Validity of penalty clauses for breaking contract

Legal Legal - Work
21

So if there is no statement of penalty for breach in your contract then you better fill me in again on what exactly you have been penalized and how? If there is no penalty clause in your contract then I can’t see any reason that you could not get this money back by appealing to the labor board. You would very likely win this one and you wouldn’t be the first to get a win against an employer who has acted inappropriately.

If you signed an employment contract that stated that if you breached you agree to pay back all the money that you had earned up to that point then I can’t see any legal reason that the school could not enforce their rights to collect that money. I am not saying that it is ethical for them to include such a large penalty, but then you should never have agreed to it in the first place.

I think that a lot of people overlook the fact that a written contract is an easily enoforceable legal agreement. It cannot force you to do something against the law, but provided that it is within the law then it is binding which is why you should read and understand any contract carefully before you sign. Far too many people gloss over the details and just sign up to get the job, only to turn around and complain when the school actually enforces the terms of that contract.

In regards to your ten month back payment example above, I would be quietly confident that you could have that one overruled as being unreasonable, but even if you did then you would still need to negotiate a penalty payment which would probably end up being in the order of two or three months.

22

[quote=“brian”]

So if there is no statement of penalty for breach in your contract then you better fill me in again on what exactly you have been penalized and how? [/quote]

well,my contract was for 1 year
apart from a 2 month notice period in order to terminate the contract,there is nothing else mentioned (certainly no penalty)

i left after 10 months,and they argue that they will keep my salary for the 10th and last month because i didn’t follow procedure.

I’m not sure if it’s wise to post the contract on here,they might complain about breech of confidentiality.

how do i contact the labor board please?

23

I suppose people just forget they are in Taiwan. In the UK, for example, employment law (and consumer law) together with “unfair contract terms” type rules often overrides what is written in a contract. So people have become lazy…

24

I definitely recommend that anyone who has a legal problem associated with their work seeks out some of the free professional advice available. I spoke with 2 lawyers employed by Taipei City Hall and one of the sessions I had was arranged by the Dept of Labor there. Another useful source of informed legal advice, albeit not professional, can be gained from Taida University’s law school which runs sessions where the public can get a team of law students to consider their legal problems.

The advice I received from the DoL-arranged lawyer was that the employer has to pay the final wage and then demand any breach of contract costs from the employee. There is also a limit to how long an employer can delay this payment. If the employee refuses to pay any breach of contract costs, the employer may decide to sue for them. However, the employer cannot just fine an arbitrary amount or even whatever is actually specified in the contract - it all has to be justifiable as damage incurred from the breach of contract and the onus is on the employer to prove it in the case that they sue. Contracts are not a law unto themselves in Taiwan signed or no, and any stipulations that seem unfair, seek the advice of a Taiwan legal professional to check their likely status if it came to court.

Now that was in 2004 and my case was I was working as an English teacher. For a chef, I’m not sure and you would be best seeking advice only from a professional. If you are outside of Taiwan, you would be best getting a friend to ask on your behalf at the DoL what you can do from overseas. As you lost a whole month of wages, probably it wouldn’t hurt to find out what your options are in terms of representation.

In my case, the Dept of Labor set up a dispute mediation meeting. These are designed primarily to help disputing employers and employees avoid the courts and I was very impressed with this service, not least because it was free. I should mention that I could speak some Chinese and it was recommended that I also bring a Taiwanese friend along to help with language problems.

I met with my former employers and a mediator from the DoL staff at Taipei City Hall. Both sides were encouraged from the outset to seek a compromise acceptable to both in order to avoid going to court.

The discussion began with me telling my former employer that the deadline that I had set for them to pay me my final wages (as I say, seek proper legal advice for legal procedures) had passed and they needed to pay it. They replied, we will when you agree to pay the penalties as stipulated in the contract. The DoL representative then pointed out that according to the basic labor law my employers had to pay me my final wages first and then seek any penalties. My former employers then suggested they would sue me for the penalties if I did not agree to them at this meeting. Neither myself nor my employers would have been happy to go to court at that point, so we then discussed the alleged penalties one by one, examining them to see if they were reasonable damages that had come from the breach of contract (my leaving the workplace). (For example, one such stipulation representing the bulk of my final wages that was deemed to be unreasonable was that I would have to pay for a teacher to be flown from overseas). The end result was that they dropped all the penalties in exchange for the recuperation of training costs - about a fifth of my final wages. By this time, we had been in heated discussions for over an hour and this seemed to be a face-saving conclusion for both sides and we shook hands on this.

As I say, the only advice I’d be happy giving in Taiwan legal matters is not to look for precedents but to instead patiently seek out the free expert advice available.

25

can anyone tell me if there is any ways to contact DoL online?

chrysegle,your post was really great,i think this whole thing should be a sticky.

26

Nice post chrysegle and good to hear a personal experience that shows that we do have rights here and that these are enforced if we take the time to ensure that they get enforced.

Also your experiences with the lawyer seem to reinforce what Blackadder was told by his lawyer, so I am certainly at odds with them in this regard. I am not a lawyer and nor am I pretending to be so I do respect what those lawyers have said. Although I am a great believer in the word of the law as being the point of last resort, I also believe that what goes on in practice is also important in judging how one should proceed in their dealings in Taiwan.

I agree that this is a valid interpretation of the law, but I also believe that there is an equally valid legal argument to the contrary. For me it all hinges on the phrase ‘advance deduction’. Does that mean in advance of payment as the lawyer in your case believed it to mean, or does it mean in advance of breach (i.e. deposits and bonds which we all know are illegal).

I think that both of the above could be reasonably argued, and rather than go back and forth on the issue, I personally prefer to look at the situation logically.

If you sign a contract that stipulates a penalty payment should you breach the contract then you should expect to pay that money if you indeed breach - whether the employer withholds it or sues you for it. If you don’t agree to that condition then don’t sign that contract and then you won’t need to worry.

I really believe that this is the only way to avoid the trouble of arguing with your employer about who is right and who is wrong.

Again, while I acknowledge that this is valuable and ‘correct’ information coming from a legal professional, I don’t agree with this from a logical and practical point of view.

Were an employer to include a penalty for the 10 month pay back on a twelve month contract as suggested by an earlier poster then that would likely be deemed unreasonable. The fact is that most schools have a penalty amount that ranges from two weeks to two months pay. I very much doubt that this would be considered unreasonable on a one year contract. As such, although it is theoretically possible to attempt to argue the pennies, I believe that most arbitration would uphold the penalty amount that is contained in most of the employment contracts used by schools in Taiwan.

Contact information for the Council of Labor Affairs (CLA) can be found here.

27

Could anyone please provide further input on an earlier posting in this thread?

Thanks

28

I have some experience with the steal your salary ploy attempted by many employers here and I’ll relate my experiences in this thread.

As many of you know, I left Taiwan for personal reasons a while back. My employer at the time was aware of my circumstances and seemed alright with my impending departure, however sudden. In fact, they seemed sympathetic. Sympathetic until, a few days later, I asked about receiving the salary for the hours I’d worked that month. Then, they completely changed, becoming evasive and saying I needed to speak to so and so and she’s busy. I knew what was going on.

I reported the school first to the foreign affairs division of the local police, who called the school to ask what’s up. The officer then called me back to inform me that the school is indeed planning not to pay me and had told him as much. He then referred me to a case worker in the labour department, but before we ended the conversation, he gave me his contact details and informed me he would be willing to testify in any hearing regarding what he had heard from the school. I thanked the officer and was transfered to the labour department worker. I recounted my predicament yet again and the case worker phoned the school.

This time the case worker told me the school was prepared to pay me the next morning. Next morning came and I went to the school. As expected, they didn’t pay, instead the manager let loose a hail of insults. I silently left and called back the case worker to let her know what had transpired. She told me that the school had no choice but to pay me, but that they’ve requested a meeting. This was a stall tactic, because the meeting would take place after my intended departure (and the school knew this-- the meeting is a formality they can request. It essentially consists of the school being informed of the law and being told to pay up).

At that point, I thought the school had won. I wasn’t going to cancel my itinerary. I thought the salary was going to have to be a write-off. However, the very helpful caseworker advised me that I could send her a proxy statement authorizing her to act on my behalf and the meeting would still be held. She seemed to feel strongly that the school should not be allowed to get away with what they were doing. She also promised to report the incident to the ministry in Taipei (which may affect their chances of being able to employ foreigners in future). I sent her the statement as requested and I received all monies owed by international transfer shortly after the meeting took place after I had left the country.

Moral? Jack and Jill English school can write whatever crap they want in their employment contracts-- and indeed many write all kinds of creative rip-off clauses. These contracts do not over-ride the law here. If you are being faced with the theft of your salary, regardless of what your rinky-dink contract says, don’t simply accept it. There are resources and people here to assist you–and they’re rather good at what they do. Fight and you’ll win.

1 Like
29

Stimpy good to hear that you had a win. Posts such as yours are really important as they really are the best way for foreign teachers to assert their rights here and show employers that they need to treat us honestly.

Out of curiosity did your contract have a contract breach clause? Was the amount of money that the school withheld the same as this breach clause amount?

30

Warning: Partial rant

So in of this, is there any real protection for the employer? We often hear the case where schools screw the teacher, but it must be noted that quite often the opposite happens. It happened just today. I hired this, what seemed like a nice honest person. My school and I spend severals days, and many man hours training her, and helping her adjust to life in Taiwan, and even providing free housing for her. Just this morning she tells me she’s found a better job, and that’s it. I feel a bit betrayed and used. After all doing this, we get a thanks for the training and help, but f*ck you later. She hasn’t started teaching any classes yet, but our school invested a lot of time and money into brining her here. Is there anything we can do? Are there any measures to prevent these bad applicants from screwing honest schools?

31

When I first read this thread I agreed that original poster should receive his final month of pay and then all damages suffered by his former company could be sued for. However, I realized that perhaps the contract was not terminated by the employee in the prescribed manner. Under Taiwan law, working for ten months would mean he should give at least ten days notice prior to vacating his position.

The Enforcement Rules of the Labor Standards Act say:

[quote=“Enforcement Rules of the Labor Standards Act”]Article 9
When an employment contract is terminated according to the stipulations of the Act, the employer shall pay the worker wages due to him (or her).[/quote]

What I see that they do not say is about what would happen if the contract is not terminated according to the Act.

If the original poster could show that

  1. he gave adequate notice of ending the contract,
  2. he had proof that he worked hours that were not paid
  3. he had proof that no payment had been received for those hours
    then he could use the CLA’s free mediation process to get his money back.

I disagree that it would be costly to get the money back from the employer. Such a lawsuit would not cost a lot of money because the free process through the CLA that has been arranged to deal with such events. Perhaps for the chance to get NT$30,000 from your employer it would be a worthwhile undertaking.

I also disagree that taking this matter to court would “set a precedent” since Taiwan is not a common law system. In Taiwan, cases are not settled on the basis of past cases, but rather on the rules as they apply to a particular case.

32

I think that these are really good questions. Even if the teacher does not set out to intentionally screw the school over, far too many teachers still act as if the rules of commonsense and common courtesy don’t apply.

In your case if the teacher was working under a work permit then the CLA would likely blacklist her if she left without giving you the appropriate notice. If there was a probation period to the contract then perhaps blacklisting is not an option.

Personally I don’t think that a blacklisting would be appropriate in this case as although her actions were an obvious inconvenience to your school, no real harm was done and we have to accept that she may have had second thoughts about your job. Perhaps it is best to accept that it is better than she left early on rather than a couple of months into the contract when she was more established in your school.

As to your second question I guess that the answer is for those employing teachers to check references and exercise care when employing. You are never going to avoid all of the irresponsible teachers but by exercising due dilligence in your employment practices you should be able to protect yourself from the really undesirables.

33

I have always been, and remain, a vocal proponent of mediation/arbirtration especially as it is free. I would not consider that a lawsuit however. My earlier point regarding court proceedings was that to me this whole issue seesm to revolve around the wording of the legislation and the fact that it is ambiguous in this regard. If one really wanted to challenge the fact of whether the breach penalty can be deducted after breach but before payment or not then I believe the court would be the only place to test this.

I didn’t really mean pecedent in the sense of legal precedent but rather as in knowing what the legislation really means in regards to this. If someone tested it then we would all know what the legal systems considers the law to mean which would be helpful, but perhaps not worth the costs of a full-on court battle with an employer.

All of this is why I really think that we foreign teachers should look at this is a more simplistic way - if you don’t agree to pay a breach penalty then don’t sign a contract that contains one, if you are happy to agree to the breach contract when you need the job then don’t try and avoid paying if you breach the contract.

34

Here’s my story…

Details first

  1. Contract contains clause stating NTD15000 for breach of contract, basically failing to finish.
  2. Employer deducted the money from my second to last paycheck (the whole amount, as a single month would not cover the fine).
  3. I only gave 24 days notice.
  4. My ARC is a JFRV (through marriage).
  5. I was working part-time only, for 4-7 hours a week (varied).

Useful links

  1. Labor standards act (in English)
  2. CLA hotline - 0800-380-038

Alright here goes, I’ll just tell it like it is.

I was working two jobs. A day job from 9 to 5 and sometimes a little longer. Cram school on Tuesdays and Thursdays, from 2-4 hours each time.

A friend of mine offered me a position at a computer hardware company and it sounded just great. I jumped at the opportunity.

I gave notice to my day school and they asked me why I wanted to leave and we talked it over. I basically told them why I wanted to leave. I had timed the start of my new job for their summer break, so I would leave between semesters. No issues. They even wished me good luck and gave me a gift.

I gave notice to my cram school and they reminded me that I would be fined. I asked to talk to someone at the main office about whether we could do away with it, and after a few calls I was asked to send an email to state my case.

After my pay slip came through, and all the money had been deducted I realised that my request had been denied.

That was 4 days before I left, so I decided to contact the CLA.

I called the CLA toll-free number and was told to call 02-8590-1236 (for Taipei City) and I spoke to a lady named Jennifer who than gave me another number.

Calling 02-2552-2151ext200 got me through to a lady named Phoebe, who then handled my case. Instead of explaining my situation over the phone she asked me to email her and to state my case.

She called my previous employer and told them of the situation.

She organized a meeting between my school and myself for the next Thursday at 18:45.

I must note that not much was required except giving her my ARC number and the phone number for my school.

-----The meeting-----

(Phoebe from the CLA could speak English and helped with translation, although I understand a lot, as well as one of the two people from my cram school who were there)

The meeting started with a reading of what was stated on the form for the case.

My part stated that the employer had taken an NTD15000 fine from my salary because of leaving my contract. I stated that I thought this should be dropped as there had been no wrongdoing on my part.

They stated that it was hard to find a new teacher so quickly, that parents would wonder what’s going on and that I knew, and was reminded of, the consequences of breaking contract.

The next to be stated was what was legally obvious, the employer was breaking article 26 which states no penalties (the school tried to argue that they were allowed some kind of fine, but the lady said that’s plain wrong). Also article 22.

She then asked us to say what we thought/felt on the matter and our opinions.

The school said that this penalty was clear in the contract and they did it because many foreigners just break contract (so we, foreigners, should all be fined). They did say many other things too, but I remembered this one.

They were willing to settle for half the fine, NTD7500.

Up to now, the lady holding the meeting had been trying to get my previous employer to drop the fine altogether. She told them that in almost all situations, the employer just gives the money back. She was ready to get out the files to show them the cases where schools had just paid it back. She also started to tell us about a school named “Hippo” or something like that in Tianmu, who she had just had a case with, where they just paid the teacher back.

I was not willing to let it go at that and the lady suggested paying the portion of the fine that covered my unfinished 3 months, so I would only pay 25% (NTD3750).

After much thinking, they were almost ready to settle on this and I was too, more or less. They then suggested that they put in clause which states that I will not share this information with my friends or spread news about it, or everyone will want to just quit early and get their money back.

That was all I could take and I said I would not accept that, and we ended our meeting there with nothing resolved.

Now, the case will get a file and be passed on to the courts as far as I know, who will make a decision based on the recommendations of the CLA.

-----Personal notes----

Through my whole meeting the pressure was on the employer to just pay me. They were quite adament that what they had done was fine and that I had done this badly.

The point was reemphasized to them that they had broken the law by taking my money. The school claimed that I could just go and collect the money in cash (not now) and this was standard for employees who left early (I certainly had never heard this before). This part made no sense to me as they weren’t saying I could get it back.

The most interesting part is that my employer was willing to fight hard, and was not ready to budge from their point, almost like a matter of principle. Well, I wasn’t ready to just give up so easily.

Furthermore, the lady made a point to my school that what they submit to the CLA and the contract that is signed don’t necessarily agree totally. She also made it clear that the wording of the contract is not as important as the spirit of the contract and that we should work together to find an amicable solution to this issue. She really just wanted us to talk things out and not have it go to court. She urged my employer to just drop it and even more when I offered 25%. She was a little stunned when I refused after the secrecy clause.

We will see how this case pans out and I’ll update this post then.

35

Pumpkinslayer thanks for the post. It is good to get feedback from actual cases as this is what really makes a difference I think.

A couple of points:

My guess is that what you wrote here and what was actually expressed at the meeting is a bit different.

It is certainly true that by the letter of the law no punitive deductions can be made ‘in advance’ from an employees wages. But there is no law that prevents a penalty from being levied upon the party that breaches and in fact this right is protected under contract law. It is totally legal and fully enforceable. Neither article 22 nor article 26 of the Employment Services Act prohibit this.

So although you post seems to indicate that government representative stated that penalties are not allowed, I think what was actually stated in the meeting was that pre-payment deductions on the basis of punitive penalty are not allowed.

I think that this is an important distinction to make unless we want foreign teachers signing contracts with huge penalties on the mistaken belief that these penalties do not apply.

[quote=“pumpkinslayer”] I was not willing to let it go at that and the lady suggested paying the portion of the fine that covered my unfinished 3 months, so I would only pay 25% (NTD3750).

After much thinking, they were almost ready to settle on this and I was too, more or less. [/quote]

You seem like a reasonable person so let me ask what I consider to be a reasonable question.

If you did not like the idea of having to pay a breach penalty for premature breach then why did you sign the contract in the first place if it stated a penalty? Put the legal aspects aside for a moment and just consider this as a gentlemans agreement (I know that its not but just for the sake of argument!). I am just curious.

For the record I believe that the school is wrong in this case to have tried to levy the penalty. While they may be legally entitled to penalize you I think that schools should exercise this right sensibly. If a teacher gives prior notice and works with the school during the resignation period well then it seems pretty pointless for a school to try then to penalize the teacher.

Interesting. It is a pretty common practice but interesting that CLA noticed this and pointed it out. Is the CLA going to pursue this?

Please let us all know how you go with this. Oh and good luck. I hope that you get a win!

36

The school has now not only withheld my second to last month’s pay, but also my last month’s pay, which is beyond the amount stated in the contract. Usual way to pay us is straight to our bank. They mentioned at the CLA meeting that I’d have to pick it up in cash. They said this is usual practice, but I know three other people from the same organization who received their final pay via transfer (all having quit, not finished contract). I’ll inquire tomorrow. I think they’re just making things difficult like I have for them. We foreigners are so much trouble you know. Ha ha ha, not a big deal, just stating what’s going on.

An answer to a reasonable question :slight_smile:

Honestly, I expected they might do it, hoped they wouldn’t, but knew I could try contest such a fine if it happened. I took the job because I was aware that I might be protected against the fine. I also never thought I would have to get into this situation in the first place, but that’s life.

Brian, I did think a lot about your question before I decided to phone the CLA about the whole matter. I did agree to their terms then and was completely aware of the fine. The choice was to contest it, or not, and I decided I should, despite the hassle. That whole gentleman’s agreement was on my mind a lot while deciding this and in the end I just had to make a choice.

A plug for my day school…

To contrast, my day school, who received only a weeks more notice than my cram school didn’t charge their NTD30000 fine. Also they PAID ME FOR ONE WEEK OF VACATION, after my official final day at their school. There was no reason to do that, they said it was just as a thank you for my time there.

I love my day school, I feel respected by them and I would recommend anyone to go work there. The school really is like a small family. I love them.

Back to the point…

The CLA’s take on this is that there is little chance for a job finder to negotiate at the time of contract signing and might accept terms they are not totally comfortable with. Employer taking the fine from your pay is illegal, but THEY ARE ALLOWED TO FINE YOU, and they have to submit something somewhere to start that process (don’t know details). They have to prove damages to their company, ie trade secrets, etc.

37

Your day school is really playing it smart in my books and at the end of the day they will win more than the school that is taking your deposit. The black and white of the contract aside, I fully support the idea that breach penalties be waived by schools if the foreign teacher works with the school in resigning properly. In those cases what exactly are they losing by letting the teacher go with all of what he or she earned in his or her pocket. This kind of behavior is discourages foreign teachers from doing the right thing in my opinion. To my mind breach penalties should only come into play if a teacher ups and leaves without notice!

This is true but then I suppose it depends on the skills of the negotiator.

I doubt that many people would be successful in getting a breach claused removed entirely from a contract but you could certainly try adding to that clause something along the lines of the breach penalty only applying if the foreign teacher fails to give at least 30 days notice of his/her intent to leave. That way the school is protected from you doing a runner without notice and you are protected if you do the right thing and resign. Not every school will agree with this of course, but if they don’t then at least you know that you are applying for a job with one of those schools that will likely take the full penalty no matter what you do.

Once again good luck pumpkinslayer. Hopefully the more recent actions of the school will also piss off the CLA such that you get them fully on your side.

38

Actually, while Taiwan courts do not make precedent in a stare decisis kind of way, they do on occassion make what they refer to as “precedent”, and afaik, the Taiwan courts will abide by a judgement that has been designated a “precedent”.

And while Taiwan courts do look first to the codified law to resolve cases, there are often instances where the law is not exactly “on point”, and in those cases Taiwan courts do frequently look at prior rulings, both “precedent” (if a relevant one is available) and regular judgments (which can often be guiding but are not binding)…

39

At his point I have been given some options (from the lady at the CLA)

  1. Send a registered letter demanding that I get paid within 7 days or something. This amounts to a legal action and is the first step towards taking this beyond the CLA to the court.
  2. Send a letter to my school saying I had rethought their original offer and ask them nicely if we can arrange another meeting.
  3. Resubmit a request to the CLA stating the whole case, including recent events, and have them to set up a meeting.

There was also a suggestion that I tell the CLA someone else at my school to talk to about this issue as the first lady was not cooperative. Funny.

By the by…

I suspect my school are really trying to look like they have done nothing wrong. I found a newspaper article (via AP) about a foreigner in China who accused my company of being bad. There was a response to this by the boss of my company, explaining how her company was doing the best they can and that there was a lack of responsibility on the part of the foreigner. If I post the links then I’ll give away my school’s name, so I won’t for now.

I will send the email to the CLA tomorrow, then see where we get, I suspect I’m going to stick to my, “Fine me the legal way” stance.

40

I have a feeling that I may know the school. If the boss has the initials P.C. then I recommend that you contact her directly with your concerns and not deal with her underlings. She is a legitimate person who will show legitimate concern. State your case clearly and I wouldn’t be surprised if you get a win directly with her. She doesn’t want trouble.

If that fails or if I have the school wrong then it seems that the registered letter might be the way to go.

Be sure to let us all know how you go.