Practical Guide to Firing an Employee in Korea for Cause

Most “employees” in Korea may only be fired for “cause attributable to the employee” or an “urgent managerial need.” An employee terminated in violation of the Korean Labor Standards Act is deemed unlawfully dismissed. An unlawful dismissal in Korea may lead to substantial liabilities to the employer, including having to reinstate the employee with back pay, fines, labor compliance audits, the scorn of the Korean Ministry of Employment & Labor, and legal costs.

The following article is intended for employers with employees in Korea that are interested in understanding how to safely and efficiently terminate an employee working in Korea for “cause attributable to the employee” and not for redundancy reasons.

For an article on laying off an employee in Korea for “urgent managerial need,” please see: Korean Law on Redundancy.

Korean Law on Termination of an Employee for Cause

South Korea’s labor and employment law is one of the most employee-protective labor laws in the world. Korea has low rankings in the world for labor flexibility, primarily because of the difficulty to terminate employees. However, with preparation, a nuanced Korean-centric approach, professional structuring of HR policies and procedures, and a good local guide, you can succeed in terminating the employment of a worker in Korea with modest costs and risks.

The Korean Labor Standards Act mandates that employees under “contract” or “regular employees” may only be terminated for “justifiable reason attributable” to the employee or “urgent managerial necessity” after the completion of the employee’s probationary period.

Definition of an Employee under Korean Labor Law

The Korean Labor Standards Act provisions on termination of an employee, in most cases, only apply to “employees” as defined by Article 2 of the Korean Labor Standards Act. A Korean court noted that “Whether a person is considered an employee under the Labor Standards Act shall be determined by whether, in actual practice, that person offers work to the employer as a subordinate of the employer in a business or workplace to earn wages, regardless of the contract type, such as an employment contract or a service contract.” 

See: Who is an Employee under Korean Labor Law? for a more detailed article on the definition of an employee under Korean law.

Termination During a Three-Month Probationary Period

An employer doing business in Korea must provide some reason to an employee for termination even under a contractually imposed probationary period. The Supreme Court of Korea noted that:

“Employers have a broad right to cancel a contract. However, even in (the case of a probationary employee), the reasons of dismissal must be rational, objective and should be considered a proper decision based on social norms.”

The Korean Supreme Court and lower court in Korea decisions have applied a lower standard than the typical “cause” standard (discussed below) applied by the Korean courts for termination after a probationary period; however, the courts in Korea still mandate some justifiable reason for termination. Thus, even “probationary” employees are not “at will” workers in Korea.

Thus, best practice is to document the reason for termination of the employment, notify the reason to the employee, and substantiate the reason not to retain the employee post-probationary period.

Justifiable Reason for Dismissal of an Employee in Korea

Article 23 of the Korean Labor Standards Act places the burden on the employer to prove a “justifiable reason to terminate.” According to the Korean Supreme Court, the reason must be “directly attributable to the employee.” The major reasons, in Korea, for a lawful termination of an employee in Korea are as follows:

1. Gross Incompetence: Lack of Productivity, Inability to Perform Job Functions or Low Quality of Work
2. Insubordination/Violation of Work Rules: Violation of the Employment Rules of the Company
3. Attendance: Absences or Tardiness
4. Criminal Behavior: Theft or other Criminal Behavior Related to the Workplace
5. Inappropriate Conduct/Violence: Sexual Harassment, Gambling, Threats, Violence and Other Hostile Behavior in the Workplace

In most cases, Korean courts shall look to whether the employee was given adequate notice of deficiencies prior to determination and if the employees were provided the resources and time to improve. Additionally, in some cases Korean courts shall look to how much damage occurred to the company in determining if a disciplinary action was justified.

Even with a justifiable reason for termination, Article 27 of the Korean Labor Standards Act mandates that the employer must provide 30-day notice in advance of dismissal or 30-day pay in lieu of the notice period. Article 28 of the Korean Labor Standards Act dictates that a written notification of the reasons for the dismissal of the employee is required.

Practical Guide to Terminating a Employee in Korea for Cause

1. Have Korean-centric employment rules drafted by a Korean labor lawyer in consultation with your HR lead.
2. Implement and publish policies and procedures for disciplinary action, including the creation of a Disciplinary Action Committee.
3. Impose written progressive disciplinary actions of the employee prior to termination. In most cases, it is best to provide three notifications/disciplinary actions prior to termination.
4. Put systems and procedures in place to document and investigate all potential wrongdoings.
5. Implement a quarterly review system and be honest in these reviews.
6. When discipling an employee, advise in writing the things the employee needs to do to improve and comply with employment rules and the expectations of the employer.
7. Provide consistent feedback to employees on issues that arise that are not yet grounds for discipline but may be in the future. Document this feedback.
8. Provide a detailed written termination letter that is reviewed by your Korean lawyer prior to informing the employee of the termination.
9. Terminate the employee, in most cases, only after a Disciplinary Action Committee meeting.
10. Provide employee 30-day notice or 30-day payment in lieu of notice.

We highly recommend consulting with an employment law attorney in Korea before firing or laying off a Korean employee. Too many companies have found themselves in courts in Korea over improperly following procedures and the lack of a little Korean-nuanced strategy.

Sean Hayes is the first non-Korean attorney to have worked 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. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw, and IPG Legal is consistently ranked Top Dispute Resolution Law Firm for our litigation services.

To schedule a call with Sean Hayes, please Schedule a Call Here. Please see: IPG Legal’s Employment & Labor Law Archive.