Unfair Dismissal Lawsuit | Supreme Court Judgment on the Number of Domestic Employees to Which the Labor Standards Act Applies

The key issue in the unfair dismissal lawsuit was whether the workplace was one to which the Labor Standards Act applies.

This was a case in which the method of calculating the ‘number of regularly used employees,’ the standard for determining whether a workplace is subject to the Labor Standards Act in an international employment relationship, was at issue.

The plaintiff was the only employee working in Korea for a foreign corporation headquartered in the United States.

That foreign corporation had no separate place of business in Korea, and it conducted its business activities by using the plaintiff, a single employee, in Korea for the purpose of securing new projects.

After receiving notice of the expiration of the employment contract, the plaintiff applied to the Labor Relations Commission for remedy against unfair dismissal.

Before this unfair dismissal lawsuit, the Labor Relations Commission rejected the application for remedy, reasoning that there was no place of business in Korea and that personnel and labor management of the plaintiff had been carried out abroad, so the Labor Standards Act did not apply.

The lower court also determined that the Labor Standards Act did not apply, on the ground that the governing law was the law of the State of Delaware in the United States.

The lower court in the unfair dismissal lawsuit determined that, with respect to the employment relationship in this case, the Labor Standards Act of the Republic of Korea applied rather than the law of the State of Delaware in the United States.

The lower court took the view that, in determining the number of regular employees, there was no reason to treat domestic and foreign corporations differently, and therefore the number of employees that the corporation used abroad should also be aggregated.

The lower court in the unfair dismissal lawsuit determined that, when the number of foreign regular employees was aggregated, the total was five or more, so the Labor Standards Act applied and the case constituted an unfair dismissal.

The Supreme Court's determination on this unfair dismissal lawsuit was different.

The Supreme Court took the view that, in an international employment relationship in which a foreign company conducts business activities in Korea and uses employees, whether the business or workplace is one that uses five or more regular employees, to which the Labor Standards Act fully applies, should, in principle, be determined based on the number of employees used within Korea.

On this basis, the Supreme Court held that, with respect to employees that a foreign company uses abroad, absent special circumstances, only the foreign labor relations statutes apply, and the determination cannot be made by aggregating even the number of foreign-used employees to whom the Labor Standards Act of the Republic of Korea does not apply.

Nevertheless, in determining that the business or workplace was one using five or more regular employees as a result of aggregating the number of foreign employees with the number of domestic employees when calculating the number of regularly used employees, the lower court committed an error of misapprehending the legal principles that affected the judgment; on these grounds, the Supreme Court reversed and remanded the lower judgment.

This was a case in which, within the international employment relationship in an unfair dismissal lawsuit, the method of calculating the number of regularly used employees was at issue.

Article 11 of the Labor Standards Act applies to all businesses or workplaces that use five or more regular employees, and it regulates the scope of application of the Labor Standards Act differently based on the number of regularly used employees.

The business or workplace under Article 11 of the Labor Standards Act is the unit of application of the Labor Standards Act. It is the basic unit for the regulation of working conditions, the exchange of opinions and consultation among employees, and the determination of the legitimacy of dismissals, including dismissals for managerial reasons.

When a foreign company operates a business in Korea and employs Korean workers, whether the Korean Labor Standards Act applies is a very important issue.

The Labor Standards Act contains various provisions and exceptions, and the manner of its application may vary depending on the specific circumstances of the company.

In particular, in the case of a foreign company, elements of foreign law to which the headquarters company belongs, such as U.S. law or European law, may be involved, which can make the legal interpretation more complex.

Daeryun Law Firm 🔗Corporate Legal Group has entered into MOUs with overseas law firms and provides advice on global legal disputes, assisting companies in conducting their business.