If you write an employment contract and receive instructions, you are considered an employee even as a registered director

Published 23 Dec.2024 13:54(KST)

[Court Ruling]

The court ruled that a registered director who signs an employment contract and is under the direction and supervision of the CEO qualifies as an employee.

The Administrative Court of Seoul, Administrative Division 3 (Presiding Judge Choi Su-jin) on October 11 issued a ruling in the case where Mr. A filed a lawsuit against the Central Labor Relations Commission seeking cancellation of the reconsideration decision on unfair dismissal relief (2023GuHap71858), partially annulling the relief order in the commission's reconsideration decision.

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[Facts]

Mr. A joined company B, a manufacturing firm, in March 2014 and was in charge of finance and accounting. He was appointed as an internal director in 2016, reappointed in 2019, and served as a registered director until September 30, 2022.

From August 2022, company B encouraged Mr. A to voluntarily resign and presented a voluntary resignation agreement including severance pay and consolation money, but Mr. A refused and requested renegotiation. On September 29, 2022, company B notified Mr. A of dismissal citing violations of work rules such as disobedience to employee recruitment instructions and verbal abuse toward the CEO.

In December 2022, Mr. A filed an unfair dismissal relief application with the Gyeonggi Provincial Labor Relations Commission. In February 2023, the commission recognized the unfair dismissal, stating “there is no evidence to acknowledge the disciplinary reasons,” and ordered reinstatement and payment of wages for the dismissal period.

Subsequently, company B requested reconsideration from the Central Labor Relations Commission, but the commission also judged the dismissal to be unfair and dismissed the reconsideration request. However, citing Mr. A’s “registered director term expiration date (September 30, 2022),” the relief order was modified to pay only the equivalent of 1 to 2 days’ wages from the dismissal date to the term expiration date instead of reinstatement.

[Court’s Judgment]

The court determined that the employment contract between Mr. A and company B continued regardless of the registered director term expiration date. The court stated, “Although Mr. A was registered as a director, he performed certain duties under the direction and supervision of the CEO and received remuneration, thus qualifying as an employee under the Labor Standards Act.” It further noted, “There is no basis to consider the expiration of the registered director term as termination of the employment contract,” and criticized, “It is unfair that the Central Labor Relations Commission changed the relief order judging reinstatement impossible.”