Renewal Expectation Right · Justifying Non-Renewal of Fixed-Term Contracts
Legitimate Expectation of Contract Renewal
What is the right to expect renewal?
- With an expectation right, an expiry notice becomes a dismissal
- Separate from the two-year limit
- Advance notice of criteria · mid-term records · written notice
Once a right to expect renewal is recognized, 'contract expiry' is no longer an automatic ground for ending employment. The company must give a reasonable reason for not renewing. If it cannot, the expiry notice may be judged an unfair dismissal, and the company can be ordered to reinstate the employee and pay back wages. This is separate from the two-year limit under Korea's fixed-term employment act. Even if the two-year limit hasn't been reached, refusing renewal requires justification when an expectation exists.
The grounds for recognizing an expectation come down to a few points: whether the employment contract or rules of employment set renewal criteria and procedures; whether contracts have actually been renewed repeatedly under those criteria; whether most other contract workers in the same role were renewed; whether the work is ongoing rather than temporary; and whether a supervisor said something like 'let's keep working together next year.' If a company has renewal evaluation rules but runs them as a formality and has renewed nearly everyone, the expectation becomes stronger. Conversely, project completion, discontinued budget-funded programs, and low ratings based on objective criteria can be reasonable grounds for refusal. Courts and the Labor Relations Commission decide case by case, so even when similar precedents exist, the outcome can't be assumed.
Year-end is when contract-worker renewal decisions all come due at once. For training and HR managers, how department heads evaluate renewals and communicate the outcome becomes a training topic. Sharing the evaluation criteria at the start of the contract, keeping records of mid-term check-ins, and giving written notice with reasons when declining renewal reduce disputes. The written-notice requirement for dismissal doesn't apply as is, but when a dispute arises, the side without a paper trail has more to explain.
Where practice goes wrong is the attitude of 'the contract term is over, so there is nothing to discuss.' Telling someone who has been renewed for three years, verbally, in the last week of December that 'there is no next year' is a textbook expectation-right dispute. Ending contracts in bulk just before the two-year mark to avoid conversion to permanent status can also fail the reasonableness test if 'avoiding conversion' is the only reason for termination. Building a renewal evaluation form and never giving a low score, then suddenly scoring someone low only in that one year, is another common pattern that casts doubt on the objectivity of the evaluation.
Inwoo LeeLeadership, communication, and performance management expert
Jongmu KimCorporate talent development and job skills expertThe right to expect renewal is not a statutory provision but a doctrine developed through Supreme Court precedent. Rulings accumulated holding that refusing to renew without reasonable grounds is invalid when a fixed-term contract is a mere formality or a legitimate expectation of renewal exists. These rulings became the benchmark in Labor Relations Commission practice.
Consider a hypothetical case. Company A, an education services firm with 410 employees, has 38 contract workers on one-year terms in its customer center, most of them renewed for a second or third year. Last December the center head verbally told 4 of them their contracts would end, citing low service quality. Two filed petitions with the Labor Relations Commission, and this October HR had to redesign the entire renewal process.
- When the HR head reviewed the past three years of renewal records, evaluation forms existed but the renewal rate was 97%. The 4 whose contracts ended had received a low score for the first time that year. The labor attorney called it 'a case where an expectation right would be strongly recognized.'
- The Labor Relations Commission found no reasonable grounds for non-renewal in the 2 cases and ordered reinstatement and back pay. When the CEO asked, 'We did run evaluations, so why do we lose?', the answer was that there were no mid-term records.
- The HR team built a new process: give the renewal evaluation criteria in writing when the contract is signed, record a mid-year review in June, and send written notice stating the reasons for any non-renewal by November 15.
- The training team ran a two-hour session for nine center heads and team leads. It covered how a remark like 'let's keep working together next year' can create an expectation of renewal, and how to document the basis for evaluations.
- This year's renewal review ended with 2 non-renewals out of 38. In both cases the mid-term check-in records and written notice were in place, so they closed without any appeal. There were 0 petitions to the Labor Relations Commission.