By Hung Ou Yang
Taiwanese Ministry of Labor published model rules for Labor Relationship on October 5th, 2015. When an employer would like to protect the business interests and an employee would like to know his/her rights after an employment contract is terminated, this article explains the new model rules which both the employers and the employees should pay attention to.
First of all, Taiwanese Ministry of Labor defined that the Post Employment Non-Compete Clause as referred to in the model rules means any agreement entered into between an employee and an employer that, in order to protect interests as defined within the scope of Article 5, the employer pays reasonable compensation to the employee in exchange for the employee’s not being employed by or starting the same or similar business in competition against the employer within certain period and/or certain area since the termination of the employee’s labor contract.
The model rules section 5 provides that "[t]he employer may not conclude a Post Employment Non-Compete Clause with the employee unless otherwise the following requirements are fulfilled:
5.1 The employer as business is entitled to trade secret and/or intellectual property rights which shall be protected in accordance with law.
5.2 The employee, at his/her position or function, has access to trade secret and/or preponderant but not general technology of the employer which shall be protected."
Moreover, the model rules section 6 provides that "[a] Post Employment Non-Compete Clause shall be restricted by the following limitations:
6.1 The prohibitions of period, area, position or function, and future employer, imposed upon the employee in the Post Employment Non-Compete Clause shall not go beyond reasonable limitation:
6.1.1 The prohibition of period shall be necessary for the protection of the employer’s interests and in any case shall not exceed 2 years.
6.1.2 The prohibition of area shall indicate clear and definite boundary within the areas where the employer runs his/her/its business, and shall not become unfair restriction to the right of work in any case.
6.1.3 The prohibition of position, function, and future employer, shall be specific and unequivocal and be the same or similar business in competition against the employer.
6.2 The compensation given in exchange for the prohibitions as mentioned above shall be reasonable:
6.2.1 The employer shall give reasonable compensation for occupational disadvantages incurred by the employee in the process of honoring the Post Employment Non-Compete Clause. During the period of prohibition of post employment competition, the employer shall pay monthly compensation not lower than 50% of the employee’s average monthly salary when he/she left his/her former occupation to the employee in such ways that maybe once in advance or per month, for the purpose of keeping the employee’s life during the period. The Post Employment Non-Compete Clause shall never be effective unless otherwise the measure of compensation is effectively agreed.
6.2.2 The compensation as described herein shall never be substituted or replaced by any payment the employer paid or shall pay to the employee during the period when he/she is still on duty."
According to the model rules, both the employers and the employees shall note that "[t]he employee may not be subject to the Post Employment Non-Compete Clause if the labor contract is terminated by the employer without justifiable cause or by the employee pursuant to Article 14 of Labor Standards Act. The same applies when the employer does not pay any compensation, partly or wholly, to the employee" (Model rules section 8). That being said, the compensation becomes a requirement, without which the Post Employment Non-Compete Clause will be invalid.
Further more, If the agreed penalty for the violation of the Post Employment Non-Compete Clause is disproportionately high, pursuant to Article 252 of the Civil Code, the court may reduce it to a reasonable amount. If the employee had honored part of his/her obligation according to the Post Employment Non-Compete Clause, the court may reduce the penalty based on the benefits so obtained by the employer and other circumstances.
It will be a whole new page for the relationship between the employers and the employees in Taiwan after October 5th, 2015.
Authour: Hung Ou Yang
Managing Partner
Taipei
+886-2-2707-9976
[email protected]
Copyright Brain Trust International Law Firm
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
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