International Employees and the Labor Standards Act

The Korean Supreme Court has recently ruled that, in the context of international labor relations, the calculation of the "number of regularly employed workers" should be based on the number of workers employed in Korea (Supreme Court Decision 2023Du46074 Decided on October 25, 2024).

In this case, Company B employed more than five workers internationally, however only one employee, was employed and worked in Korea. The central issue was the calculation method used in determining the correct number of regularly employed workers. The number of regularly employed workers has significant implications regarding the applicability of the Korean Labor Standard Act (LSA). 

The lower court had determined that in this case "even if only one person, A, is employed by Company B under an employment contract and works in Korea, Company B should still be regarded as employing five or more workers regularly." The court further held that "as long as the governing law of the relevant employment relationship is recognized as the LSA of Korea, there is no reason to interpret Article 11 of the Labor Standards Act differently for domestic companies and foreign companies unless there are special circumstances." Accordingly, the lower court concluded that Company B was subject to LSA provisions applicable to workplaces with five or more employees, including restrictions on termination. 

However, the Supreme Court overturned this decision. In so doing it ruled that the calculation of the "number of regularly employed workers" must be based on the number of workers employed in Korea. The Supreme Court found that since Company B employed only one worker, in Korea on a regular basis, it could not be considered a workplace with five or more employees. The case was remanded for further proceedings consistent with this finding. 

The Supreme Court explained: "A single business or workplace may be recognized only where it constitutes a ‘substantively unified economic and social unit where the various regulations governing the employment relationship can be applied uniformly’. Accordingly, the term 'business or workplace employing five or more regularly employed workers' under Article 11 of the Labor Standards Act refers to businesses or workplaces located in Korea." 

The Court further held that "the number of workers employed abroad, where the Korean Labor Standards Act does not apply, cannot be included in determining whether a business or workplace constitutes employing five or more regularly employed workers.