Court has even adopted a lenient criterion in the differentiation between contract of work and labor contract. Except where the parties expressly enter into a contract of work, or there is obviously no relevance to the nature of employment relationship, as the Labor Standards Act is enacted to protect the workers, a partial dependency alone will be sufficient to establish a labor contract relationship. Based on such lenient criterion, in the above mentioned case, despite a contract of work entered into by the moving company and the truck driver, owing to the facts that the remuneration calculation method prescribed in such contract of work (by the actual volume transported) was different from that for the actual remuneration received by the driver (a part of the driver's monthly remuneration is a fixed amount) and that witness testimony indicated that such contract of work was entered into for labor inspection, the supreme court had doubts over whether both parties had a real intention to enter into a contract of work and thus overruled the judgment of the High Court.
It can be seen from the Supreme Court judgements cited above that to avoid a contract being identified as a labor contract, the parties have to expressly enter into a contract of work. In addition, efforts should be made to avoid the relevant provisions thereof from being identified as featuring personal dependency, economic dependency and organizational dependency. Furthermore, even when only a partial dependency exists, for the purpose of protecting the workers, the court may still adopt a lenient criterion to determine the establishment of a labor contract relationship. Where there is a need going forward for entering into a contract of work, the parties are advised to conduct cautious discussions on the provisions thereof by referring to the reasons of the said Supreme Court judgments to prevent such contract from being identified as a labor contract.