Grounds for Termination
Termination by employer: An employer may not terminate an employment contract unilaterally unless any of the events specified in Article 11 (layoff with advance notice and severance pay) or Article 12 (dismissal without notice or pay) of the Labour Standards Act (LSA)
- Layoff: The following causes could serve as statutory grounds for termination of employees with prior notice and severance pay (Article 11 of the LSA):
- The employer’s business is suspended or transferred;
- The employer’s business is suffering operating losses and/or business contractions;
- The employer’s business is suspended for more than one month due to force majeure;
- The nature of the employer’s business has changed that requires a reduction of workforce and employees could not be reassigned to other positions; or
- An employee is unable to perform satisfactorily in his/her contracted position.
- Dismissal: An employer may terminate any employment contract without giving advance notice under any of the following grounds (Article 12 of the LSA):
- The employee misrepresents a fact at the time of signing the employment contract which might cause damage to the employer;
- The employee commits a violent act or grossly insults the employer, his agent/family, or fellow employees;
- The employee is sentenced to temporary imprisonment in a final judgment and is not granted a suspended sentence or an alternative sentence to pay a fine;
- The employee is in serious breach of the employment agreement or work rules;
- The employee deliberately damages/abuses the employer’s property or intentionally releases the employer’s confidential information; or
- The employee is absent for three consecutive days or a total of six days in any month without good cause.
Any dismissal for (i), (ii), (iv), (v) and (vi) above must be made within 30 days from the date when the employer is aware of the specific circumstance.
Termination by employee: An employee may terminate his/her employment contract based on a voluntary resignation by giving prior notice to his/her employer.
Pursuant to Article 14, Paragraph 1 of the Labour Standards Act (LSA), an employee may terminate the employment contract and seek for severance under certain conditions, including: the employer making a misrepresentation at the time of entering into the employment contract, which may cause harm to the employee; the employer or their agent engaging in acts of violence or significant insult against the employee; the work being detrimental to the employee’s health and the employer failing to make necessary improvements; the employer or other employees having an infectious disease that poses a significant threat to the employee’s health; the employer failing to pay wages or provide adequate work; and the employer violating the employment contract or applicable laws, thereby infringing upon the employee’s rights.
Collective Dismissals
If the number of laid-off employees reaches any of the prescribed thresholds for mass redundancy of employees, an employer shall go through the mass redundancy procedure including to prepare a mass redundancy plan with a 60-day prior notification to be submitted to the government authorities and the affected employees and proceeds with the subsequent consultation procedures.
Individual Dismissals
In a case of lay-off under Article 11 of the Labour Standards Act (LSA), an employer shall notify the labour authorities at least 10 days before the termination date in each case. Such a request does not apply to a summary dismissal case.
Is Severance Pay Required?
The statutory severance pay is (i) 100% of an employee’s average monthly salary for each full year of service with respect to service years under the Old Pension Scheme without an upper limit, and/or (ii) 50% of an employee’s average monthly salary for each full year of service, up to a maximum of 6 average monthly salaries, with respect to service years under the New Pension Scheme.
Separation Agreements
a. Is a Separation Agreement required or considered best practice?
In Taiwan, a resignation agreement mutually executed by both employer and employee to terminate the employment relationship is not a mandatory requirement, but it is often regarded as an ideal method to conclude the employment relationship.
b. What are the standard provisions of a Separation Agreement?
The content of a resignation agreement is not subject to statutory standard clauses and typically depends on the negotiation between the employer and the employee in each case. It may usually include the amount and date of a mutual separation payment to the employee, general release, work handover, and confidentiality obligations.
c. Does the age of the employee make a difference?
Local laws are silent on the mutual separation agreement. There is no mandatory requirement to consider the age of the employee.
d. Are there additional provisions to consider?
It is important to make sure that the employee executes the Mutual Separation Agreement out of free will.
Remedies for Employee Seeking to Challenge Wrongful Termination
Please note that if an employee files a wrongful termination lawsuit against the employer’s employment termination decision, and if the court renders a judgement in favour of the employee, the company’s liability would be to reinstate the employee’s employment and to compensate him or her for loss of salary from the date of wrongful termination to the date of reinstatement (at the same time the employee is not employed by another employer), a period which could be two to three years pending the final outcome of the judgement.
In addition, please be informed that according to the Labour Incident Act (LIA), if the court believes that it is possible for the employee to receive a favourable ruling in the suit and that there is no material difficulty for the employer to continue employing the employee, the court may order the employer to continue employing and paying wages to the employee. In this way, the employee may be reinstated and continue to work and receive wages during the course of the litigation.
Whistleblower Laws
Article 74 of the Labour Standards Act (LSAL), Article 39 of the Occupational Safety and Health Act, Article 33 of the Labour Inspection Act, Article 40 of the Labour Pension Act, and Article 36 of the Gender Equality in Employment Act, etc. are the established regulations to prevent whistleblowers from facing retaliatory actions
Furthermore, the concept of protecting whistleblowers and encouraging public interest disclosures has gradually gained recognition by the courts in Taiwan. Employers are prohibited from taking retaliatory adverse actions against employees who courageously expose illegal practices within the company.
While the newly enacted Whistleblower Protection Act will take effect in July 2025, this new law does not apply to private entities that are not invested by government.
