South Korea

    1.1 In what circumstances does the employee transfer law apply?

    Korea has no statutory employee transfer law. Instead, it relies on judicial precedent. Employee transfer law applies to the transfer of a ‘business’ by asset purchase. Acquisition of a legal entity by share purchase or by merger simply leaves all employment relationships with the acquired or surviving company unaltered. A ‘business’ for the purposes of the transfer rules is defined in case law as an ‘organised whole’ devoted to a specific business purpose, including assets and human resources.

    A corporate split-up (bunhal) is subject to similar employee transfer rules - which differ in that the employees’ right to refuse to transfer is much more limited - though use of this mechanism is less common.

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    Author: Yulchon Attorneys at Law

    Date: January 2017

    1.2 Does the employee transfer law apply to (a) a sale of a business or (b) outsourcing?

    (a) Sale of a business

    The law applies to the sale of a business. There needs to be an ‘organised whole’ devoted to a specific business purpose. This is not rigidly defined, but satisfaction of all of the following factors is likely to indicate a mere asset transfer:

    • the contract signed by the parties limits the assets/liabilities to transfer;
    • the contract specifies the transferee need not take the transferor’s employees;
    • the transferee accepts only some of the employees and the employees who move to the transferee resign and are rehired;
    • the transferee engages in restructuring the old HR organisational structure for transferred employees.
    • However, the courts have stated that they may disregard the transaction structure in light of the parties’ intent or to protect employees.

    (b) Outsourcing

    Outsourcing is the hiring of a third party to provide a service formerly performed in-house. It will generally not constitute a business transfer, and thus will not trigger the employee transfer rules. However, a decision to outsource a given activity is not a justification per se for redundancies.

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    Author: Yulchon Attorneys at Law

    Date: January 2017

    1.3 In outline, what are the implications of the employee transfer law?

    If employee transfer law applies:

    • employees assigned to the business have the option to transfer from the transferor to the transferee on their existing (pre-transfer) terms of employment, or to object to their transfer (within a reasonable time after becoming aware of the transfer, even after the transfer) and stay with the transferor;
    • the transferee becomes liable for all employment-related claims by transferred employees against the transferor (e.g. for wages, length of service or accumulated severance-benefits entitlement); and
    • a collective bargaining agreement may transfer.
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    Author: Yulchon Attorneys at Law

    Date: January 2017

    2.1 Who transfers?

    If the transfer constitutes a ‘business transfer’ the employees of the transferred business have a right to transfer (or decline to transfer) regardless of the parties’ wishes.

    Employees of the transferred business will include all employees who work solely within that business. In addition, employees who devote half or more of their time to the business may also be entitled to ask to transfer together with the business.

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    Author: Yulchon Attorneys at Law

    Date: January 2017

    2.2 Can employees object to transferring?

    Employees can decline to transfer within a reasonable time after becoming aware of the transfer, even after the transfer, unless they have already specifically agreed to be transferred. If they do not object within a reasonable time after becoming aware of the transfer, the employees will be deemed to have automatically transferred by operation of law, whether or not they have affirmatively agreed to this.

    Employees can decline to transfer for any reason, and if they do so they remain employees of the transferor and remain protected by Korea’s strict laws limiting redundancies.

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    Author: Yulchon Attorneys at Law

    Date: January 2017

    2.3 What happens to terms of employment contracts?

    Employees who transfer remain subject to the same terms and conditions as before the transfer. This includes rights under their employment contracts, and also other rights such as those under the transferor’s work rules and company policies, along with any collective bargaining rules. The transferee assumes all the obligations of the transferor in relation to the employees.

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    Author: Yulchon Attorneys at Law

    Date: January 2017

    2.4 What about other employee benefits?

    The transferee is required to maintain (i) contractual benefits; (ii) benefits set out in the transferor’s ‘work rules’, which include policies and well established practices with binding effect that supersede inferior terms in an employment contract; and (iii) benefits under a collective bargaining agreement. Employment with the transferor will count towards an employee’s length of service with the transferee, for example, for the purpose of severance benefits. It is not clear whether certain transferor-specific benefits, such as stock options, will or can be transferred. The transferor is generally expected to offer something equivalent if particular benefits cannot be transferred, though there is no case law to confirm this view.

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    Author: Yulchon Attorneys at Law

    Date: January 2017

    2.5 What happens to pension rights?

    Employers must maintain a severance pension plan (either defined benefit or contribution), or pay statutory severance pay based on length of service and ‘average wage’ to employees who have served at least one year.

    The majority view is that in a business transfer (i) the transferee assumes responsibility for transferred employees’ severance pay or pension rights, which therefore continue unchanged; and (ii) the transferor remains jointly and severally liable for accumulated rights before the transfer.

    The law is unclear, but if the employer pays out severance pay or pension benefits (as it normally would do upon termination of employment) as part of the transfer, this may be characterized as an unlawful interim severance payment.

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    Author: Yulchon Attorneys at Law

    Date: January 2017

    2.6 What liabilities transfer?

    In principle, the transferee is responsible for all employment-related liabilities with respect to its transferred employees. However, note that criminal liability is not included. Administrative sanctions may or may not transfer, depending on the circumstances.

    The prevailing view is that the transferor remains jointly and severally liable for some pre-transaction liabilities (e.g. severance), but there is no case law that confirms this.

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    Author: Yulchon Attorneys at Law

    Date: January 2017

    2.7 Do collective agreements transfer?

    The ‘work rules’ at the transferor follow the employees to the transferee. If the transferred employees are unionised and the transfer encompasses the entire business of the transferor, the transferee will be subject to any collective bargaining agreement negotiated between the union and the transferor. This applies for as long as the collective bargaining agreement remains valid.

    Otherwise, the collective bargaining agreement itself will not transfer, but any rights enjoyed by transferring employees under their collective bargaining agreement will transfer with them, essentially, as part of their terms and conditions of employment. This will remain the case until the terms of the collective bargaining agreement are changed and note that unilateral adverse changes to terms and conditions are normally unlawful.

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    Author: Yulchon Attorneys at Law

    Date: January 2017

    2.8 How does the transferee obtain information on transferring employees?

    No specific information about employees needs to be provided to the transferee, nor is there any particular process for acquiring information. The transferor and transferee should try to agree whether information should be provided, when this should happen and what information is needed by the transferee. Any provision of employee information should comply with Korea’s personal information protection law and any consent or other requirements should be satisfied by the transferor.

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    Author: Yulchon Attorneys at Law

    Date: January 2017

    3.1 Can employers make changes to employment contracts?

    The transferor and transferee cannot unilaterally make any detrimental change to employees’ terms of employment, whether contractual, or as part of the work rules or collective bargaining agreement of the transferor.

    Adverse changes to collective conditions (i.e. those contained in the work rules or collective bargaining agreement) must be approved by the employees collectively through the proper channels. This will result in the transferred employees working under a different set of terms than existing employees at the transferee, unless the necessary collective process is undergone to harmonise those terms.

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    Author: Yulchon Attorneys at Law

    Date: January 2017

    3.2 When can employers safely dismiss employees before or after a transfer?

    Employers can almost never safely dismiss employees. ‘Just cause’ is required, and for redundancies this means an ‘urgent business necessity’ as well as every effort to avoid dismissals, fair and reasonable selection criteria, and a 50-day notice and consultation period.

    Where employees either transfer or refuse to transfer, this does not amount to a ‘just cause.’ However, if certain employees refuse to transfer, but their responsibilities have disappeared and no appropriate roles remain, it may be easier to show ‘urgent business necessity.’

    Reinstatement with back pay is the ordinary remedy for unjust dismissal, and typically companies will offer compensation to voluntarily resign, rather than engage in layoffs.

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    Author: Yulchon Attorneys at Law

    Date: January 2017

    4.1 Who must employers consult?

    A business transfer does not legally require collective consultation, unless agreed otherwise in a collective bargaining agreement. Major business plans and changes should be reported to quarterly meetings of the Labour Management Council. This body must be established by employers with 30 or more employees, but there is no requirement for an advance report or consultation to the Council in relation to a business transfer as such.  However, as changing the work rules or collective bargaining agreement does require collective consultation and the employees have the right to refuse to transfer, consultation may be necessary in practice.

    A union is the natural avenue for consultation but if none exists, the employees themselves will be consulted. The Labour Management Council may serve as a good channel, or non-unionised employees may form an ad hoc representative body.

    Redundancies also require 50-days’ notice and consultation.

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    Author: Yulchon Attorneys at Law

    Date: January 2017

    4.2	What information must they provide?

    No information need be provided.

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    Author: Yulchon Attorneys at Law

    Date: January 2017

    4.3	What does consultation involve?

    There is no requirement to consult.

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    Author: Yulchon Attorneys at Law

    Date: January 2017

    4.4	How long does consultation last?

    There is no requirement to consult.

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    Author: Yulchon Attorneys at Law

    Date: January 2017

    4.5	What happens if an employer fails properly to inform or consult?

    Not applicable.

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    Author: Yulchon Attorneys at Law

    Date: January 2017

    5.1	Identify up to three issues in this country of which employers should be aware?

    First, a business transfer does not provide any particular right to dismiss employees. Transferred employees continue to enjoy strong job protection and even employees who refuse to transfer will have significant protection against dismissal. Any workforce reduction will likely require a compensatory exit package.

    Second, because employees have the right to object to their transfer for a reasonable time after becoming aware of the transfer (even after the business transfer), it is often advisable to obtain employees’ written agreement to the transfer in advance of it, especially in cases where part of the business is transferred and the number of affected employees is not high, and have them execute a new employment contract with the transferee. This provides greater certainty as to which employees are transferring.

    Third, there is a general social expectation that employees will be compensated monetarily for being transferred, and they may react negatively if their expectations are unmet.

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    Author: Yulchon Attorneys at Law

    Date: January 2017

    5.2	Would the employee transfer law apply on a cross-border transfer into or out of this country?

    Korean employment law protects all workers whose primary workplace is in Korea. Thus, to the extent Korean workers are involved in a business transfer, whether cross-border or not, they will be protected by these rules so far as the Korean legal system is concerned. This applies to cross-border transactions both into and out of Korea.

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    Author: Yulchon Attorneys at Law

    Date: January 2017

    6.1	What are the main national laws protecting employees upon transfers of businesses?

    There are no statutory rules. Transfer law comes from Korean case law.

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    Author: Yulchon Attorneys at Law

    Date: January 2017

     

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