Monday, January 21, 2013

Utilization of Accountants in Termination of Employees for Urgent Business Necessity (Urgent Managerial Need) in Korea

We have used, for all cases we were involved in regarding the layoff of Korean workers, accountants to argue that the layoff is for urgent managerial need.  We have, often, been questioned by clients if the extra expense is necessary.  Yes the expense is necessary and here is why.  

A case last year shows the need to utilize accountants in all cases where an employer intends to layoff workers based on "urgent business necessity" under the Korean Labor Standards Act (LSA). 

A case handed down by the Supreme Court in the first half of last year ruled that a layoff did not violate the LSA, since urgent managerial necessity existed because of "external factors," including the lack of overseas demand for the employer's products. 

The Supreme Court confirmed the holding of the High Court that noted that the District Court was wrong in emphasizing the possibility that overall production and profits will increase from a newly constructed factory and the economic issues of the employer were based, in large part, because of interest and depreciation costs.

The interesting aspect is not the holding.  The interesting part is that no accountants were utilized in the District Court case (loss for the employer) and accountants were utilized in the High Court and Supreme Court case (win for employer).

Economic analysis, appraisals and expert witnesses should be utilized for all cases concerning the layoff of employees for urgent business necessity in Korea.

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Sean Hayes may be contacted at: SeanHayes@ipglegal.com.

Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the only non-Korean to have worked as an attorney for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty.