Supreme Court: "Disciplinary Transfer Invalid If No Opportunity to Explain Despite Valid Reason"

Supreme Court, Seocho-dong, Seoul.

[Asia Economy Reporter Choi Seok-jin, Legal Affairs Specialist] The Supreme Court has ruled that if a transfer order given to an employee for reasons such as insubordination to a superior can be considered a type of disciplinary action under the employment regulations, the employee must be given sufficient opportunity to present their defense.

The ruling states that if the essential procedures required in disciplinary processes are not followed, regardless of whether there is a disciplinary reason, the action itself is illegal and invalid.

The Supreme Court's Second Division (Presiding Justice Cho Jae-yeon) announced on the 21st that it upheld the lower court's ruling against Cesco Co., Ltd., an environmental hygiene service company specializing in disinfection, pest control, and extermination, which had filed a lawsuit seeking to overturn the Central Labor Commissioner's decision on unfair transfer relief.

The court dismissed Cesco's appeal and ordered Cesco to bear all litigation costs, including those of Kang, who participated in the trial as an auxiliary party for the defendant.

The court explained, "There is no error in the lower court's judgment, such as misinterpreting the legal principles regarding the types of disciplinary actions under the employment regulations or the concept of disciplinary measures, nor was there a failure to conduct necessary hearings. The judgment did not violate the rules of logic and experience or exceed the limits of free evaluation of evidence."

According to the court, in December 2016, Cesco expanded its regional headquarters from five to eight. Among 85 branch managers, three were promoted to newly established regional headquarters directors. During this process, A, the manager of the Daejeon West Branch, who had a poor relationship with Kang, was promoted to the newly created Chungcheong Regional Headquarters Director.

Kang, who was working as the manager of the Daejeon East Branch, openly expressed dissatisfaction at A's inauguration ceremony after A, two years younger and hired later than Kang, was promoted to be his superior.

According to testimonies from attendees at the inauguration, Kang refused to shake hands with A, who had extended his hand first, in front of others. When a document containing instructions had a typo, Kang remarked, "Do you proceed without properly checking even such details? It seems the attitude is not right."

He also spoke informally, saying, "Either I quit or the director quits. I'll submit my resignation."

There was also testimony that Kang made inappropriate remarks at the inauguration, such as "The director said he would help the branch, but if he is going to help properly, he should help with his underwear off, or else not help at all," which ruined the atmosphere.

Other employees testified that Kang expressed dissatisfaction with sales targets, saying, "The headquarters gives our branch many goals, making achievement difficult, so I give up on branch evaluations. Either I leave or the director leaves, that should be fine." When A criticized his work, Kang reportedly said, "Don't do it like that. The director should do it properly. Either I quit or the director leaves, you have to choose one."

Eventually, in March 2017, A reported Kang's behavior to B, the head of the Customer Service Headquarters, his superior. In October of the same year, A requested B to remove Kang from the Daejeon East Branch manager position, stating it was difficult to continue working together as Kang did not follow his instructions.

B decided to transfer Kang to the Sales Manager position at the Southern Metropolitan Regional Headquarters after conducting reputation checks with other regional directors, citing insubordination to the organization head and leadership issues in organizational management.

On November 1, 2017, B met with Kang at the head office and informed him that the personnel transfer would take effect on November 11 of the same year. Kang accepted the conflict with A but refused to acknowledge complaints from branch staff under his management about him and left the meeting.

After the company issued the personnel transfer, Kang took annual leave and then was approved for sick leave, not reporting to work while filing a relief application with the local Labor Commission.

Both the local and Central Labor Commissions ruled in Kang's favor. Ultimately, Cesco filed an administrative lawsuit challenging the Central Labor Commission's reconsideration decision.

However, the Seoul Administrative Court, which handled the first trial, and the Seoul High Court, which handled the second trial, concluded there was no problem with the Central Labor Commission's decision.

The personnel order given to Kang by the company was considered a disciplinary action under the employment regulations, classified as "transfer" or "other punishment." It was invalid because the company did not follow proper disciplinary procedures, such as guaranteeing the opportunity to present a defense when issuing the personnel order.

Although the company's 'Personnel Committee Operation Guidelines,' which specifically define types of disciplinary actions, do not list 'transfer' as a disciplinary type, the court judged that transfer should be regarded as a type of disciplinary action based on the interpretation of the higher-level company employment regulations.

Article 7.7, Paragraph 1 of Cesco's employment regulations (Restrictions on dismissal, etc., and disciplinary procedures) states, "The company shall not dismiss, suspend, transfer, reduce pay, reprimand, or impose other punishments on employees without just cause."

In court, Cesco argued that ▲ Kang's personnel transfer was a horizontal transfer, not a demotion, and there was no wage disadvantage except for the branch manager's position allowance; ▲ considering the long-distance transfer, the company rented a one-room apartment at its expense and provided it free of charge for two years; ▲ thus, any minor inconvenience Kang might experience was within the scope he should endure as a manager. They claimed the action was within the legitimate discretion of the personnel authority.

However, the court recognized that Kang's rude behavior toward his superior A justified the personnel transfer but ruled that since the company imposed a transfer that effectively amounted to disciplinary action without following disciplinary procedures such as providing sufficient opportunity for defense and submission of explanatory materials, the personnel order was an abuse of rights and illegal.

This content was produced with the assistance of AI translation services.