Employment 2019 Comparisons

Last Updated March 08, 2019

Law and Practice

Authors



Yoon & Yang LLC (Seoul - HQ) 's Employment and Labour Practice Group consists of 17 attorneys and other professionals who all concentrate solely on employment issues. The type of issues that the Practice Group has recently represented are illegal worker dispatches, discriminations among different type of workers, implementation of performance-based salary system, protection of non-regular workers, and ordinary wage issues. The firm's key areas of practice are general HR issues, including performance-based salary systems, labour union activities, collective bargaining agreements and disciplinary regulations, employment issues in mergers and acquisitions, employment issues on corporate restructuring, representation in labour disputes in civil, criminal and administrative proceedings.

Korean labour laws do not distinguish blue-collar workers from white-collar workers, and these terms are merely used to describe employees providing different categories of work. Hence, both blue-collar workers and white-collar workers fall under “employees” defined under the Labor Standards Act, and are subject to identical treatment under other labour-related laws. The Labor Standards Act defines “employees” as persons who provide labour to businesses or at workplaces for the purposes of earning wages, irrespective of job types.

Meanwhile, forms of employment can be largely categorised into two types, which are (i) direct employment by the employer and (ii) indirect employment of another employer’s employee. The foregoing forms may be further narrowed down based on the employee’s employment contract period and roles. 

Direct employment by the employer can be further specified based on the employment contract period, that is, (i) “employment contracts without a fixed term” (ie indefinite employment contracts) and (ii) “employment contracts with a fixed term” (ie definite employment contracts). Further, employees who are employed under definite employment contracts can be narrowed down into fixed-term employees and part-time employees.

Employees under indirect employment (ie employees of one employer being used by another employer) can be further categorised as “dispatched agency employees” and “subcontracted employees”.

There are no differences in statuses between employees across the job types. All types of workers are considered identically as employees under the Labor Standards Act, and all labour-related laws equally apply to both types of workers.

Among various types of employment contracts, the two major types are (i) “employment contracts without a fixed term” (ie indefinite employment contracts) and (ii) “employment contracts with a fixed term” (ie definite employment contracts). The Labor Standards Act does not have provisions that separately govern the duration of employment contracts. Therefore, employers and employees may freely determine the employment contract durations.

However, definite employment contracts are governed by the Act on the Protection, etc. of Fixed-term and Part-time Workers (the “Fixed-term Workers Act”). According to Article 4 of the Fixed-term Workers Act, employment contracts with a fixed term in excess of two years are considered to be indefinite employment contracts. Further, Article 8 of the Fixed-term Workers Act prohibits employers from discriminating between employees under definite employment contracts and other employees under an indefinite employment contract who engage in the same or similar kinds of work in the same business or workplace.

Article 17(1) and (2) of the Labor Standards Act provides that employment contracts must explicitly provide for the terms and conditions of employment in writing. In particular, employment contracts must include provisions on (i) wages (eg composition of wages, methods for calculating wages, methods for paying wages, etc), (ii) contractual working hours, (iii) weekly holidays, and (iv) annual paid leaves. 

Moreover, employers are obliged to deliver such employment contracts to the employees. If employers fail to deliver employment contracts to the employees, they may be punished with a criminal fine not exceeding KRW5 million in accordance with Article 114 of the Labor Standards Act.

Maximum Working Hours

The Labor Standards Act provisions on working hours were recently amended on 28 February 2018. The maximum working hours per week has been reduced from 68 hours to 52 hours per week. This change has been in effect as of 1 July 2018.

Article 50(1) and (2) of the Labor Standards Act provides that working hours may not exceed eight hours per day and 40 hours per week. However, Article 53(1) allows employers to extend the foregoing working hours, as overtime, by up to 12 hours per week upon obtaining the relevant employees’ consent.

For the purposes of determining the working hours, one week refers to seven days including holidays. Thus, the weekly maximum working hours with the permitted extensions is 52 hours (40 hours per week + up to 12 hours of overtime).

Meanwhile, under limited circumstances where certain criteria are satisfied, the Labor Standards Act recognises the following types of “flexible working systems”:

Flexible Work Hours System (Article 51 of the Labor Standards Act)

In a Flexible Work Hours System, working hours are increased during the weeks where work is concentrated but reduced during other weeks so that, on average, the weekly working hours are within the statutory working hours (ie 40 hours).

Selective Work Hours System (Article 52 of the Labor Standards Act)

In a Selective Work Hours System, an employee may freely choose his or her working hours over a certain period (not exceeding one month), so long as the total working hours do not exceed the statutory working hours for such period. In this system, the employee may decide when he or she will begin and end work, as well as the number of hours to work in a day.

Presumed Work Hours System (Article 58(1) of the Labor Standards Act)

Presumed Work Hours Systems are used in circumstances where it is difficult to calculate the hours of work performed by an employee because such employee provides labour outside the workplace. In a Presumed Work Hours System, employees are presumed to have worked (i) their contractual hours, (ii) hours that are typically needed to perform the relevant work, or (iii) hours that have been agreed in writing with the employees’ representative for a particular work.

Discretionary Work Hours System (Article 58(3) of the Labor Standards Act)

Discretionary Work Hours Systems apply to limited types of work prescribed under the Enforcement Decree of the Labor Standards Act. These types of work consist of those that have been legally recognised, based on the nature of the work, to require employees’ discretion in determining how the work should be performed. In a Discretionary Work Hours System, working hours that have been agreed in writing between the employer and the employees’ representative are recognised as hours worked by the employees. 

Part-Time Contracts

Employees under part-time employment contracts are also considered as “employees” within the meaning of the Labor Standards Act. Hence, the laws do not require part-time employment contracts to have specific terms that are different from ordinary employment contracts. Further, the format used for part-time employment contracts is identical to that of ordinary employment contracts. However, considering the nature of part-time work, a part-time employment contract must clearly indicate the working hours.

The Fixed-term Workers Act also applies to part-time employees. As such, employers are prohibited under Article 8 of the Fixed-term Workers Act from discriminating between part-time employees and other employees under an indefinite employment contract who engage in the same or similar kinds of work in the same business or workplace.

Overtime

As described above, statutory working hours under Article 50(1) and (2) of the Labor Standards Act may not exceed eight hours per day and 40 hours per week (excluding break times). However, such statutory working hours may be extended as overtime by up to 12 hours per week in accordance with Article 53(1) of the Labor Standards Act, so long as the employees consent to such overtime.

Article 56 of the Labor Standards Act governs overtime pay. More specifically, at least 50% of the ordinary wage must be additionally paid for (i) overtime worked in excess of the statutory working hours (ie eight hours per day, 40 hours per week), (ii) work performed during holidays, and (iii) work performed during night-time (ie between 10pm and 6am).

Minimum Wage Requirements

By August 5th of every year, the Minister of Employment and Labor determines the minimum wage applicable in the following year. The publicly announced minimum wage becomes effective as of 1 January of the following year. Currently the hourly minimum wage for 2018 is KRW7,530. The hourly minimum wage for 2019 has been scheduled to be KRW8,350.

Employers are required to pay at least the minimum wage to their employees pursuant to Article 6(1) of the Minimum Wage Act. Therefore, in accordance with Article 6(3) of the Minimum Wage Act, employment contracts that stipulate for wages below the minimum wage level are invalidated as to such stipulation and, by operation of law, the wages under such employment contracts are presumed to be minimum wages.

Under Article 28 of the Minimum Wage Act, minimum wage violations are punishable with imprisonment with labour for a period not exceeding three years or with a criminal fine not exceeding KRW20 million.

Thirteenth Month and Other Bonuses

There is no legal requirement for employers in Korea to pay thirteenth month bonuses, etc. Under the Korean labour laws, employers are only obliged to pay monthly wages and severance pay upon employees’ resignation.

To describe employers’ obligation to provide severance pay in more detail, Article 8(1) of the Act on the Guarantee of Workers' Retirement Benefits requires employers to set up a system that enables the employers to pay a retiring worker a severance pay in the prorated amount equivalent to average wages earned for 30 days for each year of the resigning employee’s continuous service. Therefore, even if the severance payments are not covered in the employment contracts or otherwise covered in the employer’s rules of employment, such payments must be provided upon employees’ resignation.

If an employer is paying its “periodic bonuses” as thirteenth-month bonuses in Korea, such payment is at the employer’s complete discretion, and there are no provisions in the Labor Standards Act that prohibit such bonuses. However, if such thirteenth-month bonuses are paid periodically, uniformly (ie paid to all employees who meet certain conditions), and in a fixed manner (ie the payment is not conditioned on additional requirements), then such bonus can be considered as an “ordinary wage”. An “ordinary wage” is the wage that is used as the basis to calculate the additional payments for overtime, night-time and holiday work.

Government Intervention

The minimum wage system is the most classic example of the government’s interventions in compensation. The government determines the minimum wage on a yearly basis. For 2018, the minimum wage in Korea is KRW7,530.

Aside from the minimum wage system, the government may make compensation-related interventions by overseeing whether employers are, among other things, paying the statutory severance, as well as paying the additional wages which must be paid for work performed in overtime, during holidays or during night-time.

Vacations and Vacation Pay

The most typical types of vacation available for employees are (i) weekly holidays and (ii) annual paid leaves.

Weekly holiday (under Article 55 of the Labor Standards Act and Article 30 of the Enforcement Decree of the Labor Standards Act) refers to a paid vacation given to employees who have “worked continuously” for the contractual working days in a single week. If employees provide such “continuous work” for contractual working days in one week, employers are required to grant, on average, more than one paid vacation per week. Typically, employers designate Sundays as the weekly holiday, but employers are free to designate other days as the weekly holiday.

Annual paid leaves are prescribed under Article 60 of the Labor Standards Act, and it refers to 15 days of paid vacation granted to employees who have worked for at least 80% of a year. If an employee has provided continuous work for less than a full year or worked less than 80% of a year, then one day of paid vacation is granted as annual paid leave for every month in which an employee provided continuous work.

Required Leave

Leaves that are statutorily guaranteed include maternity leave, paternity leave, childcare leave and menstrual leave.

Maternity leave is covered under Article 74(1) of the Labor Standards Act, and it refers to a leave granted to pregnant women prior to and after childbirth. Statutes on maternity leave are mandatory provisions and, thus, neither the employer’s right to adjust the timing of such leave nor an employee’s forfeiture of the right to take such leave are recognised under the law. Employers must grant a total of 90 continuous days of leave prior to and after childbirth, and at least 45 days out of such 90-day leave must be allocated after childbirth.

Paternity leave is covered under Article 18-2 of the Equal Employment Opportunity and Work-family Balance Assistance Act (the “Equal Employment Opportunity Act”). If an employee requests paternity leave due to the employee’s spouse’s childbirth, an employer is obliged to grant a leave of at least three days and up to five days. However, an employee may not request paternity leave after 30 days from the date the employee’s spouse gives birth to a child. If paternity leave is granted, the first three days of the leave are on a paid basis.

Childcare leave is covered under Article 19 of the Equal Employment Opportunity Act. If an employee requests childcare leave in order to tend for his or her child who is (i) eight years of age or younger or (ii) in second grade or lower in elementary school, then an employer must permit a childcare leave of up to one year. Further, upon returning from the childcare leave, the employer must reinstitute the returning employee back to (a) the same position or (b) a position with a same wage level as prior to taking the childcare leave. In addition, employers are prohibited from terminating the employee or treating the employee disadvantageously on the basis of such employee taking a childcare leave. Moreover, employers are prohibited from terminating employees who are on a childcare leave (see Article 19 of the Equal Employment Opportunity Act).

Menstrual leave is covered under Article 73 of the Labor Standards Act, and employers must grant one day of unpaid menstrual leave per month upon request from a female employee.

Confidentiality and Non-Disparagement

There are no provisions under the Korean labour laws that restrict employers from requiring confidentiality and non-disparagement obligations from their employees. Therefore, employers may enter into confidentiality and non-disparagement agreements with employees. Employees’ breach of such agreements would enable employers to take disciplinary actions. Further, if an employer suffers damages from an employee’s breach of confidentiality and non-disparagement agreements, then the employer would be able to seek civil damages.

In additional to contractual agreements on confidentiality, trade secrets, as defined under the Unfair Competition Prevention and Trade Secret Protection Act (the “Trade Secret Act”), are legally protected.  According to Article 2 of the Trade Secret Act, trade secrets refer to information (including production methods, sale methods and useful technical or business information for commercial activities) that (i) is not publicly known, (ii) is the subject of reasonable efforts to maintain its secrecy, and (iii) has independent economic value.

In other words, for a trade secret to be protected under the law, it must be undisclosed, kept confidential, and useful. Undisclosed trade secrets refers to those that are not publicly known, and the confidentiality element requires the trade secret to be a secret that deserves legal protection. Lastly, a trade secret is useful if it has an independent economic value.

Therefore, so long as a trade secret satisfies all of the three requirements above, then a person (including employers) may request the court for a prohibition or preventive order against any person (including employees) who infringes or is likely to infringe trade secrets, if the business interest of the employer who possesses the trade secrets suffers damages or is likely to suffer damages due to such infringement (see Article 10(1) of the Trade Secret Act). Further, Article 11 of the Trade Secret Act provides that a person who damages, through an intentional or negligent infringement of trade secrets, the business interest of another person who possesses such trade secrets is liable for compensation for such damages.

Employee Liability

Korean labour laws do not have provisions that restrict or limit an employee’s contractual or tort liabilities. However, the Korean Supreme Court has previously held that, where an employer suffers direct damages due to an employee’s tortious act committed while performing his or her work, then such employer’s right to claim damage compensation from the employee is limited, based on the notion of fair distribution of the damages, to an amount that is deemed appropriate under the principle of good faith. In this regard, employee liability can be deemed to be partially limited.

On a separate note, obligations of employees are not expressly governed under the Labor Standards Act. Rather, employees’ obligations are stipulated under the employers’ rules of employment. Some of the common obligations of employees include, among others, obligations to (i) arrive at work on time, (ii) not hold concurrent positions, (iii) keep secrets acquired in connection with work confidential, (iv) not destroy or remove equipment or facilities from the company, (v) not engage in unlawful conducts, (vi) expend full efforts at work, and (vii) perform work in a diligent manner in good faith. Breach of such obligations and responsibilities may subject the relevant employees to disciplinary actions. Further, breach of the foregoing obligations may be deemed as tortious acts under the Civil Act if the breach causes damages to the employer, in which case the relevant employee may be held liable.

The Korean Commercial Act imposes a non-competition obligation upon directors, whereas employees are not subject to the same restriction. Nevertheless, employees’ non-competition obligation can be partially recognised through interpretations of court precedents.

The Korean Supreme Court has held that, where an employment contract has a non-competition clause, such clause is valid, so long as it is reasonable. However, if the non-competition clause excessively restricts (i) employees’ constitutionally protected rights (eg freedom in choosing jobs or providing labour) or (ii) free competition, then such non-competition clause is invalid for going against Article 103 of the Civil Act.

The Korean Supreme Court further held that, in order to determine whether a non-competition clause is valid, there must be a comprehensive consideration of various factors. Among other things, the court considers (i) whether the employer has an interest that necessitates protection, (ii) the resigning employee’s position and rank, (iii) the reasons for the employee’s resignation, (iv) territorial scope, period, and the types of jobs restricted through the non-competition clause, (v) whether the employee received compensation in exchange for signing the non-competition clause, and (iv) public interest furthered by the non-competition clause.

In practice, the most common issues that arise relating to non-competition clauses are the ones involving territorial scope and period. A non-competition clause may be invalidated for restricting an employee’s freedom of job selection if (i) the period of restriction is unnecessarily long, (ii) the territorial scope of restriction is excessively broad covering territories that need not be restricted to protect the employer’s interests, and (iii) the non-competition clause restricts employees from working in unnecessarily broad categories of jobs that are unrelated to protecting the employer’s trade secrets.

If an employee breaches a non-compete agreement, then an employer may request the court for an injunction or a preliminary injunction to suspend the relevant employee from continuing the competitive acts in breach of the non-compete agreement. Moreover, employers may seek civil damages against relevant employees if the employer has suffered damages from the employee’s breach.

Employees

Korean labour laws do not forbid or restrict non-solicitation clauses that prohibit former employees from soliciting other employees who remain employed with the former employer. Therefore, employers may include such non-solicitation provisions within their employment contracts, and require their employees to pay liquidated damages pursuant to Article 398 of the Civil Act for a breach of such an agreement. In addition to liquidated damages, employers may seek civil damages for breach of contract if the employer suffers ascertainable damages from the employee’s breach.

Non-solicitation clauses can also trigger issues regarding trade secret infringements under the Trade Secret Act. The Korean Supreme Court has held that, where a person who acquired technological information which qualifies as a trade secret moves to another company and attempts to disclose and use such trade secret at such other company, then such act constitutes violation of the confidentiality obligation under Article 2.3(D) of the Trade Secret Act. Further, the company that recruits such person is in violation of Article 2.3(A) for unlawfully acquiring a trade secret.

In such a case where a former employee and/or another company misappropriates trade secrets, a person (including employers) may request the court for a prohibition or preventive order against any person (including employees) who infringes or is likely to infringe trade secrets, if the business interest of the employer who possesses the trade secrets suffers damages or is likely to suffer damages due to such infringement (see Article 10(1) of the Trade Secret Act). Further, Article 11 of the Trade Secret Act provides that a person who damages the business interest of another person who possesses trade secrets through an intentional or negligent infringement of trade secrets is liable for compensation for such damages.

Customers

It is difficult to deem a former employee’s solicitation of their former employer’s customers as an infringement of trade secrets within the meaning of the Trade Secret Act.

However, the Korean labour laws do not forbid or otherwise restrict an employer from requiring its employees to sign an employment contract that includes a non-solicitation clause which prohibits those employees from soliciting the employer’s customers upon termination of the employment relationship. Further, as mentioned above, employers may require employees to pay liquidated damages, under Article 398 of the Civil Act, for breach of such non-solicitation clause. In addition to liquidated damages, employers may seek civil damages for breach of contract if the employer suffers ascertainable damages from the employee’s breach.

In Korea, the Personal Information Protection Act serves as the framework act in relation to data privacy. As such, unless otherwise regulated through separate legislations, data privacy and personal information are governed by the Personal Information Protection Act.

In this regard, the “Act on Promotion of Information and Communications Network Utilization and Information Protection, etc” takes precedence over other laws with regard to personal information processed between a telecommunication business operator and its users (ie customers). Further, the Credit Information Use and Protection Act takes precedence over other laws regarding matters on an individual’s credit information. Personal information processed between the employer and its employees are governed by the Personal Information Protection Act.

Methods of employing foreigners can be largely divided into two categories. The first method is through the “Hiring Foreigners with Professional Skills” system and “Other Status Stay that permits Employment (mainly those who are not professionals or simple-skilled workers)” under the Immigration Act. The second method consists of the “Employment Permit System” and “Work Permit System” based on the Act on Employment etc. of Foreign Workers (the “Foreign Worker Employment Act”).

To begin with, the Employment Permit System is a system that allows an employer to employ certain foreigners if that employer could not hire domestic employees despite its recruiting efforts.

The Work Permit System, on the other hand, allows a foreigner who satisfies certain conditions to obtain a work permit in Korea to be employed with an employer of such foreigner’s choice. This system allows for a relatively broader movement of foreign workers among workplaces in Korea compared to the Employment Permit System.

In Korea, the Employment Permit System ordinarily serves as the default system for hiring manual labourers. As for Koreans who hold foreign nationalities, the Work Permit System is applied.

Article 2 of the Foreign Worker Employment Act defines “foreign worker” as a person without Korean nationality who provides or desires to provide labour in return for wages in any business or workplace situated within Korea. Anyone within the meaning of “foreign worker” must satisfy the requirements and follow the requisite procedures under the Foreign Worker Employment Act in order to be employed in Korea. In addition, any matters not provided under the Foreign Worker Employment Act relating to entering, leaving or staying in Korea must be handled in accordance with the Immigration Act.

Meanwhile, the Foreign Worker Employment Act provides that the Act does not apply to foreigners with any of the following visas who are permitted to stay and work in Korea (ie visas that allow the visa holder to pursue employment activities in Korea):

  • Short-term employees (C-4); professors (E-1); foreign language instructors (E-2); research (E-3); technology transfer (E-4); professional employment (E-5); artistic performer (E-6); and designated activities (E-7);
  • Residence permits for overseas Koreans, such as permanent residence (F-2, F-4, F-5, F-6); and
  • Working holiday (H-1).

Pursuant to Article 18 of the Foreign Worker Employment Act, a foreign worker may pursue employment activities for up to three years from the date he or she enters Korea. Further, foreigners staying in Korea, as a principle, are subject to the sovereignty of Korea. Additionally, unless a foreigner’s rights under the public or private laws are otherwise restricted through treaties or laws, foreigners and Koreans receive identical protections.

According to Article 6(1) of the Foreign Worker Employment Act, a person who intends to hire “ordinary” foreign workers (through the Employment Permit System) must first post a job-opening for a domestic worker through an employment security office defined under the Employment Security Act.

If, despite the foregoing efforts to hire a domestic employee, an employer fails to hire a new personnel, then, as prescribed under Article 8(1) of the Foreign Worker Employment Act, the employer must apply for an employment permit for foreign workers from the head of the employment security office in accordance with the requirements under the enforcement decrees of the Ministry of Employment and Labor.

If an employer satisfies the conditions for employing foreigners, then the employer may apply for the issuance of an employment permit from an employment assistance centre. Upon receipt of such application, the employment assistance centre makes worker referrals (in multiples of three). The employer can then select the personnel qualified for the job among the referred workers and obtain an employment permit for such worker (seeArticle 8 of the Foreign Worker Employment Act).

Simultaneously upon issuance of the employment permit, a standard employment contract is drafted based on the working conditions described in the employer’s application for the employment permit. Such standard employment contract is then transmitted, through the Human Resources Development Services of Korea, to the foreign country’s agency that is eligible for dispatching the foreign worker selected by the employer. Once such transferred employment contract is conclusively confirmed and returned to the Human Resources Development Services of Korea, the employment contract is deemed executed (seeArticle 9 of the Foreign Worker Employment Act).

Once the said employment contract is executed, a visa issuance certificate is issued, after which the selected foreign worker is dispatched to the relevant workplace upon that foreign worker’s arrival to Korea and completion of employment training.

Article 2.4 of the Trade Union and Labor Relations Adjustment Act (the “Trade Union Act”) defines a trade union (ie a labour union) as “an organisation or associated organisations of employees, which is formed voluntarily and collectively upon the employees’ initiative for the purpose of maintaining and improving their working conditions and enhancing their economic and social status”. However, such organisation or associated organisations of employees are not considered as a trade union if (i) an employer or other person who always acts in the interest of the employer is allowed to join, (ii) most of the union’s expenditure is funded by the employer, (iii) its activities are only aimed at mutual benefits, moral culture and other welfare undertakings (as opposed to enhancing employees’ working conditions), (iv) those who are not employees are allowed to join the union, or (v) the main purpose of the union is to engage in political activities.

The most important function and role of a trade union is engaging in “collective bargaining” with the employer and thereby executing a “collective agreement” in order to foster enhancement and preservation of employees’ working conditions (see Articles 29 and 31 of the Trade Union Act).

In addition, trade unions may engage in “collective actions” in order to carry through with their positions in a dispute against the management arising from disagreements concerning working conditions (see Articles 2.5 and 2.6 of the Trade Union Act).

Article 29 of the Trade Union Act confers the representative of a trade union with the authority to bargain and enter into a collective agreement with the employer on behalf of the trade union and its members. Hence, any bylaws or internal regulations applicable to trade unions that limit the foregoing authority of a trade union’s representative are deemed invalid.

Neither the Trade Union Act nor any relevant laws provide for methods of appointing or electing a representative for a trade union. Therefore, methods and procedures for appointing or electing the trade union representative can be determined through bylaws or internal regulation of the trade unions, and the trade union representative should be appointed or elected accordingly.

Collective agreement refers to a written agreement that entails terms on working conditions (eg wages, working hours, etc) of the trade union members which have been negotiated through the collective bargaining process. Collective agreements are signed and executed by and between the trade union and the employer.

Collective agreements not only define contractual obligations of the parties, but also have normative effects of regulating the employment contract between the employer and individual employee. For example, Article 33 of the Trade Union Act invalidates portions of the employment contract or the employer’s rules of employment that fall foul of the standards for working conditions stipulated in the collective agreement. In other words, a collective agreement that has been entered into on an equal footing between the labourers and the management takes precedence over the individual employment contracts or rules of employment set by the employer.

Collective agreements also entail a “peace obligation” which, during the effective period of the collective agreement (i) requires the parties to mutually comply with the provisions within the collective agreement and (ii) prohibits the trade union from taking collective actions for the purposes of modifying the terms of the collective agreement that have already been agreed between the parties.

Ordinarily, contracts are binding only upon the parties to such contracts. For collective agreements, however, the binding effect of the agreement may also extend to third parties (ie non-parties to the agreement) if “certain conditions are satisfied” (seeArticles 35 and 36 of the Trade Union Act).

In Korea, termination of employment can occur in the following ways: (i) occurrence of grounds for automatic termination (eg employee reaching retirement age, death of employee, expiry of the contract period, etc); (ii) employer’s unilateral dismissal of the employee; and (iii) termination through mutual agreement between the employer and employee.

As for item (i) above (ie automatic termination), no “motivation” is required because the employment is terminated irrespective of the employer or employee’s intent. However, if employment is terminated due to expiry of the contract period, and if the terminated employee had a legitimate expectation for a renewal of his or her employment contract, then it may be difficult for the employer to terminate the employment relationship unilaterally against the relevant employee’s will without a justifiable cause.

For item (ii) above (ie unilateral dismissal), Article 23(1) of the Labor Standards Act requires employers to have a justifiable cause when dismissing, laying off, suspending or transferring an employee, reducing an employee’s wages or taking other disciplinary actions. As such, employers may only terminate employees against their will if the employer has a “justifiable cause”. The Korean Supreme Court has defined that there is a justifiable cause if, due to a fault attributable to the employee, it is impossible for the employer and the employee to, under generally accepted social norms, continue their employment relationship.

Lastly, item (iii) above (ie mutual termination) refers to termination of employment upon the employer and employee’s mutual agreement. Mutual terminations can further be narrowed down to, among others, cases where (a) employees voluntarily resign upon submission of a letter of resignation and (b) employees accept the employer’s suggestion to resign, in which case the employment relationship is terminated upon the parties’ execution of a separation agreement.

There is no difference in procedures depending on the grounds for dismissal and, hence, the general requirements for dismissals are identical regardless of on what ground an employee is dismissed. In particular, Article 26 of the Labor Standards Act prescribes that an employer must give an employee a prior notice of at least 30 days if the employer intends to dismiss such employee. If this notice requirement is unsatisfied, the employer must pay the employee an additional sum of money equivalent to at least 30 days’ worth of the employee’s ordinary wages. The foregoing requirement applies even in circumstances where employees are dismissed due to managerial reasons.

In addition to the prior notice requirement, the employer must, in order to dismiss an employee, provide the employee with a “written” notice in accordance with Article 27 of the Labor Standards Act. Further, the said written notice must describe the reason for dismissing the employee as well as when the employee is to be dismissed. In other words, verbal dismissals of employees violate Article 27 of the Labor Standards Act and thus are invalid.

Collective Redundancies

Article 24 of the Labor Standards Act governs dismissals based on managerial reasons, and it includes mass lay-offs (ie collective redundancies). In order for an employer to dismiss its employees for managerial reasons, all of the following requirements must be met: (i) there must be an urgent managerial need; (ii) the employer must take all efforts to avoid dismissals; (iii) the employer must select employees to be dismissed based on reasonable and fair standards; and (iv) the employer must notify the dismissal no later than 50 days prior to the dismissal and engage in good-faith discussions with the employees’ representative. These requirements have been further explained by the Supreme Courts as noted below.

As for requirement (i) above, an urgent managerial need is not limited to circumstances where a lay-off is required for the company to avoid bankruptcy. If there is a reasonable and objective need for a reduction in the workforce in order to prepare for a potential future risk, then such need qualifies as an urgent managerial need.

Requirement (ii) above on “taking all efforts to avoid dismissals” refers to taking all possible measures to minimise the number of dismissals by, among other things, streamlining work methods or managerial policies, freezing new hires, utilising temporary suspensions, suggesting voluntary resignations (via offering additional compensation, etc), and transferring employees. The measures to be taken and their degree are neither fixed nor conclusively defined and, thus, whether adequate measures were taken depends on multiple factors, including the managerial risks faced by the relevant employer, managerial reasons as to why lay-offs should be made, type and scale of the business, and the number of employees at various levels of positions.

The definition of “reasonable and fair standards” for requirement (iii) above is also fluid. Requirement (iii), similar to requirement (ii), considers various factors to determine what is “reasonable and fair”, such as the magnitude of the managerial risks faced by the relevant employer, managerial reasons that necessitate lay-offs, type of business performed by the relevant division and composition of employees thereof, social and economic conditions during the period when lay-off is taken, etc. Further, when determining the standards for selecting the employees to be laid off, the employer’s circumstances relating to its managerial interests can be considered concurrently with the employees’ interest, as long as the employer’s interest is objectively reasonable.

The last requirement above on 50 days' prior notice and good-faith discussion does not affect the validity of a lay-off even if it is not satisfied. Therefore, if there had been sufficient time to notify the employees and engage in good-faith discussions, then the lay-off is valid, so long as all other requirements have been satisfied.

Notice Periods

As noted above, employers must, pursuant to Article 26 of the Labor Standards Act, give an employee a prior notice of at least 30 days if the employer intends to dismiss such employee. This notice requirement applies also to dismissals caused by managerial reasons. In addition, much like procedures for taking disciplinary actions, employers are required to provide a prior notice (usually one week before the meeting) that an HR committee meeting will be held. Other than the foregoing, the Labor Standards Act does not provide for a mandatory notice period. However, if the employer provides for a separate notice period in its rules of employment that are not required by the law, then such procedures must be complied with.

Severance

If an employer fails to give the requisite prior notice of 30 days prior to dismissing an employee, then the employer must pay the employee an additional sum of money equivalent to at least 30 days’ worth of the employee’s ordinary wages pursuant to Article 26 of the Labor Standards Act.

Also, aside from the foregoing requirements to provide a prior notice and to pay additional allowances for failing to provide a prior notice, there are additional severance pay-related requirements under the Act on the Guarantee of Workers' Retirement Benefits (the “Retirement Benefits Act”). The Retirement Benefits Act requires employers to provide severance payments or retirement pensions to resigning employees who have been employed for at least one year. To provide the foregoing payments or pensions, an employer is required to operate a retirement-benefit scheme in accordance with the Retirement Benefits Act. In particular, if an employee dies or retires, Article 36 of the Labor Standards Act requires an employer to pay the wages, compensations and other money or valuables to the employee within 14 days after the death or retirement of the employee. This 14-day payment period may be extended by mutual agreement between the parties concerned if there are special circumstances.

With regard to dismissals of employees, the Labor Standards Act only requires the employer to provide a prior notice of 30 days to the relevant employee (Article 26) and to notify the detailed reason for, and timing of, the dismissal in writing (Article 27). As such, no separate procedures such as obtaining external advice or authorisation need to be taken. However, if the employer provides for additional procedures for employee resignations (including dismissals etc) through collective agreements, rules of employment, employment contracts or other relevant agreements, then the employer must comply with such procedures.

Article 23(1) of the Labor Standards Act requires employers to have justifiable cause when dismissing an employee. The Korean Supreme Court has defined that there is a justifiable cause if, due to a fault attributable to the employee, it is impossible for the employer and the employee to, under generally accepted social norms, continue their employment relationship. Whether continuance of employment relationship is impossible under the generally accepted social norms is determined upon a comprehensive consideration of various factors, including (i) the purpose and nature of the employer’s business, (ii) workplace conditions, (iii) the employee’s position and responsibilities, (iv) how and why the employee engaged in misconduct, (v) the impact such misconduct will have on the sound order of the business, and (vi) the employee’s past behaviour.

Ordinarily, grounds for dismissal are stipulated under a company’s rules of employment and other relevant internal regulations. Some of the most common grounds for dismissal recognised through court precedents are (i) misrepresentation or concealment of educational background and work experience, (ii) fabricating résumés, (iii) bad behaviours at work, such as unexcused absences, (iv) refusing to follow orders relating to personnel movements (eg transfers), (v) assaulting colleagues or supervisors, (vi) inflicting harm to the company through criminal conduct (eg embezzlement, breach of duty), and (vii) personal misconduct committed outside of the workplace.

Pursuant to the Labor Standards Act, an employer must (i) provide a prior notice of 30 days prior to the employee’s dismissal (Article 26) and (ii) notify the detailed reason for, and timing of, the dismissal in writing (Article 27).

Further, if an employer has collective agreements, rules of employment, employment contracts or other relevant agreements that separately provide for additional procedures of taking disciplinary actions, then the employer must comply with such procedures. The Korean Supreme Court has also held that disciplinary dismissals are invalid if an employer failed to follow the procedures laid out in its collective agreements, rules of employment, employment contracts or other relevant agreements when dismissing an employee.

An employer’s dismissal of its employee is valid if the employer can justify (i) its reason(s) for taking the disciplinary action, (ii) the procedures followed for taking the disciplinary action, and (iii) the level and/or adequacy of the disciplinary action taken. However, the Korean Supreme Court has held that if any of the foregoing factors cannot be justified, then the resulting disciplinary dismissal is invalid. The employer bears the burden of proof for showing that the dismissal is justified.

An employer and employee may terminate their employment relationship upon mutual agreement. There are no specific requirements as to the methods of, or procedures/formalities for, mutually agreeing to terminate the employment relationship, as long as the termination is based on the employer and employee’s free will. Ordinarily, however, an employee voluntarily submits a letter of resignation to the employer and the employer accepts such letter of resignation by the employee to terminate the employment contract.

The Labor Standards Act does not govern voluntary terminations of employment based on the free will of both the employer and employee. Although the Labor Standards Act does not have any restrictions on employers and employees terminating their relationship through a mutual agreement, the Korean Supreme Court deems termination agreements to be invalid if such mutual agreement was not a product of the employee’s genuine intent. Therefore, when terminating employment relationships through a termination agreement, the employer must take care to ensure that the termination agreement reflects the resigning employee’s genuine intent.

Article 23(2) of the Labor Standards Act protects employees from dismissals (i) when an employee is on a leave for medical treatment of an occupational injury or disease and within 30 days immediately following that employee’s return, and (ii) when an employee is on a maternity leave and within 30 days immediately following such employee’s return. However, the foregoing protections do not apply if the employer has paid lump sum compensation to the relevant employee in accordance with Article 84 of the Labor Standards Act or if the employer is no longer able to continue its business.

The Labor Standards Act does not have provisions relating to dismissals etc of an employee representative. However, if the collective agreement (or other similar agreement) requires the employer to obtain the trade union’s consent to dismiss an employee representative or a union member, then the employer must comply with such requirement. Otherwise, the employer’s actions taken against the relevant employees are deemed invalid pursuant to the Korean Supreme Court precedents.

An employee may make a wrongful dismissal claim by (i) filing a civil suit for invalidation of the dismissal and disputing whether his or her dismissal was justified, and (ii) petitioning for a wrongful dismissal relief from the local Labor Relations Commission (the “LocalCommission”). The civil suit for invalidation of dismissal and petition for a wrongful dismissal relief are two independent systems. Therefore, an employee may choose to proceed with either or both of the systems.

When an employee proceeds with the first of the two options above (ie civil suit for invalidation by the court) and subjects the dismissal to a dispute, then the court of first instance must decide as to the validity of the dismissal. Both the employer and employee may challenge the court of first instance’s decision by filing an appeal within two weeks from the date the written court decision was served to the relevant party. If either of the parties wishes to challenge the decision rendered by a High Court or a panel of district court judges acting as a court of second instance, then the parties must file an appeal to the Supreme Court within two weeks from the date the written decision was served for a final and conclusive judgment.

On the other hand, if an employee proceeds with the second option (ie petition for relief from the Local Commission), then the Local Commission determines whether the employer was justified in dismissing the employee (as opposed to whether the dismissal was valid). Article 31 of the Labor Standards Act provides that both the employer and employee may challenge the Local Commission’s decision by requesting for a new examination to the national Labor Relations Commission (the “National Commission”) in accordance with the Labor Relations Commission Act within ten days of being notified of the Local Commission’s decision. If either of the parties wishes to challenge the National Commission’s decision upon a re-examination, then the relevant party must file an administrative lawsuit in accordance with the Administrative Litigation Act within 15 days of being served with the National Commission’s decision. The administrative lawsuit can be appealed twice, much like the first option (ie civil lawsuit) described above.

Korean labour laws that prohibit employers from discriminating against employees include the (i) Labor Standards Act, (ii) Equal Employment Opportunity Act, (iii) Fixed-term Workers Act, (iv) Act on the Protection, etc. of Temporary Agency Workers (the “Temporary Agency Workers Act”), and (v) Act on Prohibition of Age Discrimination in Employment and Elderly Employment Promotion (the “Age Discrimination Act”). The foregoing legislations protect employees from various types of discriminations identified in the respective Acts’ legislative intent and purpose as described below.

Labor Standards Act: Article 6 prohibits employers from discriminating against employees based on gender. Further, employers are prohibited from discriminating in relation to employees’ working conditions based on nationality, religion or social status.

Equal Employment Opportunity Act: Article 7(1) prohibits employers from discriminating on the basis of gender when recruiting or hiring employees. Also, Article 8(1) prohibits wage discrimination by requiring employers to provide equal pay for equal work performed within the same business.

Fixed-term Workers Act: Article 8(1) prohibits employers from discriminating between employees under definite employment contracts and other employees under indefinite employment contracts who work in the same business or workplace, or in the same or similar positions.

Temporary Agency Workers Act: Article 21(1) prohibits employers of agency employees (ie dispatch agencies) and users of dispatched agency employees (ie companies that use dispatched agency employees; the “User Company”) from discriminating between such dispatched employees and other employees of the User Company who perform the same or similar work.

Age Discrimination Act: Article 4-4(1) prohibits employers from discriminating against employees on the basis of age without justifiable grounds as to the following: (i) recruitment and employment; (ii) wage, provision of money and valuables other than salary, and other welfare benefits; (iii) education and training; (iv) job placement, transfer or promotion, and (v) retirement and dismissal.

Burden of Proof

Ordinarily, the party raising a legal claim bears the burden of proof in substantiating his or her claim. However, the Korean labour laws determine whether laws have been violated based on the substantive, as opposed to formalistic, standards when the employment relationship between an employer and an employee is at issue. In particular, Article 30 of the Equal Employment Opportunity Act expressly provides that the burden of proof is shifted to the employers when resolving disputes arising out of this Act. Even in practice, when issues relating to discrimination arise, it is the employers that have the burden of proof in showing either that (i) the employee has not been discriminated against or (ii) the discrimination is justifiable.

Relief and Damages

Article 9(1) of the Fixed-term Workers Act and Article 21(1)2 of the Temporary Agency Workers Act enables discriminated-against fixed-term employees, part-time employees and dispatched employees to file a petition to the Local Commission for a corrective order against the discriminations such employees were subject to. To the contrary, the Labor Standards Act, Equal Employment Opportunity Act and Age Discrimination Act do not expressly provide for seeking relief from the Local or National Commission and, thus, remedies for violations of these Acts, including unlawful discriminations, can be obtained through filing (i) petitions with the Ministry of Employment and Labor, (ii) civil lawsuits with the court, or (iii) criminal complaints with the investigative authorities.

Separate from the above, an employee may seek compensation for pecuniary damages and/or emotional distress he or she suffered due to the employer’s discrimination that lacks reasonable cause. In this regard, the Korean Supreme Court has previously held that the legislative purpose behind the Equal Employment Opportunity Act is to effectuate the principle of equality under the Constitution and to actualise equality in employment across the genders by guaranteeing equal opportunity and treatment between men and women. In the light of such legislative purpose, an employer’s payment, without reasonable cause, of a lower wage to female employees compared with male employees who perform work of equal value within the same business constitutes unlawful conduct that violates Article 8 of the Equal Employment Opportunity Act. In such a situation, therefore, the employer is responsible for compensating a female employee who was subject to wage discrimination for the damages she suffered measured by the difference between the wage she actually received and the wage she would have received but for the discrimination.

Class actions in Korea are different from class actions in common law jurisdictions. In Korea, class actions take the form of a “multi-party litigation” in accordance with the Civil Procedures Act where multiple plaintiffs file a lawsuit as a single “group”. To the contrary, class actions in common law jurisdictions are initiated by a few plaintiffs who represent a class of individuals, where damages are awarded even to the individuals within the class who did not participate in the class action, provided that such individuals were not otherwise excluded. In other words, under Korean “class actions”, only the individuals who are named as a party to the litigation are compensated or redressed.

With certain exceptions under Article 87 of the Civil Procedures Act, only lawyers may represent employees before the court.

Employment and other related disputes between employers and employees may be resolved privately through arbitrations, mediations and settlements. Moreover, such disputes may also be resolved through arbitrations, mediations and settlements administered before the court and the Local Commissions.

Under the principle of private autonomy (ie freedom of contract), pre-dispute arbitration agreements regarding disputes relating to working conditions etc. are, as a principle, effective if they are included in the employment contracts. At the same time, labour laws, including the Labor Standards Act, are considered as mandatory provisions which cannot be avoided via contracts. Therefore, any agreement that (i) excludes such labour law provisions or (ii) is less favourable to the employees compared with labour law provisions are invalid. For example, the Korea Supreme Court has held that agreements which require employees to forfeit their rights to severance pay or rights to take legal actions against employers relating to severance pay are invalid because such agreements go against the Labor Standards Act.

Article 98 of the Civil Procedures Act imposes the cost of the lawsuit upon the losing party. As such, the losing party, as a principle, is responsible for the litigation fees. On the other hand, attorney’s fees are divided between the parties in accordance with Article 3 of the Rules on Calculation of the Attorney’s Fees.

Yoon & Yang LLC

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Gangnam-gu
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Seoul
Korea

+82 2 6003 7000

+82 2 6003 7800

yoonyang@yoonyang.com www.yoonyang.com
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Law and Practice

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Yoon & Yang LLC (Seoul - HQ) 's Employment and Labour Practice Group consists of 17 attorneys and other professionals who all concentrate solely on employment issues. The type of issues that the Practice Group has recently represented are illegal worker dispatches, discriminations among different type of workers, implementation of performance-based salary system, protection of non-regular workers, and ordinary wage issues. The firm's key areas of practice are general HR issues, including performance-based salary systems, labour union activities, collective bargaining agreements and disciplinary regulations, employment issues in mergers and acquisitions, employment issues on corporate restructuring, representation in labour disputes in civil, criminal and administrative proceedings.

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