Full Transfer of Employees After Financial Institutions’ Merger First-Time Adoption of the Principle of Merger & Acquisition Will Not Impact on Employments.

In order to protect labors’ rights and interests, the Council of Labor Affairs plans to amend the provisions of Article 20 of Labor Standards Act and adopts the principle of Merger & Acquisition Will Not Impact on Employments for the first time, providing that unless otherwise agreed by labors, the pre-agreed upon labor contracts between labors and employers shall remain effective after business entities' merger, division, generally assumption of rights and obligations or assignment.  That is, if the labors disagree to resign or to accept the labor contracts as amended, the new employers shall not lay off the labors or change the terms and conditions of labor contracts.  In the event of a financial institution’s merger or division, all of its employees shall be assigned to the surviving company altogether.

The motion for amendments to the Labor Standards Act published by the Council on 11th day, which have been the most material amendments to labor contracts since 25 years ago, includes four highlights, namely, (1) inclusion of additional personnel requirements, (2) extension of the duration of fixed-term contracts, (3) addition of non-competition, liquidated damages and minimum seniority requirements, and (4) amendments to the rights and interests of employees assigned upon business entities’ merger and acquisition.  The motion is scheduled to be reported to Executive Yuan for approval in February.  Meanwhile, the Council also proposes to amend the Business Mergers and Acquisitions Act to protect the rights and interests of the employees involved in the business entities’ merger and division as defined in the Business Mergers and Acquisitions Act, if applicable, in the same manner referred to in said amendments to the Labor Standards Act.

Article 19 of the Financial Institutions Merger Act provides that the rights and interests of employees involved in merger/acquisition shall apply the relevant regulations governed under the Labor Standards Act.  Therefore, the amendments to Article 20 of the Labor Standards Act will affect the relevant financial businesses, such as banking, insurance and securities.

Upon evaluation of the Financial Supervisory Commission (FSC), the amendments will increase the merger cost in the financial industry and be disadvantageous to mergers and consolidations in the financial industry and withdrawal of problem financial institutions from the market.  Therefore, FSC expressly objects to the amendments.  With respect to the merger and acquisition of financial institutions, FSC prefers to apply the existing Business Mergers and Acquisitions Act and to amend the Financial Institutions Merger Act by including the additional requirements defining that the employees of financial institutions who are unwilling to retain the post, or are not retained, upon merger and consolidation of the financial institutions shall be granted pension fund or severance pay.

The separate agreement made by labors and employers, if any, shall apply.  Where the labors expressly state that they are not willing to be assigned, the labors’ discretion shall apply.  (Paragraph 1 of the amendments to Article 20)

The amendments also define that where labors decide not to be assigned, the old employers shall pay them the severance pay or pension fund (Paragraph 4 of the amendments to Article 20); meanwhile, the employers shall provide labors with the “leave of absence for new job”, i.e. the labors may take the leave during working hours in order to look for new jobs (Paragraph 5 of the amendments to Article 20).

Requirements about Retention of Staff upon Business Merger in Motion for Amendments to Labor Standards Act
Article 20 of Labor Standards Act	Amended provision
When a business entity is restructured or changes ownership, except for those labors to be retained through negotiations between the old and the new employers, the employer shall terminate labor contracts with the remaining labors by giving a prior written notice to the remaining labors within the time limit specified in Article 16 and shall pay them the severance pay in accordance with Article 17.  …	Where a business entity undergoes merger or division, or generally assumes or assigns, or assigns its whole or substantial business or property, the labor contracts between it and labors shall remain binding on the assignee… 　The old and new employers shall inquire labors in writing, within 30 days prior to the record date of the assignment referred to in the preceding paragraph or the effective date of the assignment, with a view to confirming whether they are willing to be assigned to the successor.  The labors’ failure to respond to the employers shall constitute their consent to be assigned……
Applicable principle: The provision shall be applied to the financial industry in accordance with the Financial Institutions Merger Act.	Applicable principle: Principle of Merger & Acquisition Will Not Impact on Employments

 
(2010.01)
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