Ⅰ. 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.
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 the employee breaches 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 effect and duties of the parties

(1) Legal effect of a labor contract

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). The Court ruled that an employer attempting to restrict the basic rights of an employee guaranteed by compulsory provisions such as the right to claim severance payment by applying the principle of good faith goes against the constitutional value and nature of compulsory provisions of the Labor Standards Act.

(2) Duties of the parties in a labor contract

1) Primary duty
The employment contract is a legal agreement entered into for a worker to offer work and for an employer to pay wages for that work. Here, the main obligations of workers is to provide work, and employers to pay wages in return. Workers must faithfully provide the work specified in the employment contract at a fixed time and place. If the worker fails to do so for reasons attributable to the worker, the employer may claim compensation for damages or terminate the employment contract (Article 390 of the Civil Act). Even if the employer fails to receive the worker's work, the entire wage must be paid for work already performed (Article 538 of the Civil Act).

2) Secondary duty
In addition to the main obligations in these employment contracts, workers are obligated to be faithful and employers are obligated to protect, both on the “good faith” principle between contracting parties. Workers are obligated to protect the interests of the employer without engaging in acts that violate that employer’s interests. Employers also have a duty to protect the workers with whom working relations have been established.
Even if there are no such provisions in the employment contract, workers are obligated to be faithful in accordance with the principle of good faith in the Civil Act. Such integrity obligations include the duty to maintain trade secrets, to be faithful, to avoid engaging in concurrent business with the employer’s competitors, and to comply with regulations. Employers are also obligated to protect workers in accordance with the principle of good faith inherent in the employment contract. Typical examples are the duty to consider safety, the using employer's duty to dispatched workers, and the duty to prevent sexual harassment in the workplace.

Ⅱ. Terms of Contract

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 fixed-term employees and the right to anticipate automatic renewal of the employment contract 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 shall exceptionally apply. 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.