Overview of Fixed-Term Labor Contracts

Based on the freedom of contract, the duration of labor contracts is unfettered and could be determined by the parties. However, fixed-term labor contracts will expire by the end of the term, which is unfavorable for workers to accumulate their service period. Given such, the Labor Standards Act ("LSA") imposes restrictions on the fixed-term labor contracts.

Article 9, Paragraph 1 of the LSA states that "labor contracts may be divided into two categories: fixed-term contracts and non-fixed-term contracts. A contract in nature for temporary, short-term, seasonal or specific work may be made as a fixed-term contract, but a contract for continuous work, should be a non-fixed-term contract." That is, in principle, labor contracts should be non-fixed-term. Fixed-term labor contracts could only be used when the work involved is temporary, short-term, seasonal or specific.

Article 6 of the Enforcement Rules of the LSA defines the above four types of work that fixed-term labor contracts may be used:

  1. Temporary work refers to unexpected and non-continuous work with working period less than 6 months. In other words, temporary work should be occasional, non-routine, and unpredictable. Once the agreed work is completed, there is no other work for the worker to perform. For example, in a painting project where the employer occasionally and temporarily recruits workers to paint, the duration of the project is typically less than 10 days. The project ends once the painting work is completed.  Whether there is any future work is unforeseeable and should be further decided by the employer. Also, wages are paid based on the number of actual working days. No wages will be paid when no work is performed (see Taiwan High Court Civil Judgment 91-Lao-Shang-Yi-Zi No. 17).
  2. Short-term work refers to non-continuous work that is expected to be completed within six months. Examples include distributors who distribute promotional materials to pedestrians and drivers at fixed locations. In such case, payment is received on a daily basis after the daily work is completed. The employer recruits distributors for the next day at 4 p.m. each day. The distributors need to call the employer before 4 p.m. to confirm the availability of work for the next day. Whether to continue working for the next day is up to the distributors. The above scenario constitutes a fixed-term labor contract that is temporary, short-term, and expected to be completed within 1 day (see Taiwan Taipei District Court Civil Judgment 105-Dian-Xiao-Zi No. 605).
  3. Seasonal work refers to non-continuous work which is influenced by seasonal raw materials, source of materials or sale in market with working period less than 9 months. For example, in Taiwan High Court Kaohsiung Branch Court Civil Judgment 91-Lao-Zai-Yi-Zi No.2, the court held that, during the summer and winter vacations, a salesperson at a municipal high school has no work to perform for more than three months and he/she only receives half of the salary. If such salesperson works during these periods, overtime payment shall be paid separately. Given such, the work of such salesperson should be considered seasonal or specific. (Please note that the above judgement is overruled by Taiwan High Court Kaohsiung Branch Court Civil Judgment 92-Lao-Zai-Yi-Zi No.5.  However, the later judgement agreed with the above judgement on the definition of fixed-term labor contract.  The above judgement is overrule because the later judgement further held that entering another fixed-term labor contract right after the former one ended will constitute a non-fixed-term labor contract).
  4. Specific work refers to non-continuous work which could be completed within a specific period. But if the working period exceeds 1 year, the work should be reported to the competent authority for record. According to administrative rules Tai-Lao-Tzu-Er-Zi No. 0011362 dated March 31, 2000 and Tai-Lao-Tzu-Er-Zi No. 001585 dated January 15, 1999,  specific work includes scenario in which the agreed work is a part of an ongoing project which requires additional workers or workers with special skills. When the project ends, such workers are no longer needed.  In the event that the working period of the agreed work exceeds 1 year, failure to report to the competent authority is not a condition for the labor contract to take effect.

For example, postdoctoral researcher is not a job for long-term and continuous research work, but is a plan meant to assist young scholars with less experience in accumulating research achievement and enhancing research ability through fixed-term contracts. Its purpose is to nurture research talents, which is different from ordinary employment contracts where workers’ primarily goal is to earn salaries. The fact that postdoctoral researchers need to carry out particular research project and perform duties relevant to their employment purpose, the research projects they are participating in may be adjusted due to policy change, they are required to leave when the research projects are completed or their employment period expires, and their maximum working period is 6 years all make postdoctoral researcher a specific work, in which a fixed-term contract may be used (see Taiwan Supreme Court Civil Ruling 109 Tai-Shang-Zi No.2376).

Furthermore, according to administrative rulings Lao-Dong-Tiao-I-Zi No. 1080130207 dated March 12, 2019 and Lao-Dong-Guan-Er-Zi No. 1080127450 dated August 27, 2019, from September 1, 2019, resident physicians are subject to the LSA. During resident physicians' training period specified by the Ministry of Health and Welfare, medical institutions may enter specific fixed-term labor contracts with resident physicians. Also, the contract period should be based on the training period of general medical physician, specialist physician, or responsible physician, and should not be arbitrarily shortened or extended.

In addition to the four types of work specified in the LSA that fixed-term contracts may be used, determining whether a labor contract entered by the parties is fixed-term should be based on whether "continuous work" is involved. According to administrative ruling Tai-Lao-Tzu-Er-Zi No. 0011362 dated March 31, 2000, "continuous work" refers to economic activities that the employers intend to maintain and the related duties aiming to achieve such activities. Whether the context and nature of the work actually performed by the worker meets the employer's continuous need should be taken into consideration.  Whether the worker's job meets employer's continuous need should be further determined by the employer's business scope and daily operation at the time when the contract was entered. Post-contractual circumstances are irrelevant. (see Taiwan Supreme Court Civil Judgments 103-Tai-Shang-Zi No.2066 and Taiwan Supreme Court Civil Judgments 101-Tai-Shang-Zi No.264).

In summary, the key distinction between fixed-term and non-fixed-term labor contracts is whether the employment relationship has a specified period. The former ends upon expiration, while the latter could only be terminated by reasons under Article 11, 12, or the proviso of Article 13 of the LSA, or through employee's voluntary resignation. Therefore, enterprise should assess their own operating models and related business needs so as to properly arrange their employment contracts .

(The article is originally in Chinese which can be found here.)

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Overview of Fixed-Term Labor Contracts