Newsletter
The Amendments to the Labor Standards Act
The Amendments to the Labor Standards Act have been passed into law ("Amendments"). The key points of the Amendments are:
I. To protect the rights of workers regarding payment of wages, severance pay and retirement payment under the old system:
1. According to Article 28 of the Labor Standards Act, in the case of an employer winding up or liquidating his/her business or being adjudicated bankrupt, the worker's six months' wages payment in arrears shall stand in priority to any other ordinary creditors' claims. However, the said priority shall not take precedence over the priority rights under any mortgage, pledge or lien.
To solve the problem of insufficient protection of workers, the new law promulgated the following Amendments:
(1) In addition to the six months wages in arrears, a worker's priority rights under Article 28 of the Labor Standards Act shall also include severance and retirement payments under the old pension system. The ranking of the said priority was elevated to be the same rank as that which exists for the claims secured by mortgage, pledge or lien in the first tier, and the worker shall be entitled to receive repayment according to the proportion of their respective claims.
(2) As for the remaining amounts that have not been repaid to the worker, it shall still stand in priority to any other ordinary creditors' claims.
As many mortgagees and pledgees of business entities are financial institutions, in order to clarify any doubts that financial institutions may be emanating from these Amendments, the Amendments allow financial institutions to enquire with the local labor administrative Competent Authority for the necessary information to verify the financial standing of business entities on matters relating to remittances, the amount, and administrative fines of the Reserve Fund of the business entities when dealing with loans.
2. The legal rate of which an employer shall make a monthly contribution to arrear a wage payment fund (the "Fund") was increased from ten ten-thousandths (10/10,000) to fifteen ten-thousandths (15/10,000). Besides being used to pay the aforementioned six months of wages in arrears, the said Fund may also be used to pay the workers' severance pay and retirement payment under the old pension system which an employer has not yet paid to them, provided that such payment shall not exceed 6 months of the employee's average monthly wage.
3. After the Amendments take effect, an employer shall appropriate a certain sum of money every month, i.e. 2% to 15% of the total wages of the workers as a Reserve Fund. Before the close of each year, an employer shall check and estimate whether the balance of the Reserve Fund is sufficient to pay the total amount of retirement payments to workers eligible for retirement in the following year, and if not, an employer shall appropriate the difference before the end of March of the following year. If an employer violates the aforementioned obligation to check, it may be subject to an administrative fine of no less than N.T.$90,000 but not more than N.T.$450,000.
4. If an employer fails to act in accordance with the provisions of the Labor Standards Act to pay severance pay and retirement payment, it may be subject to an administrative fine of no less than N.T.$300,000 but not more than N.T.$1,500,000, and shall be required to pay such fine within a certain time limit, and if the said employer fails to pay within the specified period of time, the said employer shall be fined for each violation thereof.
II. To further urge an employer to comply with relevant provisions of the Labor Standards Act: