Prosecution of a Fraudulent Labor Agency in Taichung: An Insight on the Exploitation of Migrant Workers in Taiwan

Prosecution of a Fraudulent Labor Agency in Taichung: An Insight on the Exploitation of Migrant Workers in Taiwan
Photo Credit: CNA

What you need to know

In January, authorities indicted four people for illegally recruiting Vietnamese workers and docking half of their wage. It is time that Taiwan address structural issues in its recruitment scheme for migrant workers.

By Bonny Ling

On January 28, 2021, public prosecutors in Taichung indicted four individuals on charges of human trafficking, violations of the Employment Services Act, and forgery of documents for their role in exploiting Vietnamese migrant workers in Taiwan.

The four involved worked at the Hong Yu Employment Service Agency Company (弘宇人力仲介公司) in Taichung to recruit migrant workers from Vietnam. Established in 2017, Hong Yu placed 126 Vietnamese migrant workers in the construction sector around Taiwan from July 2018 to August 2020.

The indicted were key members of the recruitment agency: the proprietress Diao Yu-hong (刁予弘), deputy general-manger Hsu Shih-chang (許士樟), accountant Lin Chia-chin (林佳瑾), and language interpreter Ngo Quoc Ha (吳國河). The four defendants reportedly set up a complex web of 19 shell companies in manufacturing, using false residential addresses and names of over 200 Taiwanese individuals.

After Hong Yu organized the recruitment of workers from Vietnam, it then contracted 38 different construction companies around Taiwan to hire out the workers originally allocated to manufacturing. During the three years of its operation, Hong Yu thrived by exploiting its recruited workers by deducting and pocketing half of their pay every month. In what is described by the public prosecutors as the largest organized human trafficking operation undertaken by a registered recruitment agency in Taiwan, Hong Yu reportedly took in illegal gains of about NT$25 million (about US$900,000). 

Whereas Hong Yu charged the construction companies monthly NT$36,000 to 42,000 — about US$1280 to 1500 — plus other fees, the workers themselves did not receive the full amount. The agency deducted around half of the workers’ wage under the guise of paying labor insurance and other costs, leaving them only around NT$16,000 to 19,000 (about US$570 to 680) of their monthly wage.

The Vietnamese workers reportedly undertook heavy overtime to supplement their monthly earnings and feared taking time off. For those who did raise questions about their employment, the agency threatened them with deportation — a threat backed up by the confiscation of their passports and personal papers.

It is important to point out that much of the coverage reporting on the indictments centered on the unscrupulous agency owner: Diao Yu-hong (刁予弘). This is because she is a naturalized Taiwanese citizen of Vietnamese origin. Therefore, many headlines were reporting on this case, focusing on how a person exploited her compatriots. Such examples can be seen in the Liberty Times’ “Vietnamese Woman Sets Up Shell Labor Agency and Deducts Compatriots’ Salary for an Easy Profit of NT$25 Million (越女設空殼仲介 剋扣同鄉薪資爽賺2500萬),” United News’ “Shell Companies Recruit Foreign Workers; New Immigrant Defrauds Compatriots (空殼公司引移工 新移民坑同鄉)” and China Times’ “Illegal Labor Recruiter Exploits Compatriots; Vietnamese Woman Pockets NT$25 Million (非法媒介剝削同鄉 越女撈2500萬).”

In comparison, little is known about the deputy general manager, accountant and the interpreter, who, it is assumed, also had extensive knowledge of the complicated operation. However, the human-interest emphasis on the founder’s Vietnamese origin has the unfortunate effect of shifting attention from a much-needed examination about the complexity of labor migration to Taiwan and how it structurally embeds labor exploitation risks.

Under the current system, migrant workers heavily depend on labor agencies in their home countries to arrange their employment abroad. Once they arrive in Taiwan, they are again dependent on these entities in their relationship with Taiwanese employers. Taiwanese employers use labor agencies effectively as their contracted human resource team for their foreign worker pool, often citing difficulties of managing across cultures and languages. Migrant workers pay for this human resource service, whereas most professional (so-termed “white-collared”) workers do not bear their own employment’s administrative costs.

The deductions pocketed by the fraudulent recruitment agency must be seen against the background that heavy deductions are normalized for a migrant worker’s pay in Taiwan. Under the Standards for Fee-Charging Items and Amounts of the Private Employment Services Institution, migrant workers pay monthly service fees to their labour agency in Taiwan for “[e]xpenses required for undertaking employment services matters” (Article 2(5)). This monthly service fee is set at the following rates (Article 6):  

  • First-year, each month NT$1,800 (about US$65) 
  • Second-year, each month NT$1,700 (about US$60)
  • Third-year and thereafter, each month NT$1,500 (about US$55)

In contrast, service fees charged on employers are NT$2,000 per year and not monthly, as for the migrant workers (Article 3(2)). This means that migrant workers pay roughly nine to 11 times more for service fees than their employers, depending on the specific year of their employment.

The service fees that migrant workers pay in Taiwan represent a hefty portion of their monthly wage. For instance, migrant workers in domestic care receive NT$17,000 (about US$600) as their monthly minimum wage, excluding overtime pay. In their first year, service fees paid to their labor agency in Taiwan would be about 10% of their minimum monthly pay. For migrant workers outside domestic care, this figure would be around 7.5% since their minimum monthly wage of NT$24,000 as of January 1, 2021 is higher than those in domestic care whom the Labor Standards Act does not cover. These are high costs in proportion to their total monthly wage.

No doubt the four individuals, if convicted, will be used to exemplify Taiwan’s commitment to combat human trafficking. The Taichung public prosecutors have asked the court to deal with the case without leniency because the exploitation is “a transgression against the fellowship of kinship (悖於同鄉情誼且天地不容).” Beyond the heavy “killing the chickens to scare the monkeys” (殺雞儆猴) rhetoric of punishment, however, the case raises fundamental questions about the system of oversight for the 1,500 labor agencies registered and operating in Taiwan to hire workers from Indonesia, the Philippines, Thailand, and Vietnam.

h_524603782 外勞
Photo Credit: RITCHIE B. TONGO / EPA / TPG Images
A migrant worker carries placard during a protest near the Presidential office in Taipei, Taiwan, December 13, 2015. Migrant and local workers from Indonesia, Malaysia, Philippines, Vietnam, Thailand, Taiwan and other parts of Asia demand Taiwan government for their better welfare. 

Under international law, states must protect against human rights abuses within their territory. This means that Taiwan must have an effective legal framework to prevent, investigate, punish, and redress human rights abuses. The Hong Yu arrests point uneasily to Taiwan’s legal framework dealing with the registration and monitoring of labor recruitment agencies.

How did the fraudulent shell company structure, with 19 dubious firms and their respective paper trails, get past registration? Moreover, how did it then remain undetected for almost two and half years before suspicions were first raised, apparently after a tip-off to Taichung City Government’s Labor Affairs Bureau in September 2020? Does this attest to a weak system of monitoring and oversight, failing to ensure that recruitment agencies operate in accordance with the applicable laws and regulations? What mechanisms ensure workers can report, without fear of retribution, when their passports are confiscated or when abuses occur?

The same questions exist for Vietnam as the country of origin. It is important also to understand which business(es) Hong Yu collaborated with in Vietnam to organize the migrants’ departure paperwork? There needs to be a careful cross-border investigation to examine whether labor recruitment agencies and individuals in the country of origin also profited illegally from the fraudulent recruitment scheme in Taiwan.

The case also points out that the concept of human rights due diligence, at least among the construction sector, has yet to take off as a central component of the corporate responsibility to respect human rights in Taiwan. Questions here would remain on whether, if any, of the 38 firms that employed the migrant workers from Hong Yu had conducted human rights due diligence to establish whether the workers were employed in a coercive relationship.

In recent years, many countries of origin of migrant workers have embarked on tentative measures to improve labor migration. One of the most well-known of these efforts is the regulation proposed by Indonesia in July 2020 to split the recruitment fees between the government of Indonesia and the overseas employers so that Indonesian workers would not become heavily indebted just for securing a job abroad. The proposed regulation, however, received heavy criticisms from the Taiwan government and employer associations.

In early January 2021, Indonesia announced the regulation could not take effect due to funding shortfalls that prevented their implementation in Indonesia. This must have offered some relief for the Taiwan government, which held firmed last year, without basis in international law, that Indonesia cannot unilaterally embark on measures to improve the situation of its migrants (see analysis here). Nevertheless, what is happening in developments around Taiwan is a deep push by U.N. agencies, governments, civil society organizations, business groups, and individual brands to advocate for a different type of labor recruitment of migrant workers.

A U.N. official said: “Structures where migrant workers are essentially forced to pay for work opportunities mean they carry additional vulnerability to the destination workplace. To reduce the risk factors that contribute to persistent ‘modern day slavery,’ we have to restructure these systems so that the employers are paying the costs. Recruitment agencies that profit from the desperation of migrant workers to gain decent work must be held accountable.” 

In November 2020, the government of Vietnam passed revisions to the Law on Contract-Based Vietnamese Overseas Workers (Law 72), which removes brokerage commissions paid by migrant workers to recruitment agencies from 1 January 2022. Although this round of revisions did not go as far as dropping recruitment fees completely in Vietnam, it is a clear sign that this travel direction is towards a no-fees model of labor migration. UN agencies like the International Labor Organization have long advocated that migrants do not bear the cost of their own employment recruitment in both countries of origin and destination.

Taiwan can only build a migrant labor recruitment system that reduces gross labor exploitation risks if we reflect — comprehensively and honestly — about structural faults. These faults have persisted for decades in the current way of bringing migrants to meet local labor demands.

The Hong Yu prosecution offers this critical chance. This is the time to fully acknowledge the abuse of the 126 migrants, who toiled for years in Taiwan’s construction sector for half their pay, by probing behind the façade of nationality and the collective outrage against compatriot-based exploitation. Only by moving beyond this artificial narrative can we meaningfully begin to build a labor system based on migration with dignity.

The author thanks the quoted colleague for thoughtful discussions. 

The News Lens has been authorized to repost this article. The piece was first published by Taiwan Insight, the online magazine of the University of Nottingham’s Taiwan Studies Program. 

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TNL Editor: Bryan Chou (@thenewslensintl)

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