Termination of employment

The termination of employment for business needs (경영상의 이유에 의한 해고/經營上 解雇) is restricted to a certain situation provided by Article 24 of the Labour Standards Act (근로기준법/勤勞基準法).

The provision stipulates that in order for a termination for business needs to be valid, an urgent business need must exist and the employer must have:
 * made its best efforts to avoid terminating its employees;
 * used reasonable and fair selection criteria to select the employees to be terminated; and
 * engaged in good-faith discussions with the employees' representative.

Key words
termination of employment, selection criteria, in reasonable and fair manner, irregular employee

How to select the employees for termination
Whether the criteria used to select the employees to be terminated are considered 'reasonable and fair' will be determined by taking into account:
 * the severity of the business crisis faced by the employer;
 * the business reason for the termination;
 * the business to be discontinued;
 * the composition of the employees for such business; and
 * the social and economic circumstances at the time of the termination.

A number of issues have been raised in connection with the selection of employees for termination, as follows.

Business location
The employees to be terminated should be selected not only from among those working in the business location or division of the company to be closed, but from among all employees of the company who have the same or similar job functions as those employees of the business location or division that is to be closed.

If the termination is prompted by the planned closure of a certain business location or division of the company, the issue at stake is whether:
 * the pool of employees from which selection for termination is to be made can be limited to the employees of the business location or division to be closed; or
 * such pool must include all employees of the company.

In this respect, the courts have ruled that where only a certain business location or division of a company is to be closed, as the company has not discontinued its entire business (assuming that it continues to carry on business through other business locations or divisions), it would not be justified in terminating only the employees who work at the business location or division that is to be closed.

However, this ruling should not be broadly interpreted to mean that employees of other business locations or divisions that have no similarity with the employees of the business location or division to be closed should also be considered for termination.

Instead, it should be narrowly interpreted to mean that only employees with the same or similar job functions, titles and positions as those of the business location or division to be closed shall be considered for termination.

Agreements
An agreement with a labour union regarding the selection criteria for a termination for business needs may be considered in determining whether such criteria are reasonable and fair.

The courts have taken the view that if the employer has reached an agreement with its employees regarding the selection criteria for the termination of employees for business needs and such agreement is based on a good-faith discussion, this may be considered in determining whether the selection criteria are reasonable and fair. The same will apply if the selection criteria are provided for in the collective bargaining agreement or work rules.

Nonetheless, providing for the selection criteria in the collective bargaining agreement or work rules, or reaching an agreement with the employees on such selection criteria, will not automatically render such selection criteria reasonable and fair. If the court determines that the selection criteria agreed on by the employer and the employees are objectively unreasonable or unfair, the court may find that the employer has failed to meet its burden of proof to show that the termination was valid.

Non-regular employees
Employers should be cautious when terminating non-regular employees before regular employees. In the past, the court tended to side with the employer that non-regular employees may be considered first in selecting employees to be terminated before the regular employees.

However, after the implementation of the Act on the Protection of Fixed-Term and Part-Time Employees in 2007, terminating non-regular employees first without special reason may constitute 'discriminatory treatment' (which is prohibited under Article 8 of the Act).

Accordingly, whether the termination of non-regular employees for business needs is conducted based on reasonable and fair selection criteria should be determined based on all circumstances, including:
 * the purpose of the termination;
 * differences in hiring and treatment between non-regular employees and regular employees; and
 * the management situation of the company.

If non-regular employees are selected for dismissal based solely on their status as non-regular employees, such selection will not be found to be reasonable and fair.

Labour union membership
If employees subject to termination are selected based on their membership in a labour union, the selection criteria are unlikely to be viewed as reasonable and fair. Regardless of whether the company had any intention of dismantling or harming the labour union, if members of the labour union are considered for termination before nonmembers, the selection criteria would not be found to be reasonable and fair. However, if a reduction in the workforce is first conducted through, for example, a voluntary resignation programme for non-union members and the termination is thereafter conducted in consultation with the labour union, such a termination may be deemed to have been conducted based on reasonable and fair selection criteria even if the termination is limited to union members.