South Korea: Employment & Labour Law

The In-House Lawyer Logo

This country-specific Q&A provides an overview to employment and labour law in South Korea.

It will cover termination of employment, procedures, protection for workers, compensation as well as ííinsight and opinion on the most common difficulties employers face and any upcoming legal changes planned..

This Q&A is part of the global guide to Employment & Labour. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/employment-labour-law/

  1. Does an employer need a reason in order to lawfully terminate an employment relationship? If so, describe what reasons are lawful?

    Korea is not an at-will termination jurisdiction. Instead, employee terminations in Korea require just-cause. Just-cause is a very high standard to satisfy. Courts have defined just-cause abstractly as a “cause that is attributable to the employee that renders the continued employment impossible from a societal perspective.”

    Courts consider the totality of the circumstances when determining whether just-cause existed for an employee’s termination. Examples of reasons that may constitute sufficient just-cause include, but are not limited to, (i) serious and repeated violation of an internal employment regulation, (ii) conviction of a serious crime; (iii) falsification of one’s resume and detrimental reliance by the company, (iv) disclosure of trade secrets, and (vi) workplace sexual harassment. A complete business closure may also constitute just-cause under Korean law.

  2. What, if any, additional considerations apply if large numbers of dismissals (redundancies) are planned?

    Layoffs or terminations for redundancy may also be referred to as “terminations for managerial reasons.” The Labor Standards Act (“LSA”) sets forth the requirements for a lawful layoff (collectively, the “Layoff Requirements”). Please note that –as a general proposition – satisfying the Layoff Requirements is more difficult than the just-cause requirement for individual terminations. The Labor Relations Commission (“LRC”) and the courts also tend to review layoff case with greater scrutiny than individual terminations, due to the larger number of employees involved in layoffs.

    The Layoff Requirements are as follows:

    1. An imminent managerial necessity for the layoff must exist (e.g., severe financial strain over a period of time without a reasonable prospect of improved financial conditions);
    2. The employer must make best efforts to avoid the layoff;
    3. The employer must establish reasonable and fair criteria regarding those to be laid off;
    4. The employer must consult in good-faith with the employee representative or labor union (if majority union exists) on matters related to the layoff;
    5. Advance notice must be provided at least 50 days before the scheduled layoff date to the employee representative or labor union (if majority union exists) and good faith consultation in connection thereto; and
    6. The employer must submit a report to the Ministry of Employment and Labor (“MOEL”) if, in principle, 10% or more of the workforce is being laid off.
  3. What, if any, additional considerations apply if a worker’s employment is terminated in the context of a business sale?

    A business sale may broadly fall into two deal structures: (1) business transfer and (2) asset purchase/transfer. The employment law implications differ depending on the deal structure of the business sale.

    1. Business Transfer. In a business transfer, employees of the relevant business will – in principle – transfer automatically to the Buyer; provided that, the transferring employees will have the right to opt-out of the transfer and remaining with their current employer (i.e., the Seller). If an employee chooses to remain with his/her current employer, the employer must satisfy the termination standards as described in Questions 1 or 2 to terminate the employee. A business transfer or sale does not – in and of itself – constitute just-cause for employee termination.
    2. Asset Transfer. In an asset transfer, employees of the relevant business do not transfer automatically. The employees of a particular business unit that was sold will remain as the company’s employees, and the company must satisfy the termination standards as described in Questions 1 or 2 to terminate the employee. A redundancy due to an asset transfer or sale does not – in and of itself – constitute just-cause for employee termination.
  4. What, if any, is the minimum notice period to terminate employment?

    Under the LSA, an employer must provide at least thirty (30) days’ written notice of termination to the employee. Alternatively, an employer may provide thirty (30) days’ compensation instead of the advance notice. Please note that the latter will merely permit the employee to terminate an employee without the notice period. An employer must provide a written termination notice – indicating the effective termination date, and the grounds for termination – irrespective of whether advance notice is provided or compensation is made instead of the advance notice.

    Advance notice of termination is not required for:

    1. A daily employed employee who has been employed for less than three (3) consecutive months;
    2. An employee who has been employed for a fixed period of not exceeding two (2) months;
    3. An employee who has been employed for any seasonal work for a fixed period of not exceeding six (6) months; and
    4. An employee on a probationary period (3 months or shorter).
  5. Is it possible to pay monies out to a worker to end the employment relationship instead of giving notice?

    Please refer to Question 4.

  6. Can an employer require a worker to be on garden leave, that is, continue to employ and pay a worker during his notice period but require him to say at home and not participate in any work?

    Yes, the employer may instruct an employee to remain at home during the notice period. This form of leave is also referred to as an “administrative leave” in Korea.

  7. Does an employer have to follow a prescribed procedure to achieve an effective termination of the employment relationship? If yes, describe the requirements of that procedure or procedures.

    In principle, an employer must: (1) adhere to the disciplinary procedures (if any) outlined in its policies or regulations; and (2) provide a written notice of termination (either served in advance or with immediate effect pursuant to an appropriate payment in lieu thereof). Please refer to Question 4 for more details on written termination notices.

  8. If the employer does not follow any prescribed procedure as described in response to question 7, what are the consequences for the employer?

    If the employer does not follow the prescribed procedure, the termination would be held invalid for procedural error. If the employee had challenged the termination to the Labor Relations Commission (LRC) or the courts, the available remedies are reinstatement and back-pay.

    If an employer chooses not to comply with the LRC’s order, LRC will impose a compulsory fine of up to KRW 20 million (approx. USD 20,000). This compulsory fine can be levied up to twice per year but no more four times in total. The compulsory fine would be imposed even though the employer formally appeals the LRC’s order; provided that, if the decision is subsequently reversed, the compulsory fine would be returned.

    Please note that these consequences of an invalid termination are the same for layoffs.

  9. How, if at all, are collective agreements relevant to the termination of employment?

    In the case where a collective agreement is entered into between an employer and a trade union regarding the termination of employment, the employer must follow the terms of such agreement. Collective agreements may contain procedures for disciplinary actions or special notice requirements. If an employer fails to adhere to its disciplinary procedures (including those stipulated in applicable collective agreements), the termination may be held invalid.

  10. Does the employer have to obtain the permission of or inform a third party (eg local labour authorities or court) before being able to validly terminate the employment relationship? If yes, what are the sanctions for breach of this requirement?

    Employers are not required to obtain the permission of or inform a third-party (e.g., local labor authorities or the courts) before terminating individual employees.

    In the case of a layoff, one of the Layoff Requirement includes filing a report to the MOEL if, in principle, 10% or more of the workforce is being laid off. However, if the first four Layoff Requirements are satisfied (please see Question 2), the validity of a layoff would not be diluted simply because the employer fails to make this report. Please note that if a layoff is held invalid, the available remedies are reinstatement and backpay for the terminated employees.

    Please refer to Question 8 regarding the consequences of an invalid termination.

  11. What protection from discrimination or harassment are workers entitled to in respect of the termination of employment?

    Of the various protections from discrimination or harassment, the most pertinent protections may be as follows:

    Under the LSA:

    1. An employer shall neither discriminate against employees on the basis of gender, nor take discriminatory treatment (including termination) in relation to terms and conditions of employment on the ground of nationality, religion, or social status.
    2. An employer may not terminate an employee during a period of suspension of work for medical treatment of an occupational injury or disease and within thirty (30) days immediately thereafter.
    3. An employer may not terminate a female employee during her maternity leave (as prescribed in the LSA) and for thirty (30) days immediately thereafter.
    4. An employer shall not terminate or treat an employee unfairly for report a violation of the employment and laws by the employer to the MOEL or a labor office inspector.

    Under the Equal Employment Opportunity and Work-Family Balance Assistance Act:

    1. No employer shall discriminate on the grounds of gender in age limit, retirement, and termination of his/her employee.
    2. No employer shall conclude an employment contract that stipulates marriage, pregnancy, or childbirth of female employees as grounds for retirement
    3. An employer shall not terminate, or take any other disadvantageous measures against, an employee who has suffered from sexual harassment on the job (in the workplace or from clients) or who has claimed that he/she has suffered from sexual harassment (in the workplace or from clients).
    4. No employer shall terminate, or take any other disadvantageous measure against, an employee on account of childcare leave, or dismiss the relevant employee during the period of childcare leave; provided that, this shall not apply where the employer is unable to continue his/her business. Following the end of the childcare leave, the employer must also reinstate the employee back to the same work as before the leave or any other work paying the same level of wages.
    5. No employer shall terminate, or take any disadvantageous measures against, an employee on the grounds of reduction of working hours for a period of childcare instead of the childcare leave. Following the end of the period of reduced working hours, the employer must also reinstate the employee back to the same work as before the leave or any other work paying the same level of wages.
    6. No employer shall terminate an employee, deteriorate his/her working conditions, or take any other disadvantageous measures against him/her on the grounds of taking a family care leave.
  12. What are the possible consequences for the employer if a worker has suffered discrimination or harassment in the context of termination of employment?

    If an employee is terminated in violation of the provisions outlined in Question 1, the termination will be held invalid. The available remedies for the employee are reinstatement and back-pay. Please refer to Question 8 for more information on consequences of invalid terminations).

    Please refer to the corresponding protection in Question 11 above.

    Under the LSA:

    1. Administrative fine not exceeding KRW 5 million (approx. USD 5,000).
    2. Up to five (5) years’ imprisonment or a criminal fine not exceeding KRW 30 million (approx. USD 30,000).
    3. Up to five (5) years’ imprisonment or a criminal fine not exceeding KRW 30 million (approx. USD 30,000).
    4. Up to two (2) years’ imprisonment or a criminal fine not exceeding KRW 10 million (approx. USD 10,000).

    Under the Equal Employment Opportunity and Work-Family Balance Assistance Act:

    1. Up to five (5) years’ imprisonment or a criminal fine not exceeding KRW 30 million (approx. USD 30,000).
    2. Up to five (5) years’ imprisonment or a criminal fine not exceeding KRW 30 million (approx. USD 30,000).
    3. Regarding sexual harassment within the workplace, up to three (3) years’ imprisonment or a criminal fine not exceeding KRW 20 million (approx. USD 20,000). Regarding sexual harassment from clients, up to KRW 5 million (approx. USD 5,000) as an administrative fine.
    4. Up to three (3) years’ imprisonment or a criminal fine not exceeding KRW 20 million (approx. USD 20,000).
    5. Up to three (3) years’ imprisonment or a criminal fine not exceeding KRW 20 million (approx. USD 20,000).
    6. Up to three (3) years’ imprisonment or a criminal fine not exceeding KRW 20 million (approx. USD 20,000).
  13. Are any categories of worker (for example, fixed-term workers or workers on family leave) entitled to specific protection, other than protection from discrimination or harassment, on the termination of employment?

    Fixed-term employees are treated the same as regular, indefinite-term employees under Korean employment laws. Also, please refer to Questions 11 and 12 for information on specific protections for certain categories of employees against termination and/or discrimination.

  14. Are workers who have made disclosures in the public interest (whistleblowers) entitled to any special protection from termination of employment?

    Yes, as stated in Questions 11 and 12, an employer shall not terminate or treat an employee unfairly for report a violation of the employment and laws by the employer to the MOEL or a labor office inspector. Applicable penalties are up to two (2) years’ imprisonment or a criminal fine not exceeding KRW 10 million (approx. USD 10,000).

  15. What financial compensation is required under law or custom to terminate the employment relationship? How do employers usually decide how much compensation is to be paid?

    Under the LSA, an employer must provide at least thirty (30) days’ written notice of termination to the employee. Alternatively, an employer may provide thirty (30) days’ compensation instead of the advance notice. Please refer to Question 4 for more details.

    In the case of an early retirement package or mutual separation offers, there are no statutory formulas. Instead, the amounts offered are matters of contract; provided that, if an employer policy or regulation (including any collective agreements) stipulate a formula, the employer must follow its policy, regulation, or collective agreement.

  16. Can an employer reach agreement with a worker on the termination of employment in which the employee validly waives his rights in return for a payment? If yes, describe any limitations that apply.

    Yes, such an agreement is referred to as a mutual separation agreement (or if part of a larger reduction-in-force initiative, an early retirement package). In a mutual separation agreement, the employee agrees to resign in exchange for – most commonly – an ex-gratia payment from the employer. There are no statutory formulas. Instead, the amounts offered are matters of contract; provided that, if an employer policy or regulation (including any collective agreements) stipulate a formula, the employer must follow its policy, regulation, or collective agreement.

    In a mutual separation agreement, an employee may waive his right to further claims against the employer, post-termination covenants (e.g., non-compete, non-solicitation), and non-disparagement clauses.

  17. Is it possible to restrict a worker from working for competitors after the termination of employment? If yes, describe any relevant requirements or limitations.

    Yes, non-compete agreements are enforceable in Korea. When determining the enforceability of non-compete provisions, Korean courts will consider various factors including, but not limited to:

    1. Whether there exists a legitimate and protectable business interest;
    2. The circumstances of the employee’s departure from the previous employer (e.g., termination, resignation);
    3. The durational and geographical scope of the restrictions;
    4. The employee’s access to confidential information while with the previous employer;
    5. The employee’s position, rank and responsibilities; and
    6. Whether the employee received consideration in exchange for the non-compete provision.

    Based on such factors, if the court finds that an employee’s constitutional freedom of employment would be unreasonably infringed or violated, the court can invalidate the non-compete provision entirely or in part concerning the durational and geographical scopes.

  18. Can an employer require a worker to keep information relating to the employer confidential after the termination of employment?

    Yes, a post-termination non-disclosure agreement is enforceable in Korea. Employers should carefully define what constitutes “confidential information” in any non-disclosure provision. Also, unlike non-compete or non-solicitation, non-disclosure agreements or provisions may be set for an indefinite period because non-disclosure obligations are – as a general proposition – not seen as infringing upon an individual’s constitutional freedom of employment.

  19. Are employers obliged to provide references to new employers if these are requested?

    Yes, whenever an employer is requested by an “eligible” former employee to issue a certificate of employment, specifying the term of employment, kind of work performed, positions taken, wages received, and other necessary information, the employer shall immediately prepare and deliver such certificate based on facts, even after the retirement of the employee. The certificate shall contain nothing other than what has been requested by the employee.

    A former employee is eligible if the employee had worked for thirty (30) days or longer and within three (3) years of retirement/separation from the employer. Failure to provide the certificate may result in an administrative fine not exceeding KRW 5 million (approx. USD 5,000).

  20. What, in your opinion, are the most common difficulties faced by employers when terminating employment and how do you consider employers can mitigate these?

    The most common difficulty is satisfying the just-cause requirement for termination. This difficulty is even more so if the employer seeks to terminate an employee for poor performance, which is not – in and of itself – considered sufficient just-cause for termination under Korean law.

    When seeking to terminate an employee for poor performance, both evidence and time are required. As a general proposition, employers are required to demonstrate that efforts were duly undertaken to educate, train and guide an underperforming employee to provide opportunities (including adjustment of targets, reassignments, etc.) for improvement and that despite such efforts, the employee failed to improve. These efforts and the employee’s failures should be evidenced from an objective standpoint (e.g., objective and regular evaluations and feedbacks).

    Termination for poor performance is highly difficult and may require up to 9 – 12 months of evidence and employer efforts. But even then, the satisfaction of the just-cause requirement is not guaranteed. Therefore, many employers opt to use the mutual separation method as an alternative to termination.

  21. Are any legal changes planned that are likely to impact on the way employers approach termination of employment? If so, please describe what impact you foresee from such changes and how employers can prepare for them?

    N/A