A: Article 23 of the Labor Standards Act stipulates that an employer shall not, without justifiable cause, dismiss or suspend a worker, reduce wages, or take other disciplinary action against a worker. It goes without saying that dismissal of a poor performer should also be based on a justifiable cause.
Yet, no consistent legal principle has been established in regard to what constitutes justifiable cause for termination of employment. It is understood that the courts have determined the justifiableness of a low performer’s dismissal in a relatively strict manner on a case-by-case basis because dismissal of an employee based on low performance can be abused as a means to kick those disfavored by an employer out of the company.
An analysis of court precedents shows that courts generally recognize dismissal of such employees to be justifiable when (i) their performance is evaluated on a reasonable evaluation system, (ii) they are identified as low performers based on reasonable and objective standards, and (iii) they fail to improve their performance even though they have been given an opportunity to improve their performance.
First, low performance should be confirmed through a fair and objective evaluation system. Although relative evaluation has certain benefits, it may not be viewed as reasonable because employees could receive ratings that do not correctly reflect their actual performances if those ratings are determined in comparison with other employees.
In fact, there is a case where a court held that disciplinary dismissal of an employee, who received the lowest rating four consecutive times in a relative evaluation system, was wrongful. Hence, it is advisable to adopt an absolute evaluation system to the extent possible, rather than the relative evaluation system. In addition, in evaluations of non-quantitative (i.e., qualitative) criteria such as behavior, it is desirable to use a descriptive and multifaceted review by multiple reviewers.
Candidates for dismissal should be not determined based merely on poor evaluations covering a short period. Rather, employees must consistently display poor performance for a substantial period of time.
There are two cases in which courts recognized the need to dismiss employees who received the lowest rating for three and four years in a row. But when it comes to just two years, courts have made contrasting decisions.
Hence, it should be noted that an employee’s poor performance does not automatically justify such a low performing employee’s dismissal, even over a considerable period of two to three years, because courts base their decisions on a case-by-case basis in light of various circumstances including a company’s conditions, the relevant employee’s position, the nature of the responsibilities and reasons for poor performance, among others.
Finally, courts have considered whether poor performers were given opportunities to improve their performance before facing dismissal. Such opportunities for improvement may include provision of coaching, mentoring, training geared toward improving performance, performance improvement programs, change in positions, etc., and such options should be designed and operated to genuinely improve low performing employees’ performance. In case of education and training, employers should give low performers sufficient time to improve their performance.
If poor performers, who are identified through evaluation, fail to improve their performance despite being provided with the proper opportunity, their dismissal may be recognized as having justifiable cause.
By Kim Young-min
Attorney and partner of law firm Yoon & Yang LLC
Ask a Lawyer is a regular column written by attorneys at Yoon & Yang LLC on various legal aspects of the Korean life or business. The content provided here is general legal information, not legal advice on a specific situation. -- Ed.