13 April 2021
The Supreme Court rendered the 109-Tai-Shang-2579 Decision of November 12, 2020 (hereinafter, the “Decision”), holding that the restructuring and ownership change of a business entity under Article 20 of the Labor Standards Law mean that the organization format of the business entity is changed, its original personality as a juristic person is extinguished due to a transfer of ownership, or the legal representative of a sole proprietorship or partnership is changed. When the legal representative of a sole proprietorship is changed while the severance pay to an employee is not paid, the new legal representative should, after taking the helm of the business entity, recognize the years in service of such employee when s/he was employed by the former legal representative in order to be legally appropriate.
According to the facts underlying this Decision, the Appellant was employed by A, Appellee’s father, as a chef at the diner at issue after 1995. A subsequently was deceased in March 2008 when the Appellee assumed and operated the diner at issue. Therefore, the Appellee should generally assume A’s rights and obligations under Article 20 of the Labor Standards Law (hereinafter, the “Law”). The Appellee terminated the labor contract without prior notice in February 2017 on the ground that the diner was closing down. The Appellee was supposed to pay the overtime pay and wages for working during paid leave and national holidays for the past five years, which the Appellant had claimed on a retroactively basis during the labor dispute mediation applied to Taipei City Government, and the special leave wages calculated by the Appellant based on the number of special leave days. In addition, the Appellant’s years in service should be calculated based on an employment period of 18.5 years from the end of December 1998, i.e., the day when it was publicly announced that the Law applies to the restaurant sector, to the end of February 2017 in accordance with Article 17, Paragraph 1, Subparagraph 2 of the Law.
According to the Decision, Article 20 of the Law provides that if a business entity is restructured or its ownership is transferred, a prior notice on the termination of the contract shall be given during the period under Article 16 with a severance pay to the employees other than those who remained employed pursuant to the agreement between the old and new employers in accordance with Article 17. The years in service of the employees who stay employed shall be recognized by the new employer. The restructuring or ownership change of a business entity means that the business unit changes its organizational format in accordance with the Company Law, or that its original personality as a juristic person is extinguished due to a transfer of its ownership, or that the legal representative of a sole proprietorship or partnership is changed.
The Decision reversed and remanded the finding of the original trial court concerning the severance pay. Under the original decision, the Appellant was previously employed by the diner at issue and formed an employment relationship with A, the legal representative of the sole proprietorship. The labor contract between them lapsed when A was deceased in March 2008, and there is no basis to require the Appellee, who assumed the operation of the diner at issue, to assume the contract. In addition, the personality of the Appellee and that of the diner at issue run by A are different, which is different from the circumstances of “restructuring or ownership change of a business entity” under Article 20 of the Law, and the circumstances of continued employment pursuant to the agreement between the old and new employers cannot possibly arise. Therefore, such provision can hardly apply. As for the separate employment relationship between the parties, the Appellant paid the severance pay as requested in accordance with Article 17 of the Law for the an employment period of 8 years and 11 months from March 2008 to February 2017.However, the Supreme Court held in this Decision that the Appellant was employed by the diner at issue funded and operated solely by A. After the Appellee subsequently assumed the operation after A was deceased, the parties formed another employment relationship. Under such a circumstance, it would seem that the legal representative of the business entity or the diner at issue was changed. If the diner at issue failed to pay a severance pay to the Appellant upon the death of A, the Appellee should certainly recognize the Appellee’s years in service when he was employed by A to be legally appropriate. Therefore, the legal opinion of the original trial court is certainly questionable when it reached a finding unfavorable to the Appellant. The gist of the appeal was not groundless.
For further information, please contact:
Sally Yang, Lee Tsai & Partners
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