AI Is Knocking on the Door: 5 reminders about ChatGPT-generated Employment Agreement

Note: if you are not yet familiar with the rights and obligations under employment relationships or proper documentations with employees, please read “ HOW TO ENTER INTO PROPER DOCUMENTATION WITH EMPLOYEES ” first.

Recently, the chatbot ChatGPT launched by OpenAI has gained a large number of users, and the users have been sharing their chat results with ChatGPT. In light of this trend, we used ChatGPT on December 21, 2022 and asked it to provide an English employment agreement under the laws of Taiwan (R.O.C.). We found that ChatGPT was indeed able to quickly deliver an English employment agreement; however, we also noticed that the content of such agreement was too simple and would not be able to fully comply with Taiwanese labor laws.

We understand that startups may be interested in using the agreement generated by ChatGPT considering the cost and efficiency. Given such, we would like to address at least 5 crucial points below for the startups who considers using employment agreements generated by ChatGPT for hiring matter:

  1. Term of the contract:

    According to Taiwan Labor Standards Act (the “LSA”), the terms of the employment agreements are indefinite in principle, unless in certain situations specifically permitted under Article 9 of the LSA (where the employment agreements can be with a specific definite-term).

    The employment agreement template generated by ChatGPT (the “ChatGPT Template”) took a definite-term contract with a termination date as the default, which is clearly not in line with Taiwan LSA—this may lead this “definite-term” clause invalid and then may cause further disputes.

  2. Salary:

    In Taiwan, most businesses prefer to adopt a “low base salary (with a specific amount of monthly salary stated in the agreement) but high bonuses (with a vague and broad standard in determining the bonus)” salary structure. The salary clause in the ChatGPT Template did not take this into consideration when generating the template. However, it is a very important factor that the amount of the “salary” will affect the calculation of overtime pay, severance pay, labor insurance, health insurance, and labor pension, etc. under Taiwan laws. Anyone who would like to adopt ChatGPT Template’s salary clause directly should be aware of this sensitive matter.

  3. Confidentiality:

    In practice, when regulating the “confidential information”, it usually will make its scope as full and complete as possible. However, the definition of “confidential information” in the ChatGPT Template is comparatively simple. For example, it seems that the information given by a third-party to the employer (such as the employer’s customers and suppliers) is not properly covered in the ChatGPT Template. The confidentiality period is not regulated either in the ChatGPT Template. If certain business know-how or technology matters for a startup, then it should carefully design the confidentiality term in order to avoid ambiguity and disputes.

  4. Non-competition clause:

    Our first try of ChatGPT Template is shown below. This clause does not include the period, region, and scope for non-competition. It does not have corresponding compensation for non-competition restriction, either—this is clearly against Taiwan LSA, Article 9-1, which may result in the invalidity of the entire non-competition clause. That is to say, an employee who has signed this agreement turns out to be able to compete with his/her employers after the employment agreement is terminated. Startups must pay attention to the Enforcement Rules of the LSA, Article 7-2 (the reasonable period, region, and scope for non-competition) and 7-3 (the reasonable compensation for non-competition) to ensure such clauses are valid and enforceable.

    Non-competition clause
    Non-competition clause

  5. Termination:

    The ChatGPT Template allowed either party to unilaterally terminate the employment agreement with notice. This is directly against Taiwan LSA. Under Taiwan LSA, a company can unilaterally terminate an employment agreement ONLY when there is a legal reason stipulated under the LSA. In addition, where an employee wishes to unilaterally terminate an employment agreement, the mandatory notice periods will vary according to the employee’s seniority. For example, for an employee who has worked for less than one year, he/she has to provide a 10-day prior termination notice before being able to legally unilaterally terminate the agreement (i.e., resignation). For this notice period, the ChatGPT Template uniformly stipulates a 30-day notice period, which is inconsistent with the LSA.

Thoughts and Advice after testing

Based on our test on ChatGPT, we found that it indeed can quickly produce an English employment agreement within just one minute—which is very helpful for startups. However, we also found that ChatGPT will produce different versions of agreements from time to time.

Therefore, if a startup company wishes to use the ChatGPT Template, we strongly suggest that it should still seek a professional lawyer to review the agreement that ChatGPT produced. Startups may want to incorporate other terms such as a probationary period, agreement on transfers, assignment of employee intellectual property rights, confidentiality, etc., if necessary. In addition, it is also important to revise the provisions that are in obvious violation of Taiwanese laws and regulations, so as to avoid invalidation of the agreement due to violation of the laws or any other controversies.

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