Contract Breaking Fine

I know that one million posts have addressed this topic but I can’t seem to locate a perfectly straightfoward response for my perfectly straightforward question. Any help is appreciated.

I signed a one-year contract with a school. Three months into the job I discovered I hated everything about teaching and told them I wanted to quit. My contract stated that a fine must be paid if you decided to leave the job before the year was up. Seeing as I was prepared to cut off my own foot to get away from this horrible company, I didn’t think $20,000 NT was a bad deal. I’m still in Taiwan and much happier at my new non-teaching job. However, I am now hearing from people that this fine was illegal. And my question is, was it?

  1. The contract does say that there is a $20,000 NT fine for breaking contract.
  2. I gave them almost three months notice. I actually stayed on until they could find a new teacher because I didn’t want karma to bite me in the ass for bailing on them.
  3. They took the money out of my last paycheck. Or pay stack-o-cash. They didn’t tell me they would be doing this; I discovered it when I went to get my money.

I assume that because I signed the contract and broke it that this practice was A-OK, but a friend tells me that it violates Taiwanese labor laws and that I should get my money back. I’m just wondering if anyone knows whether or not this is true.

Many thanks.

A fine for breaking the contract is not illegal, if that’s what both parties agree to.
The only time it’s illegal is if they keep it out of your first paycheck as a “deposit.”

Sounds legal to me. You both signed it. You broke it. They took out the 20K.

What’s the fuss about?

What exactly does your contract say?

I’ve just been through the same thing and contrary to what others are saying it’s NOT legal even if you signed it and agreed to it. I’ve won my money back … also 20k!

Contact me if you want more info. Or go to the CLA and post a complaint and they’ll set you up a meeting with your boss for free.

[quote=“serendepity”]What exactly does your contract say?

I’ve just been through the same thing and contrary to what others are saying it’s NOT legal even if you signed it and agreed to it. I’ve won my money back … also 20k!

Contact me if you want more info. Or go to the CLA and post a complaint and they’ll set you up a meeting with your boss for free.[/quote]
Thanks for that correction. I did not know that.

[quote=“serendepity”]What exactly does your contract say?

I’ve just been through the same thing and contrary to what others are saying it’s NOT legal even if you signed it and agreed to it. I’ve won my money back … also 20k!

Contact me if you want more info. Or go to the CLA and post a complaint and they’ll set you up a meeting with your boss for free.[/quote]

It might be a good idea if you give the specifics of your case here and the reason upon which the CLA made their decision.

The law here is pretty clear about up front deductions being illegal (hence the payment of bonds or deduction of upfronts deposits is clearly not legal).

There is some ambiguity however as to the payment of fines and perhaps this is where you got your win.

The law says that fines and penalties are legally enforceable if agreed to, but that deductions cannot be made from your salary for this. I believe that the clear intent here is to prevent the deposit / bond situation, but it could also be construed to mean penalty deductions from your last pay. Theoretically i suppose that your employer really needs to pay you your full wage and you then need to hand back the penalty that you agreed to. If you don’t then they would need to take you to court for that money - a case that they would clearly win if it was written into the contract. Perhaps they could even ask for extra damages and court costs which for me would seem fair if there was an agreement in place on this matter.

This is all a furphy in my opinion however. It seems to me that we are all adults. If you don’t like the idea of a penalty when signing a contract then don’t sign. If you want the job, the money that goes with, whatever it is that you want, and you sign an agreement stating that you will pay a fine if you breach then it seems to me that you should pay that money.

Whether they deduct it from your wage or whether they hand it to you and you hand it back seems to me to make no difference.

I would be interested in hearing the particulars of your experience with the CLA.

You cannot make a labor contract the violates the provisions of the Labor Standards Law. The Labor Standards Law sets up notification periods for employees and employers (probably one month in OP’s case). If you notify your enployer sufficiently in advance, there is no statutory penalty. By imposing a penalty clause, the employer is in effect abrogating the employee’s statutory right to give notice. The penalty clause is therefore in all likelihood void. Tell your employer you are definitely going to see the CLA about this. And do it if they don’t give you your money back.

I am not a lawyer and this is not legal advice.

There is no law against two parties to a contract, including an employment contract, agreeing to the payment of damages by the party that breaches to the non-breaching party. In fact this practice is quite common in contracts which are civil agreements between two parties. I don’t disagree that a civil contract cannot override the law, but as I say I am not aware of any law that says that you cannot have a punitive penalty in a civil contract.

As has been discussed the labor laws in Taiwan prevent employers from making advance deductions as punitive punishment but what is ambiguous is what the word ‘advance’ refers to. Does this refer to the money being taken in advance of breach (i.e. deposits and bonds) or does it mean money being taken in advance of payment to the employee but after a breach has occured?

In my opinion it is the former and in the case of foreign workers this serves to protect foreign employees from being forced to pay hefty deposits to prevent them from running away. As I mentioned in my earlier post the concept of not being able to withhold an agreed upon penalty but having to pay the full wages and then have the teacher hand back the penalty seems somewhat silly - especially considering that each party knowingly and willingly entered into the agreement.

Okay wait, just so we’re clear I’m not a lawyer, but I did do my “homework” and I did win my case.

brian

[quote]It might be a good idea if you give the specifics of your case here and the reason upon which the CLA made their decision.

The law here is pretty clear about up front deductions being illegal (hence the payment of bonds or deduction of upfronts deposits is clearly not legal).

There is some ambiguity however as to the payment of fines and perhaps this is where you got your win. [/quote]

Which specifics do you want? My contract was terminated by my boss 2 months before my contract was up. My contract states that “school reserves the right to immediate terminate employment and will confiscate (200 demerit points) from the final months salary”. That’s it. I met with my boss, the CLA inspector and a friend of mine to translate… I will be given my money back. The CLA guy was a little unsure (maybe he was a newbie?) but after he did a little research he told my boss that he had to give it back otherwise my boss would be fined. IF he wants he can ask me for the money or sue me!

brian

Theoretically you are correct. But your conclusion is not so true. They do have the right to sue heck everyone has the right to sue but the thing is … Lawyers and court cases take time and money. Who in their right mind would use +/- 50k to get back 20k or 30k? Bear in mind the time it takes for cases to be processed and MORE importantly the fact that the employer DID break the law by illegally deducting the money in the first place. The fine for that is 90k which opens them up to criminal prosecution. (if you need proof read Article 78 of the Labor Standards Act)

Feiren is correct. While there is no law against 2 parties in a contract it IS against the law to construct/utilize a contract that violates the Labor Standards Act. An extreme example would be if the contract states that you have to work 168 hours a week! That’s just wrong and against the Labor Standards Act article 30. Imposing a fine/punitive penalty in a civil contract is illegal according to Article 26 of the Labor Standards Act. You’re going to have to search laws.cla.gov.tw/Eng/FLAW/FLAWQRY01.asp for more details.

I know what you’re saying… “you agreed to it so you should bear the consequences”. But it should all be taken into context. I mean none of us go into a job just to break the contract or be fired! We sign the contract on good intent. I don’t know if I speak for everyone else but I certainly did not WANT to break my contract or have it early terminated. The school sucked but I loved my “kids” and I wanted to see them finish. 20k for me was not a huge sum, it was more the principle of the matter and they way I was treated that made me file a case with the CLA.
Some schools just terminate contract for ridiculous reasons or just make it so darn hard for you to continue working there! I’m not making excuses. My point is, if the school just treats you right or justly, then you’d never want to leave, break contract or run away.

In your case, serendepity, your boss broke the contract by terminating your job. In the OP’s case, he/she was the party to terminate the agreement. Not sure if the OP has as much going in his or her favor because of this one rather significant difference.

[quote=“ImaniOU”]In your case, serendepity, your boss broke the contract by terminating your job. In the OP’s case, he/she was the party to terminate the agreement. Not sure if the OP has as much going in his or her favor because of this one rather significant difference.[/quote]I’m 100% sure that regardless of who terminated contract it is illegal to deduct money against wages earned and the deduction is a violation of the Act. The school which does so not only opens itself up to a heavy fine but also risk of criminal persecution (Tealit has a great article about “fines and deductions”).

Just so that we are clear on this, I am happy that you got a win with the CLA. If you read through my posts you will see that I have always had a degree of faith that the CLA can come through if you are in the right and can show that you are in the right. So your win helps to vindicate this position.

My concern in clarifying this issue is that I would hate for people to read a bit of this thread and then go away thinking that they can sign a contract with any penalty on the mistaken belief that such is unenforceable when in fact it is legally enforceable provided that it is done within the bounds of the law.

Specifics wise it would be good to see the full contract clause that you refer to. I would also be interested in knowing what grounds the CLA guy gave for making his judgement.

You state above that you were terminated, and in most cases the right to immediately terminate goes along with a serious breach of contract. What were the grounds that your employer fired you?

As someone else has pointed out, being fired from a job, and choosing to leave a job are quite different cases and as such we should be careful when extrapolating your experience across.

I think that you may have missed my earlier point on this.

My point is that whether the agreed upon penalty is first deducted from your last months salary just prior to payment, or whether you are required to hand this back straight after receiving it, may make a difference in the truely legal sense but not in a practical sense. At the end of the day if you have agreed to pay a penalty for breach and then you breach, then you are legally liable to pay this money to the employer. I don’t think that there is any confusion about this.

Should you refuse to pay and should the employer then take you to court I am pretty well positive that they would get a win, in which case they could likely also claim their court costs from you. So yes, it would be silly for anyone to sue anyone else over NTD20,000 in my opinion, but if you were an employer who was guaranteed a win and court costs covered then you would likely do this.

So my opinion on this is that if you sign a contract that includes a breach penalty and then you breach, you should expect to pay that money regardless of the specifics of how this is done.

There is no disagreement on the point that a contract cannot override the law. I stated as much in my last post.

The question is whether the inclusion of a breach penalty within an employment contract constitutes a breach of the law. I don’t believe that it does and in fact I believe that breach penalties are an inherent right of contract law and as such very commonly used to protect the party who did not breach. I welcome you to point out a relevant clause if you feel that one does exist.

I am familiar with the article of the act that you are referring to but I do not agree with your interpretation of this article.

[quote]Article 26

An employer shall not make any advance deduction of wages as punitive damages or indemnity.[/quote]

The article does not state that imposing a fine/punitive penalty is illegal. It states that making advance deductions for the purposes of punitive penalty or indemnity is illegal. I referred to this earlier, and although the article is somewhat ambiguous, it seems clear to me that this is referring to the act of deposit taking prior to breach as being illegal. Hence the use of the word ‘indemnity’ rather than the word ‘penalty’.

And this is exactly the whole point of a contract in the first place. Of course very few people enter into contracts with the intent to breach. In fact the inclusion of clauses regarding breach penalties etc, are partly enacted to raise awareness that there are repercussions to entering into a contract which you may have no intention of fulfilling.

No one is saying that any contract should be set in stone as far as not allowing breach by either party. Life is fluid and circumstances change, but both parties need to be protected. In cases where one party wants to breach then there will always be an out in the contract which may be the requirement for a certain amount of notice and/or the requirement for the party at breach to cover the other parties ocsts or some other punitive damages.

Contracts are a two way street. While a teaching contract carries certain obligations for you, it also carriues certain obligations for the employer and it seems that your win is evidence of this.

While it is all well and good for a teacher two months into a one year contract say “Sorry, my circumstances have changed and I won’t be coming back after today”, could you imagine if the reverse occured where a teacher with a contract was informed by a school that “our circumstances have changed and we no longer need you to work here anymore as of tomorrow”.

Unfortunately some teachers also terminate contracts for ridiculous reasons and it is not always the schools fault. This is why we have contracts in the first place - to protect both parties, not to make it difficult for one or the other.

Anyway, I would be interested in hearing why you were fired and what the clause in your contract says about this that caused the CLA to find against your employer. I feel that your case may be somewhat different to the question posed by the OP and I think that it is in everyones best interests to clarify this.