Termination in Korea

1. When is “Ordinary Dismissal” Possible?

Employer may dismiss an employee by way of an “ordinary dismissal” if (i) the employee is unable to perform work at the normally expected level due to such reasons as injury or illness, as objectively determined; or (ii) the employer is no longer able to continue its business due to such reasons as business closure or dissolution.

If the employer dismisses an employee under the guise of “ordinary dismissal” when in fact the circumstances have not reached a level where the employee is no longer able to continue the employment relationship, such dismissal will constitute “wrongful dismissal.”

2. When is “Disciplinary Dismissal” Possible?

Employer may dismiss an employee by way of a “disciplinary dismissal” only if there is “just cause,” and the process through which the disciplinary dismissal is implemented must also be “just.” There is, however, an exception to this rule which applies to workplaces with less than five (5) workers; the employer at such workplaces may freely dismiss employees so long as a dismissal notice is given one (1) month in advance.

The range of circumstances under which one’s dismissal can be recognized as rightful “disciplinary dismissal” is fairly narrow in Korea. Court precedents show that courts are not usually inclined to view employee dismissal legitimate, barring special circumstances (e.g. in the case of the dismissed employee’s grave illegal act or the employee’s intentional interference with the employer’s operation of the business). When the employee merely lacks work skills or exposes the company to damages due to a mistake, such situation – while it may potentially constitute valid grounds for imposing a disciplinary action such as a pay cut or suspension – would not by itself constitute sufficient grounds for justifying dismissal. This is because Korean courts view dismissal as the employer’s very last resort.

3. When is “Redundancy Dismissal” Possible?

When there is an “urgent business need”, employers may dismiss employees without fault by going through certain prescribed procedures.

An “urgent business need” refers to a situation where multiple adjustments of the workforce are needed to avoid a business crisis affecting the workplace. The company being on the verge of bankruptcy is not an absolute requirement to satisfy this condition; rather, this “urgent business need” includes situations where a reduction of workforce is reasonably necessary in order to transform the company’s work system to recover its business competitiveness or otherwise improve the company’s productivity.

The employer must also follow certain procedural requirements: the employer must (i) notify the representative of the workforce at least fifty (50) days in advance and discuss diligently and in good faith; (ii) use efforts to avoid employee dismissal; (iii) select the employees subject to dismissal under a reasonable and fair standard; and (iv) comply with the requirement to provide the dismissed employee with a dismissal notice at least thirty (30) days in advance.

What usually becomes an issue in actual practice is whether the employer had (i) used sufficient efforts to avoid employee dismissal; or (ii) selected the employees subject to dismissal under a reasonable and fair standard. In regards to the efforts to avoid employee dismissal, the employer must have taken all possible measures including, among others, avoidance of employing newly recruits, going through a “solicited resignation” process, implementation of leave of absence with/without pay and reduction of working hours and ordinary managerial costs. In regards to the selection standard, the employer must diligently discuss with the representative of the workforce and apply a fair standard such as allocating the number of dismissals per each level of position and targeting those with low performance evaluation scores.

4. When is “Solicited Resignation” or “Honorary Resignation” Possible?

“Solicited resignation” refers to a process where the employer solicits voluntary resignation from an individual employee and the employee responding to such solicitation submits his/her resignation. This arrangement does not constitute “dismissal” because the employment relationship has ended by the parties’ mutual agreement. The employee is entitled to receive his/her unemployment benefit because the employee has submitted his/her resignation per the employer’s solicitation and has not voluntarily left the workplace. Since the employee is not obligated to respond to the solicitation, the employer should not impose any penalty or disadvantage on the employee for not responding. Sometimes, the employer may offer certain exit package as part of the solicitation.

“Honorary resignation” refers to a process where the employer offers uniform exit conditions to multiple employees and end the employment relationship by mutual agreement with those who choose to accept the offered exit conditions. This process is often used by companies as a way to re-organize its workforce because employee dismissal is permitted to a very limited extent in Korea. Companies sometimes implement this process as a prior step which will afterward be followed by redundancy dismissal. It is usually the case that the exit conditions include certain exit payment package in order to induce the employees to submit their resignation. 

5. What Procedures Must be Followed for Dismissal?

A thirty (30) day prior notice must be given to the dismissed employee. If the prior notice is not given, the employer must pay an amount that is at least equivalent to the employee’s thirty (30) day-worth ordinary wage. Dismissal must be implemented by a written instrument. Also, if the company’s Rules of Employment or other internal policy provides for procedures that the company must follow before dismissing the employee, the company must comply with such procedural requirements.

Having said that, the employer is not obligated to follow the above process where the employee is dismissed by way of an “ordinary dismissal” and there exist circumstances which may objectively warrant a view that the employment relationship can no longer continue in light of the generally accepted social norm.

6. What Happens if Dismissed Employee Challenges Dismissal?

The employee may file a petition for a wrongful dismissal relief with the relevant regional Labor Relations Commission within three (3) months from the date of his/her receipt of the dismissal notice. Once the regional Labor Relations Commission renders its decision, one may file a petition to appeal the decision with the National Labor Relations Commission within ten (10) days from the date on which the decision of the regional Labor Relations Commission is served. Once the National Labor Relations Commission renders its decision, one may file an administrative appeal with an administrative court within fifteen (15) days.

Separately from the filing of a petition for a wrongful dismissal relief (which is an administrative procedure), one may also file a civil suit seeking a declaratory judgment invalidating the dismissal and a monetary relief for payment of wages to which the employee would have been entitled since the date of dismissal. That said, employees usually elect to file a petition with the Labor Relations Commission because the process is simpler and the outcome is often favorable to the employee.

If the dismissal is deemed wrongful, the employer must pay all wages accrued but unpaid during the dismissed period and re-instate the employee in his/her original position within the company. If the employee does not want to return, parties sometimes agree to end the employment relationship after the employer makes certain additional condolence payment to the employee.

7. Can Employee on Probation Period be Dismissed At-Will?

Dismissal is possible only when there is “just cause” even during the probation period. Having said that, the one (1) month prior notice requirement does not apply during the probation period.

“Just cause” is a bit more broadly interpreted during the probation period. However, objective and reasonable grounds should nonetheless exist, such as that (i) the employee evaluation during the probation period was made under objective and quantified standards; (ii) the employee was informed of the evaluation standards in advance; (iii) employee evaluation was made on a regular basis; and (iv) the employee’s work performance remained sub-par even after the employer had provided performance feedback and guidance for improvements.

Probation Period is not a “trial period”; the employer cannot dismiss the employee simply because the employer feels, after a brief work period, that the person does not seem to be a right fit. This is because “probation period” merely means that the employer, having already hired the employee on a permanent basis, provides the person with some time to familiarize him/herself with his/her new tasks. If the employer intends to use the probation period as a “trial period” rather than “adjustment period,” it would be advisable for the employer to enter into a “fixed-term” employment contract with a term that is equal to the intended probation period and decides whether to continue his/her employment or not at the time the fixed term expires.

8. What Should Retirement Age be?

Retirement age must be set at sixty (60) years of age or above. If hired as a permanent employee for an indefinite work term, the employer must guarantee employment until the retirement age. In Korea, employee dismissal is permitted only when there is “just cause.”

9. Can Employee Leave Employment At-Will?

Employees may leave at his/her discretion. This is because forced labor is prohibited.

Having said that, the employee’s resignation is effective one (1) month after the date of his/her resignation notice. Normally, the company’s Rules of Employment or employment contract provides that the employee should express his/her intention to resign at least thirty (30) days in advance. Requiring a notice period of longer than thirty (30) days is not legally enforceable. If the employee does not come to work before thirty (30) days have passed since the date of his/her resignation notice, such conduct would constitute unauthorized absence and the employer may take a disciplinary action.