Korean labor law: When in Korea, do as the Koreans do

Korean labor law: When in Korea, do as the Koreans do

Bongsoo Jung / Korean labor attorney

I. Introduction

Labor laws are different in every country, and their application exclusive to each country. As long as corporations do business in Korea, they need to observe Korean labor law. Even though a company's headquarters are in another country, Korean labor law applies to any Korean branch offices, in terms of labor disputes and employment relations.[1] The following case of unfair dismissal shows that while a Singaporean-invested company dismissed an employee according to its own corporate operational regulations, they did not consider Korean labor laws. While this company was confident of the legitimacy of a particular dismissal according to its own interpretation of “justifiable causes”, that dismissal was regarded as unfair as it violated Korean labor law.

-    May 10, 2012: Employee is dismissed

-    May 20, 2012: Employee files for remedy against unfair dismissal with the Labor Relations Commission (LRC).

-    July 30, 2012: At an adjudication meeting, the LRC determines dismissal is unfair, and orders reinstatement of the Employee to his/her original position. Back pay equivalent to what was missed since the dismissal is also ordered. 

-    August 7, 2012: Company appeals to the National Labor Relations Commission.

-    Oct 15, 2012: Fine of ?5 million levied for failure to implement the LRC’s orders.

- November 14, 2012: Chairwoman of the Adjudication Meeting during the appeal suggests a settlement. Both parties accept an adjusted draft of the settlement and finally conclude with a monetary compromise.

There were two critical questions in this case: First, when dismissing an employee, can a company’s sales department dismiss sales staff due to a lack of qualifications for the work without going through the personnel department? Second, is a written notice of dismissal legal if it only lists the date of dismissal and not the reasons for the dismissal?

II. LRC Adjudication Meeting and Details of the Case

 This case of unfair dismissal occurred at the Korean branch of a multinational company located in Singapore (Hereinafter referred to as “the Company”). This dismissal could have been justifiable, but it was determined to be unfair because the Company failed to follow the required disciplinary process due to a lack of understanding of Korean labor law. The Company opened its Korean branch in November 2009 and began by selling its products through Department Store sales outlets before extending its business through creation of production facilities for related products. While opening its sales office and sales outlets in major department stores, the Company hired this employee (Hereafter referred to as “Employee A”) as an assistant sales manager in September 2010. Employee A displayed a good attitude during the six month probationary period, but failed to follow his immediate superior’s instructions after that time, seeming to think he was in charge of all sales in Korea. Employee A’s immediate superior was a Singaporean sales manager who directed him and received reports from him, splitting his time between Singapore and Korea. Employee A had received 14 email warnings for failing to follow instructions, neglecting his duties, making critical mistakes at work, and poor performance, etc. for a period of one year before his dismissal. As the corporate structure of the Korean branch became firmly established, the Company decided to change the employment contract form from the form used for the Singapore head office to a new one for the Korean branch, and asked all employees to sign the same contract as before, but on the new Korean branch form. All employees signed the new contract forms, except Employee A, who refused. His immediate superior then recommended disciplinary action for Employee A with the sales department head in Singapore. Upon review of Employee A’s history of warnings from his immediate supervisor, the Company decided to dismiss Employee A. The Singapore sales department head visited the Korean sales office on May 10, 2012, explained the reasons for dismissal and handed a notice of dismissal to Employee A. Employee A then filed for remedy against unfair dismissal with the Labor Relations Commission, which ruled that Employee A had been unfairly dismissed. The LRC’s verdict was as follows:

“It is regarded as justifiable to dismiss an employee when implemented in cases where the violations were serious enough to discontinue employment relations in terms of socially accepted common sense. In determining whether the violations are serious enough to discontinue employment relations in terms of socially accepted common sense such items as the employer’s business purpose and characteristics, workplace conditions, the employee’s position and job description, motivation for and severity of the violations, the effects on corporate order, the employee’s previous attitude, and other related items shall be collectively reviewed ”(Supreme Court on July 8, 2003, 2001du8018).

In reviewing the above legal principle and the established facts, we would like to make judgment on this case based upon the following: 1) What the employer mentioned: absences without permission, work negligence, poor performance, and mistranslations are acceptable reasons for disciplinary action, but they are not serious enough to dismiss the employee; 2) The employer claimed that the Company had scolded Employee A many times for his poor attitude, poor performance, and misuse of authority etc., but the Company had not given him warning letters or disciplined him officially; 3) What the employer claimed as the reasons for dismissal (poor attitude, poor performance, and misuse of authority), are not reasons for dismissal as stipulated by the Company’s Rules of Employment and the employment contract. Accordingly, the use of dismissal, the most serious form of disciplinary action for Employee A, is judged to be unfair, and abuses the discretionary power of the employer’s personnel management rights.

III. Reasons the Employer Accepted a Settlement

1. Reasons for the appeal and the severity of disciplinary punishment

As the Company was certain that the first judgment of the Labor Relations Commission did not reflect the severity of the employee’s violations such as his disobedience to instructions, absences without permission, neglect of his work duties, and poor performance, it decided to appeal. Regarding his work duties, Employee A had received 14 warning letters from his supervisor over the past year, and there were several instances of insulting behavior towards his immediate superior. In particular, despites his lower position, Employee A had behaved as the Sales Director for Korea, which disrupted the corporate structure. The Company had given Employee A several opportunities to improve his behavior but he had not made the effort, and so it decided to dismiss him after determining that giving other opportunities would be pointless. In the first LRC Adjudication Meeting, the Company had sent the Personnel Manager, but she had not been involved with this case, could not explain the case in detail, and could not provide sufficient documentation. Accordingly, at the appeal adjudication meeting, the Company sent Employee A's supervisors who actually dismissed Employee A and were better able to explain the reasons behind Employee A's dismissal.

2. Cases where the sales department, and not the personnel department dismisses an employee

Even though reasons for disciplinary action with Employee A were considerable, these 14 email warnings were not from the personnel department in charge of the company’s personnel management rights, so could not be seen as official disciplinary action conducted in accordance with the Rules of Employment by the employer’s personnel department. Concerning this, the chairwoman of the Adjudication Committee stated “When in Korea, do as the Koreans do.” In the course of exercising personnel management rights, a particular department’s disciplinary behaviors are not accepted as the Company’s disciplinary actions because those disciplinary actions are not recognized as Company punishment, even though the department’s disciplinary actions were justifiable.   

3. Omission of reasons for dismissal in the written notification

During the appeal adjudication meeting, a member of the Adjudication Committee mentioned that the sales department head had given a Notice of Dismissal to Employee A which only described the dismissal date and a dismissal allowance. The Company stated ‘Even though the notification letter did not stipulate the reasons for dismissal, the sales department head discussed the reasons for dismissal with Employee A, after which Employee A had accepted the dismissal and apologized.’ However, at the adjudication meeting Employee A stated that he had received a written notification without any discussion. According to judicial ruling, a written notification of dismissal shall contain the reasons for dismissal and the effective date of dismissal.

When an employer issues a written letter containing reasons for dismissal, it is not sufficient to enumerate articles of the Collective Agreement or the Rules of Employment (Supreme Court ruling on Oct 27, 2011, 2011da42324).

Article 27 of the Labor Standards Act regulates that “an employer who wants to dismiss an employee shall give written notice as to the cause for dismissal, and the date of dismissal, etc.” This written notification of reasons for dismissal is designed for the employer to think carefully about dismissing employees, to make clear that an employee is being dismissed, the effective date and reasons for dismissal, and to aid the employee in responding appropriately to dismissal. Accordingly, when an employer issues a written letter of dismissal, the employee shall be told the reasons he/she was dismissed for. In particular, disciplinary dismissal shall include concrete facts or details of violations that led to actual reasons for dismissal. It is not sufficient to simply enumerate articles of the Collective Agreement or the Rules of Employment that the employee violated.  

Accordingly, when determining reasons for disciplinary dismissal, the employer did not write down reasons for disciplinary action to which the Company’s Rules of Employment applied. Therefore, this dismissal violated Article 27 of the Labor Standards Act, which requires carrying out of the disciplinary process.

4. Settlement

The employer justified the dismissal of Employee A by citing Employee A’s violations. However, disciplinary actions for Employee A were not made by the Company’s personnel department, which has disciplinary rights. These disciplinary actions were also email warnings, not official written notices. The Company also erred severely by not including the reasons for dismissal in the written notification.

The chairwoman of the adjudication meeting gave the two parties one week to reach a mutually-acceptable compromise. As it knew there was a danger of losing the case due to its dismissal process mistakes and the insufficient information on the written notification of dismissal, the Company agreed to an adjusted monetary compensation.

VI. Conclusion

Labor law has authority within its territorial jurisdiction, and applies exclusively to the corresponding country. This case shows that even though the Company could have justifiably dismissed Employee A, the dismissal was deemed unfair due to the Company’s failure to observe Korean labor law. In the end, the case was concluded through a settlement after appealing to the National Labor Relations Commission. In the initial case before the Labor Relations Commission, Employee A expressed an intention to settle the case for 1.5 month’s salary as compensation, but during the appeal to the National Labor Relations Commission, Employee A realized the strength of his case, and requested compensation equal to the salary missed during the entire dismissed period. Fortunately for the Company, the labor attorneys on both sides reached agreement to adjust this claim to 3.5 months’ salary.

The lessons that we can learn are that when an employee wishes to dismiss an employee, he/she must be sure that the dismissal is not carried out by the related department, but by the personnel management department. The employer shall also confirm whether the dismissal is acceptable according to the regulations in the Rules of Employment. In particular, notification of dismissal shall include reasons for dismissal as well as the effective date of dismissal. When working in countries outside of the nation where its headquarters are located, it is very much necessary for foreign companies to recognize that while one nation’s labor laws do not generally apply to other countries, they are exclusively and definitely applied within that nation’s boundaries.

[1] The Conflict of Laws, Article 28 (Employment Contracts)