Employers in Korea must be cautious when terminating employees as the country’s Labor Standards Act (the LSA) along with other laws and regulations provide generous protections to workers. When HR law is not adhered to by employers, Korean courts can rule any termination void.
Unlike the United States, which generally allows employers to terminate employees without cause, Korea is not an “at-will” employment jurisdiction. Korea’s LSA requires employers with five or more employees to establish a just cause when terminating employment. Further, companies are required to pay statutory severance to terminated employees.
Specifically, the LSA permits employee terminations only when there is a justifiable reason or urgent managerial necessity – after the completion of the employee’s probationary period. As the Korean Supreme Court has ruled, the reason for termination must be “directly attributable to the employee”.
When the employer has an urgent managerial necessity to terminate an employee, the Korean Supreme Court has ruled that this test requires an employer to have extreme difficulty maintaining operations in the absence of a termination. Companies must also prove that it exhausted all other remedies including offering voluntary retirement – before the termination will be considered fair and reasonable by the courts.
Time of service, age, performance, and skills of the employee may all factor into any determination of whether to terminate, as Korean courts have ruled. Further, employees or the trade union representing employees, must be consulted 50 days prior to any termination.
These standards are often difficult to meet without an employer first creating a professional structure for their HR policies and procedures to ensure compliance with relevant Korean laws and regulations related to terminations. Many companies in Korea have ended up in court for not properly following termination procedures, which can often be very nuanced in their application to real-life conditions.
Notably, executives and directors are not typically considered employees and therefore cannot avail themselves of the protections afforded by the LSA. However, if the company is operating a subsidiary in Korea which does not appear to be a unique legal entity, Korean courts often treat these senior executives as employees and are thereby subject to the protections of the Act.
Korean Labor Disputes Can Be Very Contentious
In one particularly notable labor dispute which lasted decades, Kim Yong-hee was fired by Samsung in 1995 after he tried to establish an independent labor union. Since then, he’s been trying to get his job back, including monetary compensation and an apology from the company.
In 2018, he went so far as to scale a camera tower in downtown Seoul adjacent to Samsung’s headquarters, where he remained for almost a year – using a sleeping bag by night and hoisting signs denouncing Samsung by day. Mr. Yong-yee was interviewed by the New York Times in late 2019, shortly before coming down from the tower, saying his protest was a “…last stand against that evil behemoth”. His recent protest atop the tower was his most recent in a series of protests which included sit-ins and hunger strikes near Samsung’s headquarters.
2019 also saw a new law adopted in Korea permitting employers to be jailed and fined for unfairly dismissing employees deemed to have been harassed at work. Imprisonment can last up to three years and a fine of up to 30 Million Won ($25,000 USD) can be levied.
Many attribute these contentious labor disputes to a competitive job climate and hierarchical structures in the Korean workplace. Either way, they are a stark reminder of the potential minefield terminations can be for employee and employer alike in Korea.
A Local Korean Expert Employer of Record (“EOR”) Can Help You Avoid Costly Problems
If you’re considering entering the Korean market using an EOR, make sure they have team members locally on the ground to advise on the issues of terminations in native and practical methodologies and how to accomplish it.
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