Case News

The TCC delivers its Judgment 112-Hsien-Pan-16 (2023)

    TAIPEI, November 16, 2023. The Taiwan Constitutional Court (TCC) delivered its Judgment of the “Case on the Employer’s Obligation to Make Up the Yearly Difference in the Labor Retirement Reserve Fund” on October 27, 2023.

Principal Facts, Issues, and Procedure of the Case

    This case concerns the employer’s obligation to make up the difference in its business entity’s labor retirement reserve fund (the Old Fund). Since the enactment of the Labor Standards Act in 1984, employers have been required to appropriate a certain amount of money to their business’s labor retirement reserve fund. Although a new system, the Labor Pension Fund (the New Fund), was established after the enactment of the Labor Pension Act in 2005, employees may choose to continue applying the Old Fund instead of asking their employers to appropriate pensions to their individual labor pension accounts per the new system. To ensure the Old Fund of each business entity has adequate pension money, Article 56, Paragraph 2 of the Labor Standards Act (the disputed provision) establishes a mandatory yearly obligation for the employers to make up the difference between the current amount in the pension reserve fund and the following year’s estimated pension for eligible retirees.

    The petitioner is Panel No.3 of the Supreme Administrative Court. When hearing a case concerning labor pensions, the petitioner believes that Article 56, Paragraph 2 of the Labor Standard Act is unconstitutional. The petitioners argued that the disputed provision violates the principle of proportionality, the principle of equality, and the right to property as it requires a lump-sum appropriation without considering (1) the difference in pension fund is an inevitable result as it runs on a statutory reserve system; (2) the scale of the business entity, the number of employees applying the Old Fund, and how the business is doing; (3) contrastingly, the law allowed pension payment in installment for retired employees. 

    Judgment 112-Hsien-Pan-16 (2023) was announced on October 27, 2023. Justice Hui-Chin YANG wrote this Judgment. Justice Ming-Yan SHIEH (joined by Justice Jui-Ming HUANG and Justice Sheng-Lin JAN) filed a dissenting opinion. 

Decision of the Court

    The TCC upheld the constitutionality of the disputed provision. In its reasoning, the TCC applied the rational basis review and ruled that the provision rationally related to a legitimate government interest (strengthening the protection of laborer’s right to pension), thus not violating the principle of proportionality and the right to property. 

    The TCC also pointed out that the appropriation to the labor pension reserve fund and pension payment to retired employee are different obligations and serves different institutional interests. The different treatment (whether allowing installment payment) does not constitute a violation of the principle of equality.
 

Notes:

1. Full texts of the Judgment and Opinions are available on the TCC website here (Traditional Chinese). An English summary of this Judgment will be available later on the TCC English website.
2. The TCC's Case News is prepared by the Department of Clerks for the Constitutional Court (Judicial Yuan) for information only and does not bind the Court. 
3. In case of any conflict of meaning between the Traditional Chinese version and the translated English version, the Traditional Chinese version shall prevail.