Case Scenario
Mr. Chen works for a dispatch company and is assigned to serve at Company A's project site. His labor contract is signed with the dispatch company and is generally a "one-year-renewal" fixed-term contract.
Recently, Mr. Chen heard that Company A's project might not renew its contract with the dispatch company. He asked the dispatch company (his employer): If the contract at Company A's site is indeed terminated, which leads to the termination of his labor contract with the dispatch company, is he entitled to severance pay?
The dispatch company's reply was: "The contract automatically ends upon expiration; there is no issue of severance pay".
Mr. Chen wants to know if the dispatch company's statement is correct.
Case Explanation and Rights Analysis
The dispatch company's statement is not necessarily correct. This involves the classification of "fixed-term contracts" and "non-fixed-term contracts" under the Labor Standards Act (hereinafter referred to as the "LSA"), as well as the definition of "severance".
1. Determination of Labor Contract Nature
According to Article 9, Paragraph 1 of the LSA, work that is continuous in nature should be a non-fixed-term contract; only work that is temporary, short-term, seasonal, or specific can be covered by a fixed-term contract.
Practical Judgement: Although Mr. Chen signed a "one-year-renewal" fixed-term contract with the dispatch company, in practice, if Mr. Chen's job duties are regular and continuous (e.g., administrative work, production line, etc.), and the dispatch company can assign the employee to other project sites, then this "one-year-renewal" labor contract should essentially be classified as a non-fixed-term contract.
2. Conditions for Severance Pay
Severance pay is a cost that the employer must pay to the employee in cases of involuntary separation that qualify as "severance" under the LSA.
|
Situation |
Explanation |
|
Automatic termination upon contract expiration |
If Mr. Chen's job nature truly meets the definition of "temporary, short-term, seasonal, or specific work" (Note 1) as stipulated in Article 6 of the Enforcement Rules of the LSA, and the dispatch company does not renew the contract after its expiration, it is considered "contract expiration," and there is no issue of severance pay. |
|
Termination due to non-renewal of the project site contract |
If Mr. Chen's job is deemed a non-fixed-term contract, or if it is a fixed-term contract but the employer terminates it early, and the reason for termination is one of the grounds specified in Article 11 or the proviso of Article 13 of the LSA (Note 2) (e.g., employer's business contraction, unit loss, change in business nature, or end of the corporate project site's operation), severance pay must be provided. |
3. Basis for Dispatch Employee Rights
For a dispatch employee, even if the dispatch company claims the contract termination is due to "non-renewal of the project site contract," this still meets the grounds for severance for the employee as described in Article 11, Subparagraph 4 of the LSA: "When the nature of the business is altered, necessitating a reduction of workers, and no suitable work is available for placement".
In short, the dispatch company "having no project for the employee to work on" is a change in the company's operation, not a voluntary resignation by the employee. Therefore, it should be regarded as the dispatch company severing the employee according to the LSA. The dispatch company must legally pay Mr. Chen severance pay and provide a notice period or wages in lieu of notice.
Note 1: Enforcement Rules of the Labor Standards Act, Article 6:
The terms "temporary," "short-term," "seasonal," and "specific" work referred to in Article 9, Paragraph 1 of this Act shall be determined according to the following provisions:
- i. Temporary work: Refers to non-continuous work that cannot be foreseen, and the work period is within six months.
- ii. Short-term work: Refers to non-continuous work that is expected to be completed within six months.
- iii. Seasonal work: Refers to non-continuous work affected by seasonal raw materials, sources of materials, or market sales, and the work period is within nine months.
- iv. Specific work: Refers to non-continuous work that can be completed within a specific period. If the work period exceeds one year, it shall be reported to the competent authority for approval.
Note 2: Labor Standards Act, Article 11:
An employer shall not terminate a labor contract with a worker unless one of the following situations occurs:
- i. The employer's business suspends or is transferred.
- ii. The employer suffers losses or business contraction.
- iii. A force majeure event causes work to be suspended for more than one month.
- iv. The nature of the business is altered, necessitating a reduction of workers, and no suitable work is available for placement.
- v. The worker is definitely incompetent to perform the duties required of the work he or she is employed to do.
Labor Standards Act, Article 13:
An employer may not terminate a contract with a worker during the period of suspension from work under Article 50 or the medical treatment period under Article 59. However, this shall not apply if the employer's business cannot continue due to an act of God, an accident, or other force majeure, and has been approved by the competent authority.
