For employees that a company intends to retain after a merger, the Business Mergers and Acquisitions Law requires the company to give such employees a ten-day period during which they may choose to remain with the company or not. If an employee agrees to remain, their seniority (accumulated years in service for pension calculations) shall be accepted by the new or surviving company. If the employee does not agree to stay, then it is handled as normal severance. If for any reason no reply is made within the 10 days, then the employee is deemed to have accepted the conditions of continued employment. If the employee is subsequently unwilling to remain, they will not be entitled to seek a severance payment.
Although the regulation allows retained employees to keep their accumulated seniority, and provides severance payments to those not retained as the price for terminating their contracts, it does not address the problems of retained employees who find it difficult to adjust to a different corporate culture or handle different employment conditions. These are presumably what is referred to in the above law as "workers who, having been notified clearly and in writing of labor conditions and who are to be retained by the new or surviving company…" In other words, workers in a company that is dissolved or spun off can only accept or turn down the employment contract written by their new employer, and they are not empowered to negotiate contract terms with that employer.
Collective Bargaining - A Platform for Dialogue between Management and Labor
Facing the turmoil of corporate mergers and acquisitions, do workers have no choice but to "accept reality", or might they not find some help from collective bargaining? Article 27, paragraph 1, of the Collective Bargaining Act reads, "Except as otherwise agreed to separately, in the event of the merger or division of the organization, the rights and obligations under a collective bargaining agreement of an organization which is party to the agreement shall be transferred to the new organization formed as a result of the merger or division." That is to say, in principle, the collective bargaining agreement of a company that is dissolved in a merger is still effective, unless the two parties to the agreement, labor and management, have entered another agreement.
This means, therefore, that workers can go through a union in their firm's industry to enter contract negotiations before a buyout or merger, giving them a chance to negotiate in advance how differences in corporate culture or working conditions will be handled. They may even invoke the "tin parachute" concept and include language in their contract with a company, prior to a change in the company's ownership, guaranteeing compensation above what is required by law to employees who are let go after a change of ownership or who choose to leave voluntarily, under certain conditions.
Where a collective bargaining agreement expires and a new agreement has yet to be negotiated, Article 17 of the Collective Agreement Law provides that, until a new agreement is signed, the rules on employment conditions in the original collective bargaining agreement remain in effect as the labor contract for parties to that agreement. Therefore, workers do have a certain degree of protection owing to the "residual effectiveness" aspect of collective bargaining.
Legal Reform
A draft amendment of the Collective Agreement Law proposed by the Council of Labor Affairs (Legislative Yuan) adds a provision on mandatory bargaining. Under this provision, when labor or management proposes negotiations with the other side on a collective bargaining agreement, if the other side does not respond with a counterproposal and begin negotiations within a prescribed time limit, it will be regarded has having refused to negotiate without just cause. The draft also stipulates that one side may request the other side to provide information that may reasonably be required for negotiations, and if the other party refuses to negotiate or refuses to provide the information requested, such refusal will be viewed as being without just cause. On this point, a draft amendment of the Settlement of Labor Disputes Law provides for an adjudication process under which both labor and management may apply to the governing authority for adjudication, and the latter may impose a fine if it determines that a law has been broken. Naturally, the scope of this adjudication provision would cover situations where an employer shows a passive unwillingness to negotiate, or simply refuses to provide information.
However, when it comes to matters as important to the vital interests of labor as corporate mergers and takeovers, a reliance only on fines for employers may fail to offer concrete protection. In the opinion of this writer, where a corporate deal leads to a change of employers, the effect on workers is great indeed and goes well beyond such general conditions of employment as wages and work hours. If concrete safeguards for workers affected by M&A can be worked into the draft Collective Agreement Law, with a provision giving protection against arbitrary dismissal (e.g., a provision saying that if labor and management have been unable to reach a consensus through collective bargaining on at least maintaining the current employment conditions, then a freeze on layoffs should be imposed on the new employer during which it is obligated not to terminate or transfer employees retained when the merger/acquisition took place). This way, perhaps employers will be more forthcoming in talks with labor.
For the foreseeable future, the key players - labor, management (representing owners, or "capital") and government - will be influenced by market trends, but only through a mechanism built around open and frank discussion can labor and management arrive at a deeper appreciation of each other's needs. Such a mechanism would allow our labor market to evolve from the earlier, factory-style management system to one better suited to the 21st century; one where human beings are viewed as the enterprise's most valuable resource.
Eric Tsai is a partner at PricewaterhouseCoopers Taiwan. Please send your comments and questions to: Eric.Tsai@tw.pwc.com
