International Law

Temporary Employees, Contract Employees: Two Years Only

Anyone doing business in Korea quickly becomes familiar—sometimes through painful experience—with the extreme legal protection of employees’ “right” to continued employment. Requiring “just cause” to terminate an employee under the Labor Standards Act (LSA), Korea has created a system of employment for life.

Differing (informal) standards of official enforcement against small-and-medium enterprises (SMEs) and large corporations means that there are two classes of employees in Korea: Those who have nearly no protections or recourse to law, and those who have a grip on an iron rice bowl. Multinational and foreign-invested companies are generally imagined to be flush with cash—which means you, Mr. Foreigner, are only permitted to offer the iron rice bowl.

Under the 1998 Dispatched Workers Protection Act (DWPA)—and its companion statute adopted in 2006, the Fixed-Term and Part-Time Workers Protection Act (FT-PTWPA)— there are some alternative working arrangements possible.

Today my associate Sun-Hee Kim brought me a case report from the Supreme Court of Korea establishing a useful precedent in respect of these workers: Namely, that in all cases, a non-regular employee’s status shall be converted by operation of law to regular (i.e., permanent) employment whenever an employer shall have used that employee for a continuous period of two years or more.

Most of us in the private practice of law already knew this, but a lot of HR directors and company managers have thought they could get fancy and evade the laws. However, this precedent, as a unanimous decision of the Supreme Court, makes things rather unambiguous.

In the case at hand, a company sourced dispatched workers from a worker-dispatch agency, and used those workers for a period longer than two years (over five years, to be precise). But the activities for which the workers were used were not included in the 26 types of occupations enumerated on the “positive list” established under the DWPA.

When those workers tried to claim regular-employee status, the company claimed that since the worker-dispatch was unlawful, the DWPA—and its rule limiting the non-regular status of dispatched workers to two years—should not be applicable.

Needless to say, they lost.

With this precedent in hand, we can state unambiguously: Non-regular employment in Korea is always limited to two (2) years. After two years, if the employer continues to use the services of the non-regular employee, the relationship converts to regular employment by operation of law. And this means that all the consequences of that status—in particular, employment for life—shall come into play.

Full post as published by Korea Law Blog on November 10, 2008 (boomark / email).