Supreme Court: Dismissal Possible Under Civil Law for Workplaces with Fewer Than Five Regular Employees

The Supreme Court has ruled that workers at workplaces with fewer than five regular employees are not subject to the Labor Standards Act, and therefore can be dismissed according to employment regulations under the Civil Act.

The dismissed worker claimed that the employer reduced the number of regular employees by changing the apartment management method to avoid application of the Labor Standards Act, but this claim was not accepted.

Supreme Court, Seocho-dong, Seoul.

According to the legal community on the 4th, the Supreme Court's First Division (Presiding Justice No Tae-ak) upheld the lower court's ruling that found no issue with the dismissal in the final appeal trial filed by Mr. Lee against the residents' representative meeting of an apartment in Incheon.

Mr. Lee, who had worked as an accounting staff at the management office of an apartment in Gyeyang-gu, Incheon since May 2002, had his employment contract extended and continued working under the condition that "work continues unless there is a reason for dismissal."

The issue arose when the residents' representative meeting held in April 2017 resolved to change the apartment management method from the previous self-management system to a consignment management system.

After this decision to change the apartment management method, Mr. Lee filed several complaints with the local district office, and the residents' representative meeting held a disciplinary committee for him, imposing a 45-day unpaid suspension from April 28 to June 1, 2017, for reasons including failure to follow work instructions, negligence, and obstruction of work.

However, after Mr. Lee was reinstated through the Central Labor Relations Commission's remedial judgment, the residents' representative meeting held a meeting on June 8 of the same year and resolved to dismiss Mr. Lee on the grounds of "organizational reform and socially accepted impossibility of maintaining continuous employment relationship." On June 9, they notified Mr. Lee that he would be dismissed effective June 12.

Mr. Lee filed another unfair dismissal relief application, but both the local Labor Relations Commission and the Central Labor Relations Commission dismissed and rejected the claims respectively. The Central Labor Relations Commission judged that the residents' representative meeting was not subject to the Labor Standards Act because the number of regular employees was fewer than five.

After the change in apartment management method, the residents' representative meeting decided to outsource apartment security to an external security company. On May 13, 2017, the residents' representative meeting signed a security service contract with Company A. The three security guards who had been working at the apartment submitted resignation letters on May 10, 2017, stating they would resign effective May 12, and then signed new employment contracts with Company A on May 13, continuing to work as security guards.

Ultimately, since the number of regular employees including the manager, security guards, Mr. Lee, and accounting staff changed from five or more to fewer than five (three), the Central Labor Relations Commission judged that the Labor Standards Act did not apply.

Mr. Lee filed a lawsuit seeking confirmation that his dismissal was invalid. In court, Mr. Lee argued that the residents' representative meeting changed the apartment management method to avoid application of the Labor Standards Act and that there were procedural defects.

However, the first trial court did not accept Mr. Lee's claims. The court ruled that there was no problem with Mr. Lee's dismissal but ordered payment of approximately 1.56 million won in wages corresponding to the period from the dismissal date (June 12, 2017) to the effective date of dismissal under the Civil Act (July 19, 2017).

Under the Civil Act, if there is no separate agreement on the employment period, either party may notify termination of the contract at any time, and the termination takes effect one month after the notification is received.

The court acknowledged that "the fact that the majority of residents' consent was not obtained during the process of changing the apartment management method and that a fine was imposed due to procedural violations in the contractor selection process" was recognized, but judged that "these facts alone are insufficient to recognize that the security service contract itself is invalid or that the security guards' resignation declarations are invalid due to procedural defects claimed by the plaintiff."

Furthermore, the court concluded that "it is difficult to see that the defendant changed from self-management to consignment management solely for the purpose of easily dismissing the plaintiff."

Mr. Lee appealed, but the second trial court also found no problem with the first trial ruling, judging that the residents' representative meeting genuinely intended to change the apartment management method and signed the security service contract.

The Supreme Court's judgment was the same.

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