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Jipyong News|KOREA LEGAL INSIGHT

Navigating Employee Dismissal Practices in Korea: Challenges and Legal Considerations

2024.11.04

<div>Introduction 
 
As South Korea’s corporate landscape evolves amidst global competition and economic uncertainties, companies face the pressing challenge of managing low-performing employees. Recent trends indicate that major Korean conglomerates are increasingly recommending voluntary resignations— a practice aimed at restructuring or letting go of employees with deficient performance without resorting to outright dismissals, which require a justifiable cause (as explained below) under the law. This approach reflects a strategic response to the need for performance-driven workforce optimization, but also highlights the unique challenges of dismissing employees in Korea due to stringent labor laws and cultural norms that prioritize job security.  
 
Unlike in some Western countries where employment-at-will doctrines provide employers with broad discretion to terminate employment, Korean law imposes significant restrictions. These stringent labor laws are the primary hurdles for both domestic and foreign enterprises unfamiliar with Korea’s legal environment. Understanding these challenges is crucial for employers seeking to navigate the complexities of Korean labor law while maintaining operational efficiency. This article explores and analyzes the legal framework governing employment terminations and examines landmark court cases that shed light on how the law is applied in practice. 
 
  
Recent Trends in Employee Dismissal Practices 
 
The rise in advised employment terminations among Korean conglomerates reflects the need to shift towards achieving greater flexibility in workforce management. Companies are facing heightened pressures to adapt quickly to changing market conditions, technological advancements, and global competition. The traditional model of lifelong employment is giving way to a more dynamic approach where agility and adaptability are essential for survival. 
 
Despite this shift, the cultural emphasis on job security remains strong in Korea. Employees often view their roles as long-term commitments, and there is social stigma attached to being dismissed. As a result, companies prefer to encourage voluntary resignations rather than enforce involuntary terminations, which can lead to legal disputes and damage corporate reputation. 
 
This trend is particularly pronounced in addressing low-performing employees. Employers are increasingly seeking ways to manage performance issues without violating legal protections or cultural expectations. The delicate balance between organizational needs and employee rights requires careful navigation to avoid potential pitfalls. 
 
 
Legal Framework Governing Dismissals 
 
The Korean Labor Standards Act (the “LSA”) is the cornerstone of employment law in Korea, providing robust protections for employees. Two critical provisions relevant to dismissals are Sections 23 and 24. 
 
<ul>
	<li>Section 23: Restrictions on Dismissal 
	 
	Section 23(1) of the LSA mandates that employers cannot dismiss, lay off, suspend, or transfer an employee without “justifiable cause.” Korean courts interpret “justifiable cause” strictly, necessitating substantial evidence that the employee’s underperformance is significant, enduring, and unlikely to improve despite employer support. The courts hold that justifiable cause for dismissal due to poor work performance means the employee’s performance is too inadequate to maintain employment relations according to a socially accepted understanding.1 Given this somewhat ambiguous but stringent standard, in cases of low performance, employers must present clear, objective evidence that the employee consistently failed to meet reasonable performance standards over a considerable period. Additionally, employers are expected to have made efforts to assist in the employee’s performance improvement—through measures such as providing training, counseling, or job reassignment—before considering termination. Procedural adherence is also crucial; employers must provide adequate notice and offer the employee an opportunity to respond.</li>
</ul>

<ul>
	<li>Section 24: Restrictions on Dismissal for Business Reasons 
	 
	Section 24 of the LSA addresses terminations due to business reasons, such as economic downturns or organizational restructuring. The law outlines four stringent conditions that must be met for such dismissals to be considered lawful:

<ul>
	<li>Case 2: Court Upholding Termination for Low Performance 
	 
	In a Supreme Court decision on February 25, 2021 (Case No. 2018Da253680), the court upheld the termination of employees due to consistently poor performance. The employer had documented the employees’ low rankings in performance evaluations over several years. The evaluations were conducted using objective and transparent criteria, and the employees consistently ranked at the bottom among thousands of employees. The employer provided substantial support, including a 10-month retraining program and subsequent job reassignment. Despite these efforts, the employees failed to improve, and issues persisted due to their mistakes and lack of initiative. The employer also complied with procedural requirements by providing notices and opportunities for the employees to respond. 
	 
	The court ruled that the dismissals were justified because:

<table align="left" border="0" cellpadding="0" cellspacing="0" style="width: 100%; margin-top: 10px">
	<tbody>
		<tr>
			<td align="left" style="width:3%; valign:top" valign="top">1. </td>
			<td>Establish Clear Performance Standards: Develop and communicate objective performance metrics aligned with job responsibilities.</td>
		</tr>
		<tr>
			<td align="left" style="valign:top" valign="top">2. </td>
			<td>Document Performance Issues: Maintain thorough records of performance evaluations, feedback sessions, and any corrective measures taken.</td>
		</tr>
		<tr>
			<td align="left" style="valign:top" valign="top">3. </td>
			<td>Provide Support and Opportunities for Improvement: Offer training, coaching, or reassignment where appropriate to help employees address performance gaps.</td>
		</tr>
		<tr>
			<td align="left" style="valign:top" valign="top">4. </td>
			<td>Ensure Procedural Fairness: Follow legal procedures meticulously, including providing adequate notice and the opportunity for the employee to respond.</td>
		</tr>
		<tr>
			<td align="left" style="valign:top" valign="top">5. </td>
			<td>Engage in Sincere Consultation: If dismissals are due to managerial reasons, engage in genuine discussions with employee representatives.</td>
		</tr>
		<tr>
			<td align="left" style="valign:top" valign="top">6. </td>
			<td>Seek Legal Advice: Consult with legal professionals experienced in Korean labor law to ensure compliance and mitigate risks.</td>
		</tr>
		<tr>
			<td align="left" style="valign:top" valign="top">7. </td>
			<td>Cultural Sensitivity Training: Educate management teams on Korean cultural norms and workplace expectations to navigate performance issues respectfully.</td>
		</tr>
		<tr>
			<td align="left" style="valign:top" valign="top">8. </td>
			<td>Maintain Open Dialogue: Implement regular feedback sessions to communicate performance expectations and address concerns promptly.</td>
		</tr>
		<tr>
			<td align="left" style="valign:top" valign="top">9. </td>
			<td>Consider Alternative Dispute Resolution: Explore mediation or settlement to resolve conflicts and minimize litigation risks. 
			 </td>
		</tr>
	</tbody>
</table>
 
 
By adhering to these practices, employers can better manage performance issues while respecting legal obligations and cultural considerations. 
 
 
Conclusion 
 
Dismissal of low-performing employees in Korea is a complex challenge due to legal obligations intertwined with deep-rooted cultural values prioritizing job security. Despite recent trends toward performance-driven workforce optimization, stringent labor laws and societal expectations continue to impose significant constraints. 
 
Employers must balance operational efficiency with the rights and protections afforded to employees under Korean law. Understanding the legal framework, learning from court precedents, and being aware of the various avenues for employee redress are essential in managing this delicate process. 
 
By staying informed about legal requirements, embracing cultural understanding, and implementing fair and supportive management practices, companies can navigate the complexities of workforce management effectively. Engaging HR experts familiar with Korean labor laws is crucial for crafting legally sound and culturally appropriate strategies, ultimately contributing to sustainable organizational success. 
 
 
Disclaimer 
 
This article is for general informational purposes only and is not intended to provide legal advice. Employers should consult legal professionals for advice specific to their circumstances. 
 
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<div style="line-height: 110%;">1 Supreme Court Decision 2006Du18287, February 9, 2007 
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