Corporate Downsizing the Korean Way

Corporate Downsizing the Korean Way
Appeared in the Korea Times on May 18, 2007
Lex Pro Bono Column

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 o ff 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.

You can hire an employment/labor lawyer for this service or if you don’t have the means you can, often, manage the matters without the assistance of an attorney.

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