Legal 500 Country Comparative Guides 2024

Legal 500

Country Comparative Guides 2024

South Korea

Employment and Labour Law

Contributor

Lee & Ko

Sanghoon Lee

Senior Partner | [email protected]

William Kim

Partner | [email protected]

This country-specific Q&A provides an overview of employment and labour laws and regulations applicable in South

Korea.

For a full list of jurisdictional Q&As visit legal500.com/guides

Employment and Labour Law: South Korea

South Korea: Employment and Labour Law

1. Does an employer need a reason to lawfully

terminate an employment relationship? If so,

state what reasons are lawful in your

jurisdiction?

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.

A key exception to the just-cause requirement: the just-

cause requirement does not apply to workplaces with

fewer than 5 employees.

2. What, if any, additional considerations apply if

large numbers of dismissals (redundancies) are

planned? How many employees need to be

affected for the additional considerations to

apply?

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:

An imminent managerial necessity for the1.

layoff must exist (e.g., severe financial strain

over a period of time without a reasonable

prospect of improved financial conditions);

The employer must make best efforts to avoid2.

the layoff;

The employer must establish reasonable and3.

fair criteria regarding those to be laid off;

The employer must consult in good-faith with4.

the employee representative or labor union (if

majority union exists) on matters related to the

layoff;

Advance notice must be provided at least 505.

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

The employer must submit a report to the6.

Ministry of Employment and Labor (“MOEL”) if,

in principle, 10% or more of the workforce is

being laid off.

Of the Layoff Requirements, the “imminent managerial

necessity” requirement is considered the gateway

requirement, the absence of which would render layoffs

as a non-viable option.

There is no minimum number of employees required in

order to trigger the requirements above. Thus, a layoff

against just one (1) employee would still require that the

layoff requirements above are met.

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.

Business Transfer. In a business transfer,1.

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

Employment and Labour Law: South Korea

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.

Asset Transfer. In an asset transfer, employees2.

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? Are there any categories

of employee who typically have a contractual

notice entitlement in excess of the minimum

period?

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 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.

Under limited circumstances, employers may be exempt

from the written termination notice requirement, for

example, causing severe harm to the company, etc.

Employers are not required to provide the 30 days’ notice

in advance for employees who have been employed for

less than three (3) consecutive months, unless stated

otherwise in the applicable employment contract or

employer rules.

There are no specific categories of employees who are

typically provided with a longer contractual notice period

as each case of notice entitlement would vary widely,

depending on the prevalent practice of the employer.

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 stay 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. It is

common for administrative leaves to be fully paid to

minimize legal challenges from the employee.

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 or work rules; and (2) provide a written notice

of termination (either served in advance or with

immediate effect pursuant to an appropriate payment in

lieu thereof) – as described in Question 4 on written

termination notices.

If the employer does not have any prescribed disciplinary

procedures in its policies, regulations, or work rules, the

employer is not required to have any particular procedure

(except for statutory procedures such as the notice

requirement in Question 4). However, most employers

choose to provide a form of due process to the employee,

which includes a reasonable notice period for a

disciplinary hearing and a chance to present arguments

or submit evidence.

In some cases, immediate termination without prior

procedure is permitted. This form of termination is called

“general termination.” General terminations include

situations where applying any procedures is impractical

such as the death of an employee, an employee reaches

retirement age, expiration of the employment term, or the

incapacitation of an employee that no longer allows him

to perform his job, and loss of a prerequisite license to

continue doing the job. Please note that even in the case

of general terminations, employers are highly

recommended to provide a notice of termination.

8. If the employer does not follow any prescribed

Employment and Labour Law: South Korea

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

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 30

million (approx. USD 25,000). This compulsory fine can

be levied up to twice per year and up to 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 that includes

certain requirements (substantive or procedural)

regarding terminations, the employer must follow the

terms of such collective agreement. If an employer fails

to adhere to its disciplinary procedures (including those

stipulated in applicable collective agreements), the

termination may be held invalid.

Please note that an employer must follow any certain

requirements (substantive or procedural) regarding

terminations in the collective agreement for all union and

union-eligible employees in case the trade union is a

majority union. If not a majority union, the requirements

(substantive or procedural) regarding terminations (if

any) in the collective agreement apply only to union

members.

10. Does the employer have to obtain the

permission of or inform a third party (e.g 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.

However, in the case of a layoff, one of the Layoff

Requirements 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 (4) 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:

An employer shall neither discriminate against1.

employees based on gender, nor take

discriminatory treatment (including

termination) in relation to terms and

conditions of employment on the ground of

nationality, religion, or social status.

An employer may not terminate an employee2.

during a period of suspension of work for

medical treatment of an occupational injury or

disease and within thirty (30) days

immediately thereafter.

An employer may not terminate a female3.

employee during her maternity leave (as

prescribed in the LSA) and for thirty (30) days

immediately thereafter.

An employer shall not terminate or treat an4.

employee unfairly for reporting a violation of

the employment and laws by the employer to

the MOEL or a labor office inspector.

An employer shall investigate any claim or5.

incident of workplace sexual harassment or

general workplace harassment. The employer

must also maintain confidentiality during the

investigation, take appropriate measures

during and after for the victim(s), and make

efforts to prevent secondary harm to the

victims and witnesses. Furthermore, the

employer must take disciplinary action without

delay as necessary, and no adverse measures

shall be taken against victims or those

assisting the victims.

Employment and Labour Law: South Korea

Under the Equal Employment Opportunity and Work-

Family Balance Assistance Act:

No employer shall discriminate on the grounds1.

of gender in age limit, retirement, and

termination of his/her employee.

No employer shall conclude an employment2.

contract that stipulates marriage, pregnancy,

or childbirth of female employees as grounds

for retirement.

An employer shall not terminate, or take any3.

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).

No employer shall terminate, or take any other4.

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.

No employer shall terminate, or take any5.

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.

No employer shall terminate an employee,6.

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 Questions 1, 2, 4, 7, and 8, 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 the consequences of invalid

terminations.

Please refer to the corresponding protection in Question

11 above.

Under the LSA:

Administrative fine not exceeding KRW 51.

million (approx. USD 5,000);

Up to five (5) years’ imprisonment or a criminal2.

fine not exceeding KRW 50 million (approx.

USD 50,000);

Up to five (5) years’ imprisonment or a criminal3.

fine not exceeding KRW 50 million (approx.

USD 50,000);

Up to two (2) years’ imprisonment or a criminal4.

fine not exceeding KRW 20 million (approx.

USD 20,000);

Administrative fine not exceeding KRW 55.

million (approx. USD 5,000) for failure to

investigate or take appropriate measures to

protect the victim(s) or take disciplinary action

or maintain confidentiality. However,

employers can be subject to up to three (3)

years’ imprisonment or a criminal fine not

exceeding KRW 30 million (approx. USD

30,000) for taking disadvantageous measures

(e.g., termination, discrimination, exclusion,

disciplinary actions) against victims or those

who reported the workplace sexual or general

harassment.

Under the Equal Employment Opportunity and Work-

Family Balance Assistance Act:

Up to five (5) years’ imprisonment or a criminal1.

fine not exceeding KRW 30 million (approx.

USD 30,000);

Up to five (5) years’ imprisonment or a criminal2.

fine not exceeding KRW 30 million (approx.

USD 30,000);

Regarding sexual harassment within the3.

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, up4.

to KRW 5 million (approx. USD 5,000) as an

administrative fine;

Up to three (3) years’ imprisonment or a5.

criminal fine not exceeding KRW 20 million

(approx. USD 20,000);

Up to three (3) years’ imprisonment or a6.

criminal fine not exceeding KRW 20 million

(approx. USD 20,000);

Up to three (3) years’ imprisonment or a7.

Employment and Labour Law: South Korea

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 Question 11 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 Question 11, an employer shall not

terminate or treat an employee unfairly for reporting 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 20 million (approx. USD 20,000).

15. In the event of financial difficulties, can an

employer lawfully terminate an employee’s

contract of employment and offer re-engagement

on new less favourable terms?

Yes, an employer can terminate an employee for

imminent managerial necessity. Termination for financial

difficulties or imminent managerial necessity falls under

the category of layoff terminations which requires stricter

and additional requirements for lawful termination.

Please refer to Question 2 for more information.

At any time during an employee’s employment, an

employer can approach an employee to amend the

existing working terms and conditions. In most cases,

employers would not terminate an employee only to offer

reengagement under new or less favorable terms.

Instead, employers would approach employees for

possible amendments to their existing terms and

conditions before considering employment termination.

16. What, if any, risks are associated with the use

of artificial intelligence in an employer’s

recruitment or termination decisions? Have any

court or tribunal claims been brought regarding

an employer’s use of AI or automated decision-

making in the termination process?

The use of artificial intelligence has not been fully

considered by the current legislations. The current laws

do not restrict or prohibit the use of artificial intelligence

in an employer’s recruitment or termination decisions.

However, even if the decision to recruit or terminate an

employee maybe decided by artificial intelligence, the

legality of the decision (result) will be reviewed with the

same legal standard applicable to hiring or firing

decisions done by a committee or a human being. For

example, the courts will review whether a termination

meets the procedural, substantive (just-cause), and the

proportionality requirements, irrespective of whether the

termination was decided by artificial intelligence.

While the advancement of AI is accelerating, there have

not been any cases associated with the use of AI or

automated decision-making in the termination process.

17. What financial compensation is required

under law or custom to terminate the

employment relationship? How is such

compensation calculated?

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 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) stipulates a

formula, the employer must follow its policy, regulation, or

collective agreement. See Question 18 for more

information.

Under Article 8 (1) of the Employee Retirement Benefit

Guarantee Act, upon the termination of the employment

relationship for any reason including mutual separation,

an employee who has been employed for 1 or more years

(and worked for 15 hours or more per week based on 4

week average) is entitled to a (statutory) minimum

severance pay equal to not less than 30 days’ average

wage per each year of service (including partial years pro

rata). The average wage is calculated by dividing the total

Employment and Labour Law: South Korea

wages paid to the employee during the last 3 months of

service by the number of days in the three months.

18. 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, in what form, should

the agreement be documented? Describe any

limitations that apply, including in respect of

non-disclosure or confidentiality clauses.

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 and

may agree to post-termination covenants (e.g., non-

compete, non-solicitation), and non-disparagement

clauses. Further, the parties may draft in a non-disclosure

or confidentiality clause as they deem necessary, and

such clauses would be generally binding upon the

parties. See Questions 19 and 20.

Mutual separation agreements are most commonly

documented in writing; it is highly rare and unadvised for

the terms to be agreed upon verbally or in a less definitive

written medium such as an email.

Further, while restrictive covenants such as non-

competition and non-solicitation are, in principle,

enforceable, the courts are requiring specific

consideration in exchange for the restrictions as a de

facto element. General renumeration such as the regular

salary and other benefits are not readily recognized as

the requisite consideration for enforceability.

19. 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:

Whether there exists a legitimate and1.

protectable business interest;

The circumstances of the employee’s2.

departure from the previous employer (e.g.,

termination, resignation);

The durational and geographical scope of the3.

restrictions;

The employee’s access to confidential4.

information while with the previous employer;

The employee’s position, rank, and5.

responsibilities; and

Whether the employee received consideration6.

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.

Although there is no statutory limit on the recognized

restrictive period for non-compete agreements, as a

general proposition, restrictive periods that are longer

than 12 months may be subject to a higher risk of

challenge.

Of the factors above, Factor 6 (i.e., consideration received

for the restrictions) has become a defacto requirement

for enforceability. Courts are highly reluctant to enforce

non-compete or non-solicitation agreements unless the

employee received payment in exchange for his/her

agreement to the restrictions or material risks of

irreparable harm exist if an injunction is not granted.

Enforcing non-compete provision and other post-

termination restrictive covenants may require significant

resources in terms of time and money. It is highly advised

to consult with local counsel before commencing such

procedures.

20. 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 –

Employment and Labour Law: South Korea

not seen as infringing upon an individual’s constitutional

freedom of employment.

21. Are employers obliged to provide references

to new employers if these are requested? If so,

what information must the reference include?

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 only the information that was requested by the

employee. Failure to provide the certificate may result in

an administrative fine not exceeding KRW 5 million

(approx. USD 5,000). Please note that a character

reference is interpreted to be not included in this

employer obligation.

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.

22. What, in your opinion, are the most common

difficulties faced by employers in your

jurisdiction when terminating employment and

how do you consider employers can mitigate

these?

We can identify two major difficulties when terminating

employees in Korea:

1. The most common difficulty is satisfying the just-

cause requirement for termination, especially if the

employer seeks to terminate an employee for poor

performance or redundancy (i.e., elimination of a single or

few positions), 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). Therefore, 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. Many employers opt to use the mutual

separation method as an alternative to termination.

As redundancy (i.e., elimination of a single or few

positions) is not – in and of itself – considered sufficient

just-cause for termination under Korean law, employers

also rely on the mutual separation method to separate

from the employee; provided that, there are no other

grounds for establishing just-cause.

Note: The just-cause requirement applies only for

employers with 5 employees or more.

2. The second difficulty involves the protections around

workplace harassment. Workplace harassment

prevention laws were intended to protect employees and

workers of third parties from hostile work environments

and general harassment by supervisors and other

employees. An employer is required to investigate any

report of workplace harassment in addition to taking

protective measures for the alleged victim and satisfying

other statutory requirements. However, cases are

becoming more frequent where employees weaponize the

well-intended workplace harassment protection

provisions. Specifically, when an employee believes that a

company is threatening the employee’s job security by

initiating discussions about mutual separation, engaging

in discussions about poor performance, initiating an

investigation to review an employee’s potential unlawful

or acts of misconduct, or initiating disciplinary

procedures, the impacted employee could file a

workplace harassment claim to the employer, effectively

attempting to suspend any procedures or measures

initiated against the employee until the investigation is

complete.

Employers often react highly cautiously and

conservatively when faced with a workplace harassment

claim. However, employers may consider taking a

“parallel approach” where the employer may choose to

continue its initial, lawful procedure while satisfying its

obligations under the workplace harassment prevention

provisions to investigate the matter. Please be advised to

seek legal counsel before proceeding.

23. Are any legal changes planned that are likely

to impact the way employers in your jurisdiction

approach termination of employment? If so,

please describe what impact you foresee from

such changes and how employers can prepare for

Employment and Labour Law: South Korea

them?

No, there is no major legal changes planned that would

impact the way or standards that employers would

approach termination of employment.

Contributors

Sanghoon Lee

Senior Partner

[email protected]

William Kim

Partner

[email protected]