SOUTH KOREA Law and Practice Contributed by: Sihoon Yang, Young Min Kim, Jung Mo Hong and Douglas Hwang, Yoon & Yang LLC
to dismiss its employees for managerial reasons, all of the following requirements must be met: • there must be an urgent managerial need; • the employer must make every effort to avoid the dismissals; • the employer must select employees to be dis - missed based on reasonable and fair standards; and • the employer must notify the employee representa - tive of the dismissal no later than 50 days prior to the dismissal and engage in good-faith discussions with said employee representative. These requirements have been further explained by the Supreme Courts, as follows. Urgent managerial need An urgent managerial need is not limited to circum - stances where a lay-off is required for the company to avoid bankruptcy. If there is a reasonable and objec - tive need for a reduction in the workforce to prepare for a potential future risk, then such need qualifies as “Making every effort to avoid dismissals” refers to tak - ing all possible measures to minimise the number of dismissals by, among other things, streamlining work methods or managerial policies, freezing new hires, utilising temporary suspensions, suggesting voluntary resignations (by offering additional compensation, etc) and transferring employees. The measures to be tak - en and their degree are neither fixed nor conclusively defined; thus, whether adequate measures were taken depends on multiple factors, including the managerial risks faced by the relevant employer, managerial rea - sons as to why lay-offs should be made, the type and scale of the business, and the number of employees at various levels. Reasonable and fair standards The definition of “reasonable and fair standards” is also fluid. It considers various factors to determine what is “reasonable and fair”, such as the magnitude of the managerial risks faced by the relevant employer, the managerial reasons that necessitate lay-offs, the type of business performed by the relevant division an urgent managerial need. Efforts to avoid dismissal
and the composition of its employees, and the social and economic conditions during the period when lay- offs are deemed necessary. Furthermore, when deter - mining the standards for selecting the employees to be laid off, the employer’s circumstances relating to its managerial interests can be considered concur - rently with the employees’ interests, as long as the employer’s interest is objectively reasonable. Notice period The final requirement of 50 days’ notice and a good- faith discussion does not affect the validity of a lay- off, even if it is not satisfied. Therefore, if there has been sufficient time (albeit not 50 days) to notify the employees and engage in good-faith discussions, the lay-off is valid as long as all other requirements have been satisfied. 7.2 Notice Periods Notice Periods As noted in 7.1 Grounds for Termination , employers must, pursuant to Article 26 of the Labor Standards Act, give an employee prior notice of at least 30 days if the employer intends to dismiss such employee. This notice requirement also applies to dismissals due to managerial reasons. Other than the foregoing, the Labor Standards Act does not provide a mandatory notice period for termi - nations. However, if the employer provides a separate notice period in its rules of employment that are not required by law, then such procedures must be com - plied with. In addition to the mandatory notice requirements for terminations mentioned in the foregoing, employers are required to provide prior notice when initiating pro - cedures for taking disciplinary actions if the employ - ers’ rules of employment or other internal policies require such prior notice. Even if no such procedural requirement is stipulated in the employer’s rules or policies, it is recommended that the employers still provide prior notice before the HR committee meet - ing, in which case prior notice of one week is generally considered appropriate.
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