Feb 13, 2008

Dismissal of Workers for Operational Emergency Declared Invalid under Korea Labor Standards Act.

Incheon District Court (2007 KaHap 4420) recently ruled that the dismissal of 5 workers for an "operational emergency" is in violation of the Labor Standards Act, since "In order for an employer to dismiss a worker due to operational reasons, there should be and emergency in operations. But defendant has maintained profit since 2000 and only had a loss in 2006." The Court also noted that employer did not have debt and was sufficiently solvent.

The employer was ordered to pay the defendant for wages "which they could be paid if continuing to work. So the plaintiff should pay them for wages from the next day after the dismissal to the reappointed day."

Here is a general article I wrote for the Korea Times last year that may be useful when an employer dismisses an employee or when an employee is dismissed. Ahnse Law Offices successfully represented the employee asking the question in the article below.


Corporate Downsizing the Korean Way

Lex Pro Bono Column
Korea Times May 18, 2007


Dear Professor Sean Hayes, I am working for a company that has notified us that they will layoff around 25 workers. I heard that under the Korean Labor Law an employer cannot dismiss employees without just cause. Is this true and what can I do to protect my job? Worried in Yeouido.

Dear Worried, the Korean Labor Law provides some protection from dismissal by employers, but provides little protection for employees that are dismissed because of serious economic difficulties facing an employer.

Korean Labor Law is codified in the Korean Labor Standards Act (LSA). The LSA is a statute that dictates the working standards for most workplaces. The statute is vague and most of its language has been developed through case law.

Article 30 and 31 of the LSA assist in guaranteeing employment security. The LSA states that an employee under contract cannot be terminated unless "just cause" exists for the termination. Case law has established that just cause includes "fault directly attributable to the employee" and "urgent managerial necessity."

So accordingly, employers that intend to lay off workers must assert that an "urgent managerial necessity" exists. Urgent managerial necessity includes mergers and acquisitions, business relocations and most serious economic difficulties.

However, the LSA provides some protection even when an urgent managerial necessity exists. LSA 31 (2) states that the employer must "make every effort" to avoid layoffs.

The (Korean) Supreme Court has noted that to make every effort means that an employer may need to offer early retirement packages, reduce working hours, obtain labor concessions, and institute a freeze on hiring before being able to satisfy this requirement.

The LSA also provides that an employer must select those to be laid off in a "reasonable and fair way." For instance, laying off only women or elder employees will immediately raise red flags.

The LSA also requires that after a layoff occurs an employer who wishes to increase the number of workers within two years of the layoff must give "preferential treatment" to former employees.

If you believe that an employer is terminating employees in violation of the LSA an employee may institute either an administrative complaint with the Labor Relations Commission, a criminal complaint with a local prosecutor's office, or a civil complaint with a local court.

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SeanHayes@ipglegal.com