Ⅲ. Governing Law and Related Labor Cases

1. Details of governing law

The Conflict of Laws Act: Article 28 (Employment Contracts)
① For employment contracts, regardless of the governing law that both parties agreed, it is not possible to ignore the employee protections endowed by compulsory rules of the resident country related to the governing law stipulated by Paragraph 2.
② If neither party chose the governing law, the employment contract usually follows the law of the country where the employee provides labor service ordinarily. If the employee does not provide labor service in a particular country, the governing law shall be the law of the country where the business office exists that hired the employee.
③ With employment contracts, the employee can take legal action against the employer in a country where the employee provides labor service ordinarily or provides labor service ordinarily at the end of employment. If the employee does not or did not provide labor service ordinarily in a particular country, the employee can take legal action against the employer in the country where the business office that hired him is located.
④ For employment contracts, a judicial suit by the employer against an employee shall be filed only in the country where the employee’s habitual residence is, or where the employee provides labor service ordinarily.
⑤ Both parties in the employment contract can agree on international jurisdiction in writing. However, this agreement can only be effective in either of the following cases:
1. Where a dispute has already occurred, or
2. Where the employee is allowed to file in a court in a different jurisdiction in addition to the court stipulated in this Article.


2. Judicial ruling quoting governing law

“In the employment contract agreed between the employee and the company, it is regulated that interpretation and application will follow the laws of Cyprus, and that disputes related to employment will follow the jurisdiction of the Cyprus court. However, when the employee was informed of his dismissal on January 10, 2004, he was ordinarily working as an executive director in a Korean branch office employing more than five employees, located in Korea. In this case, despite the details of the employment contract, the Korean Labor Standards Act and other labor laws shall apply to the employee, and will be applied under the jurisdiction of the Korean legal system, according to Article 28 of the Conflict of Laws Act. As the employee was dismissed through termination of the employment contract, the National Labor Commission can determine whether dismissal is justified or not. Dismissal is unfair when the reason for dismissal cannot be admitted as justifiable.”

3. A case of unfair dismissal and governing law

An American(hereafter referred to as “the Employee”) was hired by a subsidiary of an American parent company(the subsidiary hereafter referred to as “Company A”) established to develop the Incheon-Songdo City project. After working as vice-president for four years, the Employee was suddenly dismissed on January 21, 2011 due to a lack of work. He was informed of the dismissal by the American parent company(hereafter referred to as “Company B”). In the dismissal notice, Company B requested that the Employee sign an agreement to resign, offering the Employee compensation in the form of four years’ severance pay(equivalent to the Employee’s number of service years), but the Employee refused. Instead, the Employee applied for remedy against Company A with the Seoul Labor Relations Commission on February 15, 2011 to get legal protection against what he considered unfair dismissal.
Company A claimed that the Employee belonged to Company B and was dispatched to Korea to do work for Company B. According to Company A, Korean labor law did not apply to the Employee because his salary was paid to his American bank account by Company B, and because the Employee was covered by the American national pension and medical insurance, and worked under Company B’s direction. Company A added that even though the Employee had the position of vice-president with Company A, Company B had personnel management rights for him, so the Employee could not apply for remedy against Company A.
In the end, just before the judgment hearing, Company B agreed to settle with the Employee for financial compensation of 180 million won on June 3, 2011, whereupon the Employee withdrew his application.
The Employee referred in this case to Article 28 of the Conflict of Laws Act, which states that, even though jurisdiction in a labor dispute related to the employment contract is stipulated as belonging to the court in a foreign country, Korean labor law and its compulsory rules apply to employees working in a Korean branch office of a foreign-registered company. The Employee’s contract signed with Company B stipulated that any disputes arising over employment conditions between the parties shall be the jurisdiction of the laws of the US state of Georgia. However, Article 28 of the Conflict of Laws Act clarifies contract-based employment relations. Even though Company B was authorized in actuality to dismiss the Employee, for as long as the Employee provided labor service in Korea, the Korean Labor Standards Act(and other labor laws related to protecting employment conditions) shall apply to the Employee, and jurisdiction shall be in Korea.