Contributed By Yoon & Yang LLC
A new law on “Prohibition on Workplace Harassment” has come into effect as of 16 July 2019. This law proscribes employers and employees from using their superior positions at the workplace to engage in actions that cause physical and/or mental distress to other employees. Under this new law, relevant employers must promptly investigate the workplace harassments as they occur. Further, employers are obligated to accommodate the victims by taking measures such as ordering workplace relocation or provision of paid leaves, if such measures are requested.
There also has been an amendment in the Labor Standards Act to enhance an employee’s “right to rest”. As a result of this amendment, employers who have adopted the measures to urge employees to take paid leaves are now required to include the following employees within such measure:
This amendment applies to paid leaves that accrue after 31 March 2020.
The Korean government has been taking various initiatives to minimise the adverse effect of the COVID-19 crisis from an employment perspective. However, most of these initiatives are temporary in nature designed to cope with the direct impacts of COVID-19 or temporary easing of existing legal schemes.
Some of these temporary initiatives that provide monetary support to employers or employees include subsidies paid to:
On the other hand, initiatives that temporarily ease existing legal schemes, requirements, or payment procedures include lenient operation of
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 purpose of earning wages, irrespective of job types.
Meanwhile, forms of employment can be largely categorised into two types:
The foregoing forms may be further narrowed down based on the employee’s employment contract period and roles.
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 “employment contracts without a fixed term” (ie, indefinite employment contracts) and “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.
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:
Moreover, employers are obliged to deliver such employment contracts to the employees.
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 employee's 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 plus 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 they 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:
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.
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.
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:
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 January 1st of the following year. Currently the hourly minimum wage for 2020 is KRW8,590. The hourly minimum wage for 2021 has been scheduled to be KRW8,720.
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.
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.
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 2019, the minimum wage in Korea is KRW8,350.
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 that 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:
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.
A public holiday prescribed under Presidential Decree refers to statutory holidays (excluding Sundays) and alternative statutory holidays provided under the “Regulation on Holidays of Government Offices.” An employer must guarantee such public holidays to its employees on a paid basis. However, an employer may substitute public holidays with other working days by entering into a written agreement with the employee representative (see Article 55(2) of the Labour Standards Act) and the regulation on holidays comes into effect at different times based on the number of employees employed by an employer.
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.
Leaves that are statutorily guaranteed include maternity leave, paternity leave, fertility treatment leave, childcare leave, family-care leave, short-term family-care 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 is 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 ten days. However, an employee may not request paternity leave after 90 days from the date the employee’s spouse gives birth to a child. Paternity leave granted to an employee is on a paid basis. An employer is prohibited from dismissing, or taking any disadvantageous measures against, an employee on the basis of paternity leave.
Fertility treatment leave is covered under Article 18-3 of the Equal Employment Opportunity Act. If an employee requests fertility treatment leave in order to take medical treatment such as artificial insemination or in vitro fertilisation, an employer is obliged to grant up to three days of leave per year, first day of which is 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 their child who is eight years of age or younger or 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 the same position or a position with the same wage level as prior to taking the childcare leave.
Family-care leave is covered under Article 22-2 of the Equal Employment Opportunity Act and Article 16-3 of the Enforcement Decree of the same Act. An employee may request for the family-care leave in order to care for their grandparents, parents, spouse, parents-in-law, or grandchildren (hereinafter, Family) on grounds of their disease, accident, or senility. If family-care leave is requested, an employer is obliged to grant up to 90 days of leave per year. Family-care leave may be taken over multiple occasions, provided that each of these leave is at least 30 days long.
Short-term family-care leave is also covered under Article 22-2 of the Equal Employment Opportunity Act and Article 16-3 of the Enforcement Decree of the same Act. An employee may request for the short-term family-care leave in order to urgently care for his or her Family on grounds of their disease, accident, or senility, or to urgently rear for their children. If family-care leave is requested, an employer is obliged to grant up to ten days of leave per year, which may be taken in increments as short as a single day. The number of days taken as short-term family-care leave is counted towards the ordinary family-care leave.
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 addition 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
In other words, for a trade secret to be protected under the law, it must be undisclosed, kept confidential and useful. Undisclosed trade secrets are 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 preventative 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).
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 their 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 to:
Breach of such obligations and responsibilities may subject the relevant employees to disciplinary actions.
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 employees’ constitutionally protected rights (eg, freedom in choosing jobs or providing labour) or 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:
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 that 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.
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 that prohibits those employees from soliciting the employer’s customers upon termination of the employment relationship.
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 (the Info-communications Act) takes precedence over other laws with regard to personal information processed between a telecommunications business operator and its users (ie, customers). Further, the Credit Information Use and Protection Act (the Credit Information Act) takes precedence over other laws regarding matters on an individual’s credit information. However, all three of the foregoing data privacy laws have been amended on 4 February 2020.
These amendments either remove provisions relating to personal information from the Info-communications Act and Credit Information Act or add special provisions within the Personal Information Act. Once these amendments go in to effect on 5 August 2020, data privacy laws will de facto be unified under the Personal Information Protection Act. Personal information processed between the employer and its employees are governed by the Personal Information Protection Act.
Duty to Comply
An employer’s duty to comply with the Personal Information Protection Act begins from the recruiting stage and extends beyond the termination of the employment agreement with its employees. During the foregoing period, the employer must collect and/or use the employee’s personal information in compliance with the Personal Information Protection Act. Employers may independently collect and/or use the employee’s personal information, and, if necessary, employers may also:
Employers are required to store the collected personal information safely, and the collected personal information must be destroyed once it is no longer necessary due to reasons such as:
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.
Defining Foreign Workers
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.
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 they entered 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.
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):
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 (see Article 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.
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 trade unions if:
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 and working hours) of the trade union members that 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” that, during the effective period of the collective agreement requires the parties to mutually comply with the provisions within the collective agreement and 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” (see Articles 35 and 36 of the Trade Union Act).
In Korea, termination of employment can occur in the following ways:
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.
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.
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.
This 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 employees voluntarily resign upon submission of a letter of resignation, and employees accept the employer’s suggestion to resign, in which case the employment relationship is terminated upon the parties’ execution of a separation agreement.
Article 24 of the Labor Standards Act governs dismissals based on managerial reasons, and it includes mass layoffs (ie, collective redundancies). In order for an employer to dismiss its employees for managerial reasons, all of the following requirements must be met:
These requirements have been further explained by the Supreme Courts as noted below.
Urgent managerial need
An urgent managerial need is not limited to circumstances where a layoff 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.
Efforts to avoid dismissal
“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 layoffs should be made, type and scale of the business, and the number of employees at various levels of positions.
Reasonable and fair standards
The definition of “reasonable and fair standards” is also fluid. It 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 layoffs, type of business performed by the relevant division and composition of employees thereof, social and economic conditions during the period when layoff 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 of 50 days' prior notice and good-faith discussion does not affect the validity of a layoff 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 layoff is valid, so long as all other requirements have been satisfied.
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.
If an employer fails to give the requisite prior notice of 30 days before 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.
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:
Common Grounds for Dismissal
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:
Pursuant to the Labor Standards Act, an employer must provide a prior notice of 30 days prior to the employee’s dismissal (Article 26) and 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:
However, the Korean Supreme Court has held that if any of the foregoing factors cannot be justified, then the resulting disciplinary dismissal is invalid.
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.
Article 23(2) of the Labor Standards Act protects employees from dismissals 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 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 their dismissal was justified, and (ii) petitioning for a wrongful dismissal relief from the local Labor Relations Commission (the Local Commission). 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 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.
Petition for Relief
If an employee proceeds with the second option, then the petition for relief must be filed with the Local Commission within three months from the date the employee was dismissed. Once the petition for relief is filed, 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:
The foregoing legislations protect employees from various types of discriminations identified in the respective acts’ legislative intent and purpose as described below.
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.
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:
Separate from the above, an employee may seek compensation for pecuniary damages and/or emotional distress they suffered due to the employer’s discrimination that lacks reasonable cause.
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 that cannot be avoided via contracts. Therefore, any agreement that excludes such labour law provisions or is less favourable to the employees compared with labour law provisions are invalid.
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.