The Supreme Court has ruled that it is unfair for a Korean corporation, integrated and operated with the domestic office of an overseas corporation, to dismiss employees due to business closure or other reasons. It held that if a Korean corporation with fewer than five employees is effectively operated as a single workplace with a foreign corporation, the requirement of having five or more regular employees for the application of the Labor Standards Act is considered fulfilled.
The Supreme Court’s Special Division 1 (Presiding Justice Seo Kyunghwan) dismissed the appeal and upheld the lower court’s ruling against Company A in the unfair dismissal relief retrial cancellation lawsuit filed against the Central Labor Relations Commission on the 25th of last month (2023Du57876).
Company A, a domestic travel agency, was acquired by Company B located in Dubai in 2015, and Company B was subsequently acquired by Company C based in Australia. Both Company A and Company B’s Korean sales office came under Company C, and from March 2019, they shared an office in Seoul. Both companies operated businesses securing overseas hotels and selling to travel agencies, with Company A mainly handling Asia and Company B’s Korean sales office mainly handling Europe and other regions.
Mr. Choi, who joined Company A in 2016 and was responsible for accounting tasks, received a dismissal notice in October 2020 stating that “due to the downturn in the travel industry caused by COVID-19 and business closure, the finance team’s work is no longer needed.” Mr. Choi filed a relief application with the Seoul Regional Labor Relations Commission, but it was dismissed on the grounds that “the number of regular employees at Company A was three during the one month prior to the retirement date,” so he requested a retrial with the Central Labor Relations Commission.
The Central Labor Relations Commission recognized Company A as a workplace with five or more employees subject to the Labor Standards Act, stating that “Company A is effectively integrated with Company B’s Korean sales office in terms of personnel and accounting, operating as a single workplace,” and granted the relief application. Company A filed a cancellation lawsuit against the Central Labor Relations Commission in objection.
The court ruled in favor of the Central Labor Relations Commission. The first trial court judged that “Company A and Company B’s Korean sales office performed the same business in the same office,” and “the branch of Company B’s Korean sales office took integrated responsibility, and personnel and accounting tasks were unified, effectively operating as a single workplace.”
The second trial court also found that “personnel tasks such as sick leave and promotions at Company A were also involved by Company B’s employees, strongly recognizing the integration of management,” and “considering that some employees of Company A moved to Company B, the dismissal of Mr. Choi cannot be seen as a dismissal due to ‘urgent business necessity’ and thus violates the Labor Standards Act.”
The Supreme Court stated, “Company A and Company B’s Korean sales office performed the same type of business in the same office in the same manner, received instructions from Company B, and had active personnel exchanges,” and “Company A’s business closure is merely a simple organizational integration, not an actual closure.”
It added, “At the time of dismissal, Company A had three regular employees, and Company B’s Korean sales office had six regular employees,” and “Company A only claimed the need to close the business due to the spread of COVID-19 but did not prove the dismissal requirements or make efforts to avoid dismissal.”
A Supreme Court official explained, “In international labor relations where foreign corporations conduct business activities and employ workers domestically, the principle is to determine whether the workplace subject to the Labor Standards Act is applicable based on the ‘number of employees employed domestically’ (2023Du46074),” and “although Company A closed its business, Company B’s Korean sales office, sharing the same business address, continued operations, so it is not a closure of the entire business but a partial closure or reduction, and the ruling to uphold the labor commission’s relief order was maintained.”
Reporter Lee Sungkyu, Legal Newspaper
※This article is based on content supplied by Law Times.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
