CONTENTS
- 1. Labor Standards Act Litigation, the Detailed Background
- 2. Labor Standards Act Litigation, the Plaintiff's Arguments
- 3. Labor Standards Act Litigation, the Court's Determination
- - Labor Standards Act Litigation, Relevant Statutes and Precedents
- 4. Labor Standards Act Litigation, Daeryun's Strategy
1. Labor Standards Act Litigation, the Detailed Background
The plaintiff in this lawsuit was the residents' representative council of an apartment complex in Seoul. The plaintiff directly employed as many as 140 workers, organized under the apartment management office into a management team, a safety team, a mechanical team, and an electrical team, among others, to manage the apartment complex.
However, citing the financial burden arising from direct employment, among other reasons, the apartment residents' representative council notified approximately 100 security guards belonging to the safety team of their dismissal.
The apartment side, however, attached the condition that it would help the dismissed security guards immediately enter into new employment contracts with a new security service contractor and would also maintain their existing working conditions.
Although most of the workers complied with the plaintiff's request, A, the head of the security guards, did not accept it.
A filed an application for remedy with the Labor Relations Commission, claiming that the decision of the apartment residents' representative council was an ‘unfair dismissal.’
The Regional Labor Relations Commission found that the dismissal of A was not an unfair dismissal, but in the ensuing review by the National Labor Relations Commission, A's argument was accepted.
In response, the apartment side, stating that it would not accept the decision of the National Labor Relations Commission, filed an administrative lawsuit against the National Labor Relations Commission.
2. Labor Standards Act Litigation, the Plaintiff's Arguments
The apartment residents' representative council argued that the ‘outsourcing of the security duties’ was urgently necessary.
Its reasons were that the increase in the minimum wage had heightened the cost burden, and that the apartment residents' representative council lacked the expertise to employ and supervise more than 100 security guards.
It also argued that, after the Multi-Family Housing Management Act was amended so that apartment security guards could no longer be assigned parking management duties, managing the security duties had become difficult.
It further emphasized that it had made sufficient efforts to secure employment, including entering into an agreement with the contractor to which the services would be entrusted so that the existing security guards could continue to work under the same working conditions.
3. Labor Standards Act Litigation, the Court's Determination
First, the court of first instance rendered a judgment against the plaintiff, again ruling in A's favor.
Its reasoning was that it was difficult to find that there had arisen urgent financial difficulties so severe that the security guards had to be dismissed, or that there was a likelihood that such difficulties would not be readily resolved in the future.
The determination of the appellate court, however, was different.
The appellate court held that there were objective and reasonable grounds for changing the management method of the apartment security duties from self-management to entrusted management, and that, accordingly, the dismissal of the security guards was also recognized as based on an ‘urgent managerial necessity.’
It added that, because the plaintiff, in entering into the service contract, had set as a condition that the employment of all of the security guards currently working be guaranteed, there was no discrimination in the standards for dismissal, and the decision could therefore be regarded as reasonable.
It also explained that the plaintiff appeared to have gone through good-faith consultation during the dismissal process, including by holding labor-management consultations.
In response to this determination of the appellate court, the defendant, the National Labor Relations Commission, immediately expressed its intention to file a final appeal.
The Supreme Court likewise determined that the dismissal carried out in this case was lawful as it met the requirements for a dismissal prescribed by the current law, and dismissed the final appeal.
Labor Standards Act Litigation, Relevant Statutes and Precedents
Article 24 of the Labor Standards Act (Restrictions on Dismissal for Managerial Reasons)
(1) Where an employer intends to dismiss a worker for managerial reasons, there must be an urgent managerial necessity. In such cases, a transfer, acquisition, or merger of a business to prevent the deterioration of management shall be deemed to constitute an urgent managerial necessity.
(2) In the case of paragraph (1), the employer shall make every effort to avoid dismissal and shall establish reasonable and fair standards for dismissal and select those subject to dismissal in accordance therewith. In such cases, no discrimination shall be made on the ground of sex.
(3) Where there is a trade union organized by a majority of the workers at the relevant business or workplace, the employer shall notify that trade union of the methods to avoid dismissal under paragraph (2) and the standards for dismissal, among other matters, by no later than 50 days before the intended date of dismissal, and shall consult in good faith.
(4) Where an employer intends to dismiss a number of workers exceeding a certain scale prescribed by Presidential Decree under paragraph (1), the employer shall report to the Minister of Employment and Labor as prescribed by Presidential Decree.
(5) Where an employer has dismissed a worker by meeting the requirements under paragraphs (1) through (3), the dismissal shall be deemed to have been made on justifiable grounds under Article 23 (1).
“The term ‘urgent managerial necessity’ is not necessarily limited to cases of avoiding a company's bankruptcy, and should be construed to include cases in which a reduction of the workforce is, viewed objectively, recognized as reasonable in order to cope in advance with a crisis that may come in the future. In addition, whether there was an urgent managerial necessity, among the requirements for a layoff, should be determined on the basis of the circumstances existing at the time the layoff was carried out.” (See Supreme Court, Decision of June 13, 2013, 2011 Da 60193)”
“The requirement that the employer ‘shall make every effort to avoid dismissal’ means that the employer takes all possible measures to minimize the scope of dismissal, such as rationalizing management policies or work methods, prohibiting new hiring, utilizing temporary leave and voluntary retirement, and transfers; and its method and degree are not fixed or definite, but vary depending on the degree of the relevant employer's managerial crisis, the managerial reasons for which the layoff must be implemented, the nature and scale of the business, and the staffing situation by position, among other factors (See the aforementioned Supreme Court Decision, 2011 Da 60193)”
4. Labor Standards Act Litigation, Daeryun's Strategy
Through this judgment, the court made clear that social changes, such as an increase in the minimum wage or the amendment of related laws, may extend even to the grounds for dismissal.
This shows that the ‘urgent managerial necessity requirement’ set out in the Labor Standards Act is gradually being recognized more broadly.
Disputes between labor and management surrounding unfair dismissal occur frequently, reaching several thousand cases each year.
As a reliable partner to both businesses and workers, Daeryun Law Firm LLP provides high-quality legal services based on its experience.
If you need related consultation or advice, you are welcome to reach out to Daeryun Law Firm LLP at any time.
