A leading Taiwanese online bookstore, books.com.tw, got an employment law issue. A janitor who had worked for 20 years for the online bookstore was notified that she was not needed anymore in the end of 2022. When she would like to claim her employee benefits for the termination of employment relationship, such as compensation and pension, the online bookstore refused. Here is the online bookstore's argument: the janitor was hired as an independent contractor, not as an employee who can enjoy the mandatory employee benefits. Is that true? No really.
The Taiwanese Ministry of Labor announced its definition of an employment relationship: when the contract, regardless of its title, meets one or more of the following standards, it would be more likely to be viewed as the employment relationship rather than an independent contractor relationship. Here comes the employer's problem. The definition does not look like a definition. It is more like a complicated legal structure, so abstract that every employer who does not want to pay mandatory employee benefits under the Labor Standards Act would be confused. When mandatory employee benefits would include but not limited to labor insurance, health insurance, and pension, we are not talking about a small amount of money. It accumulates in a long term employment relationship, especially when you are hiring many empoyees, let alone the Taiwanese Labor Standards Act provides more protective measures for employees.
Let's check the standards provided by the Taiwanese Ministry of Labor. There are three major types of employment relationship. If satisfying more factors listed in each standard, the chances are that you have an employee other than an independent contractor.
1. The personal subordinate relationship may contain the following factors:
(1) The working time of the worker is controlled and decided by the business entity.
(2) The working methods of the worker is controlled and decided by the business entity. But if the methods are necessary for performing the work, they will not be considered as subjecting to the business entity's control.
(3) The workplace of the worker is controlled and decided by the business entity. But if the workplace is necessary for performing the work, the workplace will not be considered as under the business entity's control.
(4) The worker could not refuse the work that is instructed by the business entity.
(5) The worker shall accept that the business entity could evaluate the quality of the work or could give assessment via reviewing the working products.
(6) The worker shall abide by the business entity's disciplines, and if the worker violates the rules, the worker shall accordingly be subject to punishment.
(7) The worker shall perform the work personally. Without the business entity's approval, the worker cannot not use an agent to perform his or her job.
(8) The worker could not perform the work by his or her name.
2. The economic subordinate relationship may contain the following factors:
(1) Once the worker has performed the work, he or she will be entitled to claim for the payment without factoring his or her working products. The worker shall not bear the risk of business.
(2) The facilities, machine, material, tools and other costs for running a business shall not be provided, managed and maintained by the worker.
(3) The worker's purpose for performing the work is not for running his or her own business.
(4) The business entity has drafted the standard contract in advance, thus the worker could only claim the payment as per the terms and conditions in the standard contract.
(5) The worker is obligated to perform the work for the business entity only during the effective contract time, and the business entity prohibits the worker from establishing other employment relationship with any third party.
3. Organization Subordinate Relationship: the factor needs to be considered is whether the business entity adds the worker into the business entity's working system so that the worker shall perform the work with co-workers.
Wait a minute, there are still other standards include: whether the business entity applies for labour insurance for the worker, or the business entity allocates funds to the worker's pension account; whether the business entity withholds tax for the worker's income, and the business entity further applies for a withholding statement to the tax bureau; and whether other workers perform the same work, and the business entity has employment relationships with them.
Undoubtedly, the Taiwanese Ministry of Labor aims to avoid any chance that the employers can circumvent the Taiwanese Labor Standards Act. Having said so, it does not necessarily mean that the employers cannot take advantage of independent contractors to deal with some work need to be done. The employers can still hire an independent contractor to do website maintenance or to organize a birthday party for the employees, but better off retaining a lawyer in advance to assess the legal risks in a specific contract for saving more money and your employer reputation. For the time being, the Taiwanese online bookstore seems to take a compromise solution, paying all the fees it is supposed to pay. What we do not know is whether more money can save its reuptation.
AUTHOR: Hung Ou Yang
Managing Partner
Taipei
+886-2-2707-9976
[email protected]
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