1. Signing a Labor Contract, Effective Period and its Effects

(1) Signing a labor contract
A labor contract can become effective by means of oral agreement, present practices, or precedents when an employee begins work, even if no contract has been drafted. A labor contract does not demand a specific type of form.³⁶⁾
When a contract of employment is concluded, the employer shall clearly state to the employee concerned the wage, given hours of work, holidays, paid annual leave, and other working conditions, and shall specify in writing the components of his/her wage, and the methods of calculation and payment(Article 17 of the LSA). Given that general working conditions are provided for in the rules of employment, etc., it is possible that a contract of employment may only contain specific conditions for the particular employee, such as his/her job description and location of work, along with the clause ‘other working conditions shall be the same as prescribed in the rules of employment.’ However, a contract of employment may not provide for any estimated amount of penalty or damages or any compulsory deposit in case of the employee's breach of the agreement.

(2) Effective period of a labor contract
The effective period of a labor contract is generally initiated as soon as the contract is signed, but the actual time considered in the calculation of severance pay or annual leave starts from the first day the employee provides his/her work.

(3) Labor contract's effect and duties of the parties
1) Labor contract's legal effect
A labor contract that fails to meet the standards of employment shall be null and void to that extent. The conditions invalidated shall be governed by the Labor Standards Act(Article 15 of the LSA).
2) Duties of the parties in a labor contract
① Primary duty
The employee is obliged to provide labor service for which the employer has the duty to pay wages.
② Secondary duty
The employee shall abide to such duties as faithfulness, devotion, sincerity, confidentiality, maintenance of the company's honor, etc. and the employer shall be responsible for the good management of employees' safety and health, equal treatment, etc.


2. Terms of Contract³⁷⁾

(1) Principle
The term of a labor contract shall not exceed two years, except in cases where no term is fixed or the term is fixed as a necessary measure for the completion of a certain project. When a fixed-term contract is made, the employment relationship under the contract shall be automatically terminated upon maturity of the fixed term. If an employee has been employed for a term exceeding 2 years, the employee shall be treated as if he/she had signed a contract of employment for an indefinite term. However, in cases where an employee is employed for longer than 2 years for the work required to complete a particular project or task, the employee may not be treated as working under a contract of employment for an indefinite term.
(2) Exception: Employment contracts for part time employees and the right to anticipate automatic renewal of the employment contract³⁸⁾
If an employee signs an employment contract for a fixed period, it is a principle that the employment is naturally terminated when the fixed period expires, and if not renewed, the employment contract is complete without the employer's expression of intent to reject renewal. However, in cases where there is a conditional provision in the employment contract, the rules of employment or the collective agreement that the current employment contract will be renewed if certain conditions are satisfied, despite expiration of the contract period, and those conditions are satisfied, this can exceptionally applied. In the event there is no such conditional provision, but in collectively considering various situations around the employment relations related to the employment contract and the intention and procedures, the criteria and requirements for renewing the contract, and employee duty types, in cases where the employee could reasonably anticipate having his/her employment contract renewed with the belief of both parties (employee and employer) that the employee would have the employment contract renewed if certain conditions were satisfied, and those conditions were satisfied, it can be accepted as unfair dismissal if his/her employment contract were not renewed.

3. Prohibition against predetermined nonobservance(Article 20 of the LSA)³⁹⁾

(1) Principle: In cases where an employee promises to pay a fixed amount of money in the event that he/she breaks an agreement to work for a certain period of time, if the employee has to pay this penalty immediately upon resigning ahead of the mandatory service period regardless of whether the company will suffer damages due to the early resignation, this is a clear violation of Article 20 of the Labor Standards Act. In addition, in cases where the employee has to return his/her wages that would have been paid to the employee simply because the employee resigns prior to the previously agreed end-of-service date, such provision of the employment contract violates the purpose of the above Article and will not be deemed valid.
(2) Exception: However, in cases where there is an agreement that the employer will subsidize the cost of a training course for the employee and the employee promises to reimburse the entire or partial costs if he/she resigns early, such an agreement can be considered justifiable. In this case, the employer not only subsidized the training for occupational necessity and benefits, but also completely paid (or partially paid considering the employee's individual desire to take the training) the expenses for the employee. If such a mandatory service period and reimbursement amount are determined to be within a reasonable and acceptable range, and the employee does not have to continue to work against the employee's will, such agreement will not violate Article 20 of the Labor Standards Act.


4. Labor Contract Sample

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