Dismissal for Business Reasons · Requirements for Redundancy Dismissal
Dismissal for Managerial Reasons
What is dismissal for managerial reasons?
- All four requirements must be met for the dismissal to be deemed valid
- Most often fails on avoidance efforts and good-faith consultation
- Fair selection criteria also bear on discrimination claims
Redundancy dismissal turns the management decision of 'how many people to cut' into a matter of procedure and records. Before the size of the cut is fixed, there must be documents showing what the company tried first to avoid cutting. In a dispute, the company bears the burden of proving it met all four requirements, and the Labor Relations Commission and the courts look less at whether the decision was right than at how the company reached it. That is why, in practice, what decides the outcome is not the date of notice but when preparation began.
Here are the specific standards. The worker representative you consult is the majority labor union if there is one, and otherwise a person representing the majority of employees. You must notify them at least 50 days before the planned dismissal date and consult in good faith. For dismissals above a certain size, you must also report to the competent government office at least 30 days before the first dismissal date, using the thresholds set by the Enforcement Decree. And if you hire for the same work within 3 years of the dismissal, you must offer the job to the dismissed employees first. The legal basis and the procedure are entirely different from disciplinary dismissal for an individual’s misconduct.
Companies most often slip by assuming, 'We announced a voluntary retirement program, so we made avoidance efforts.' If you kept hiring while only accepting voluntary retirements, that is hard to count as a genuine effort. Even signed recommended resignation forms will be treated as dismissals if the resignations turn out to have been effectively coerced. Where there is no majority union and the company simply installed a team leader of its choosing as employee representative to collect a signature, the consultation is treated as if it never happened. If you do not give written notice of the reason and timing of the dismissal, it is an unfair dismissal for violating procedure even when the reason is valid. The employee can file a remedy application within 3 months of the dismissal date, and you may face reinstatement and back pay for the intervening period. The requirements and reporting thresholds may be amended, so involve a labor law specialist from the start of your review.
Hwi KimCEO of HRDIST & Talent Development Systems Consultant
Jongmu KimSpecialist in corporate talent development and job competency buildingThe Labor Standards Act sets the requirements for dismissal for managerial reasons: an urgent managerial need, efforts to avoid dismissal, selection of targets by reasonable and fair criteria, and advance notice to and good-faith consultation with the employee representative (Article 24).
Company A, a second-tier auto parts supplier, has 180 employees and annual revenue of about KRW 32 billion (≈ US$23,941,300). Orders from its main client fell for eight straight months, dropping its utilization rate to 52%, and management proposed cutting 30 production workers. (Hypothetical example)
- When the CEO said, 'Let's cut 30 people starting next month,' the HR head pushed back. "If we give notice now, we already miss the 50-day requirement. We need at least two months of avoidance efforts on record."
- The company ran six weeks of avoidance measures first. It froze all 3 experienced-hire openings, ended overtime on 2 lines to cut the 52-hour week to 44 hours, and reassigned 11 people to the warehouse and quality team.
- The company ran a two-week voluntary retirement call, and nine employees with 15+ years of service applied. HR filed the official notices and results of every measure by date. The number of reductions needed dropped from 30 to 10.
- With no majority union, the company elected two employee representatives by a vote of all production and office staff, and gave notice 52 days before the planned dismissal date. It then held five rounds of consultation, with both sides signing the minutes.
- Targets were selected using a four-category scoring sheet covering attendance, disciplinary record, job replaceability, and more. After the labor attorney pointed out that "without extra points for dependents, the cuts would cluster in a particular age group," they added a livelihood-circumstances category to the scoring.
- The final dismissals were reduced to 7, with written notice given in every case. When volume recovered the following year, 4 people returned through priority rehiring, and the one unfair dismissal claim that was filed was rejected on the strength of the consultation records.