Dismissing Low-Performing Employees Under Korean Labor Law

Article 23, Section 1 of the Korean Labor Standards Act (근로기준법) stipulates that an employee cannot be dismissed without just cause. 

Article 23 (Restriction on Dismissal)

(1) An employer shall not, without justifiable cause, dismiss, lay off, suspend, or transfer an employee, reduce his or her wages, or take other punitive measures (hereinafter referred to as “unfair dismissal, etc.”) against him/her.

However, the law does not restrict the “justifiable cause” for dismissal to only disciplinary actions. Therefore, if there is a justifiable cause, it is possible to dismiss the employee whose performance or job competency is significantly lacking (referred to as “low-performance dismissal”). In this article, we will explore key considerations regarding low-performance dismissal based on recent rulings by the Korean Supreme Court.

Supreme Court’s Criteria for Justifying Low-Performance Dismissals

In the landmark case, Supreme Court Decision, February 25, 2021, 2018Da253680, the Supreme Court established the criteria for determining the legitimacy of low-performance dismissals. These criteria are as follows:

1. Objective and Fair Evaluation: The employer’s assessment of the employee’s performance or job competency must be based on fair and objective standards.

2. Inability to Improve and Continue Employment: The employee’s performance or job competency must be significantly below the expected level for a prolonged period, to the extent that continuing the employment is no longer viable. This includes situations where there is little to no potential for improvement in the future.

Factors that should be considered in determining whether the employee’s performance is insufficient to continue the employment include: 

  • The employee’s position and the nature of their duties,
  • The expected level of performance or expertise required for the role,
  • The extent and duration of the employee’s poor performance,
  • Whether the employer provided opportunities for improvement (such as training or reassignment),
  • Whether the employee’s performance improved after being given the opportunity to improve,
  • The employee’s attitude and behavior,
  • The overall circumstances of the workplace.

Recent Case Law on Low-Performance Dismissals

1. Supreme Court Decision, December 28, 2023, 2021Du33470

The recent decision by the Supreme Court on December 28, 2023, upheld the criteria established in the 2021 ruling and validated a low-performance dismissal in line with these principles. Key facts from the case include:

  • The employee, who had been with the company for 25 years, was responsible for cost-saving operations and was expected to perform at a high level given his role and seniority.
  • Over the 11-year period from 2007 to 2017, the employee’s performance and job competency were below standard, with a performance ranking of 11,222nd out of 11,229 employees in the last three years.
  • Despite being placed in a performance improvement plan (PIP) for seven times, the employee continued to perform poorly and failed to improve despite several opportunities for training. The company attempted to reassign the employee to other duty, but the employee refused.

2. Lower Court Decision Recognized Low-Performance Dismissals

The Seoul Central District Court’s decision on May 18, 2023, 2021Gahap544824, acknowledged the legitimacy of the dismissal, citing the following circumstances, in a case where the employee had mostly received a D grade from 2016 to 2018 and was subject to a low-performance program, and was given several opportunities to improve, but was dismissed due to lack of improvement.

  • Objective and Fair Evaluation: There is no evidence to suggest that inappropriate evaluation criteria were intentionally applied to disadvantage the employee
  • Inability to Improve and Continue Employment:
    • The employee performed poorly, such as accessing the computer network only during the evaluation period, frequently left work for long periods of time without manager approval, which was pointed out but did not improve.
    • Did not submit a report at all in the first low performer program, and submitted an improvement plan in the second low performer program, but did not do any actual improvement work.
    • Was offered the opportunity to transfer to another department and continue working there, but was rejected due to lack of competence and lack of willingness to improve during both the paperwork and interview process.

3. Lower Court Decision Rejected Low-Performance Dismissals

There are cases where courts denied the legitimacy of the dismissal on the grounds that the evaluation was not objective and fair. In a case where a member of an artistic troupe was dismissed after receiving the second lowest rating in a periodic evaluation for three consecutive years, the Seoul Administrative Court found it difficult to believe that the periodic evaluation was conducted fairly, noting that the member was not given an opportunity to make a defense in relation to the evaluation (Seoul Administrative Court, August 19, 2021, Decision 2020Guhab83553). The court also pointed out that there were no internal controls in place to prevent arbitrariness in evaluations, such as the disclosure of evaluation scores and appeal procedures (Seoul Administrative Court, Jan. 13, 2023, Decision 2022Guhap51079).

There are also cases where courts denied the legitimacy of dismissal because there is no evidence to objectively recognize poor work performance of the employee. In a case where an employee was dismissed for receiving the lowest grade twice in a row, the Seoul Administrative Court ruled that the lowest grade was always received by 5% of the evaluated employees, so it could not be concluded that the employee’s performance was objectively poor, and no specific data was submitted to show how low the performance was (Seoul Administrative Court, February 10, 2023, Decision 2022Guhap51161).

There are also cases where courts have rejected the legitimacy of dismissal on the grounds that no opportunity for improvement was given. The Seoul Northern District Court held that there was no specific evidence that discipline or training had been provided up to the time of the dismissal notice, and therefore, it was difficult to conclude that the employee was given the opportunity to improve their work performance through training or reassignment (Seoul Northern District Court, July 11, 2023, Decision 2021Na40738).

Important Considerations for Employers in Low-Performance Dismissals

From the case law presented, there are several key points for employers when considering low-performance dismissals:

1. Burden of Proof: The burden of proving the legitimacy of the dismissal lies with the employer. The employer must present evidence that the dismissal is justified, and that the employee’s performance was sufficiently poor to warrant it.

2. Objective and Fair Evaluation Criteria: It is crucial for employers to ensure that their performance evaluation standards are both objective and fair. Employers should avoid using subjective or biased criteria. Additionally, employees should be given an opportunity to appeal or contest their performance evaluations if necessary.

3. Periodic Evaluations: Employers should implement regular and consistent performance evaluations. This helps provide a clear record of the employee’s performance over time and ensures that the evaluation criteria are applied consistently.

4. Providing Opportunities for Improvement: Employers are required to provide employees with sufficient opportunities to improve their performance. This may include offering training, reassignment, or other remedial actions. A failure to offer such opportunities could undermine the justification for dismissal.

5. Consideration of Employee Attitudes: Employee attitudes, including their willingness to improve and cooperate, should be documented and taken into account. A lack of cooperation or poor attitude during the performance improvement process can strengthen the case for dismissal.

6. Compliance with Internal Procedures: Even in cases of low-performance dismissal, employers must ensure that all internal procedures, such as disciplinary actions or reassignment efforts, are properly followed. In some cases, it may be necessary to revise the company’s internal rules to clarify the procedures for dismissals.

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