The Executive Yuan last week approved a package of draft amendments to the Labor Standards Act (勞動基準法), which, if enacted, would require companies to pay severance or pension funds to their workers in a timely manner, as well as enable employees from liquidated or bankrupt firms to occupy the same position as creditor banks in the hierarchy of debt claims.
The Cabinet expects that if those amendments are rapidly sent to the Legislative Yuan for deliberation and approval and become laws quickly, they would oblige employers to deposit sufficient employee pension funds and severance packages on a regular basis, or face administrative punishments.
The move comes after former employees from Hualon Corp’s synthetic fiber plants and their supporters intensified their longtime campaign for full compensation for unpaid wages and pensions over the past few months.
Among their recent actions, some paid a surprise visit to Premier Jiang Yi-huah’s (江宜樺) residence in Taipei this month, while others stormed the lobby of the Ministry of Labor building last month in their efforts to demand that the government step up action over their unpaid wages and pensions owed by the textiles maker, which declared bankruptcy in 2012.
Although the draft amendments also come as President Ma Ying-jeou (馬英九) and his Chinese Nationalist Party (KMT) government face increased public complaints ahead of local elections on Nov. 29, it still marks an important milestone toward better safeguarding of workers’ basic rights.
Yet it has left banks undefended, because the Cabinet proposed that the amendments be retroactive. According to local media outlets, some banks have started worrying about current loans to local firms — especially ones with insufficient pension reserves or high debt ratios — while others have expressed reservations about future lending to small companies or business startups, to pre-empt any concerns the new regulations might cause to the banking system.
There are doubts about the proposals’ effectiveness, because the government still has not established a single window in this nation to facilitate information exchange among agencies, let alone set up a unified platform to deal with companies that have pension shortfalls.
What remains unclear is whether labor affairs officials would stay alert to changes in businesses’ pension reserves, or leave banks to do their own due diligence and obtain the data themselves. Even though the Cabinet has advised banks that they must be prepared to employ all available tools — including the Equator Principles credit risk management framework — to review loans made to projects that might generate social and economic effects, it is debatable whether addressing unpaid wages and pensions and other social implications of the liquidation of a company’s assets should be addressed by a court or through the nation’s social safety net.
On the other hand, no one should underestimate the risk of a potential credit squeeze facing small companies and startups if the proposals are approved by the legislature. As small and medium-sized firms generally do not garner enough funds from banks, the new regulations could just create a new problem.
It is also worth pondering whether the government can serve a major role in the temporary receivership of a bankrupt firm and seek more viable results for workers against other debtors in liquidations.
Time and again, the government has moved forward in the protection of the rights and interests of local workers, but its problem consistently lies in its poor policy execution and inefficient bureaucracy.
To avoid its new policy becoming another empty promise, a comprehensive check on local businesses’ deposits of pension funds and severance packages would be an important first step in reducing mishaps during bankruptcies. Then the nation can move on to the next steps.
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