2.1 Statutory requirements
Pursuant to the Labour Standards Act, an employer may only terminate the employment of an employee for ‘just cause’. Just cause is not defined in the LSA, making its application quite subjective. Korean court decisions have generally only held that ‘just cause’ exists in 2 circumstances:erally only held that ‘just cause’ exists in 2 circumstances:
- Fault attributable to the employee making continued employment untenable. For example:
- where the employee is guilty of sufficiently grave misconduct making it impossible to continue the relationship;
- continuous and persistent unsatisfactory performance;
- criminal or deliberate tortious acts against the employer;
- serious criminal acts that are not in the line of duty;
- improper relationships with other employees; or
- material misrepresentation in the hiring process.
- Urgent managerial necessity to try and save a failing business from imminent bankruptcy. The scope of ‘urgent managerial necessity’ is also largely undefined (see further under heading 2.6 below).
2.2 Notice periods
In all cases of unilateral termination, an employer must notify an employee of their dismissal at least 30 days in advance, or pay 30 days’ wages in lieu of notice. The dismissal notice must be in writing and state the reasons for dismissal. This provision applies to all workplaces, including those with less than 5 employees.
2.3 Restrictions on the ability to terminate employment
The Labour Standards Act protects the following categories of employees from dismissal:
- employees recovering from work-related illness or injury during their period of recovery and for 30 days afterwards; and
- employees who take statutory maternity leave, until 30 days after the leave has ended.
In addition, the Gender Equality in Employment Act protects employees who take childcare leave from dismissal.
2.4 Remedies
Employees can apply to the Labour Relations Commission or the local district labour office if they believe they have been terminated without ‘just cause’. If it is determined that the employee has been dismissed without ‘just cause’, the employer will be ordered to rehire the employee (at the employee’s discretion) or compensated in lieu thereof, and to pay backpay. An employer who fails to comply with a rehire order may be subject to criminal penalties.
2.5 Severance payments
Pursuant to the Labour Standards Act, upon termination of employment for any reason of an employee who has been employed for at least one year, the employee is entitled to severance pay of one month’s ‘average wage’ (see 1.4 above) for each year of continuous service.
More generous amounts may be provided for under company regulations and collective bargaining agreements.
2.6 Specific requirements applicable to redundancy
In theory, ‘urgent managerial necessity’ to try and save a failing business from imminent bankruptcy is recognised as a ’just cause’ for termination of employment. In practice, however, the conditions for implementing redundancies are very difficult to meet.
The Ministry of Labour has issued guidelines which indicate that multinational companies cannot lawfully make Korean employees redundant simply because of a worldwide retrenchment plan, particularly if the Korean business is profitable. The guidelines provide that employees cannot be sacrificed simply for the convenience of management.
Pursuant to the Labour Standards Act, in the event of ‘urgent managerial necessity’, the employer is required to do the following:
- Make every effort to avoid involuntary redundancies. Supreme Court decisions interpreting this provision have held that employers must first exhaust all other options, such as offering early retirement packages, implementing a hiring/wage freeze, reducing working hours/wages and other reasonable measures.
- Adopt and use reasonable and fair criteria in selecting the employees to be made redundant. Discrimination based on gender, for example, is expressly prohibited.
Where there is a union, representing more than half the employees, the employer must give notice of the redundancies to the union no later than 50 days before the intended date of dismissal. If no such majority union exists, the notice must be given to the employee representative.
The employer must also consult in good faith with the union (or, where no union exists, a person duly selected by more than half of employees as their representative) to discuss the steps taken by the employer to avoid the redundancies and the criteria used to select the affected employees. The requirement to consult does not however grant the union or representative a right to veto the employer’s plan. The Supreme Court has held that redundancy planning is not a matter subject to collective bargaining between employers and unions. Industrial action in response to proposed redundancies is therefore unlawful (although common).
An employer must rehire former employees when recruiting within 3 years of the redundancy for positions that are similar to those held at the time of redundancy, unless the employees do not wish to be rehired.
In most cases where an employer intends to dismiss more than 10 employees, the employer must file a report with the Ministry of Labour at least 30 days before the proposed redundancies, in the prescribed form, which includes statements regarding:
- the date when notice of redundancies was given to employees;
- the method of employee notice;
- the criteria used by the employer for selecting employees to be made redundant;
- the alternatives considered to avoid redundancies; and
- other matters, including the employer’s plan to rehire redundant employees.