I. Introduction

Of the total labor cases brought to the Labor Relations Commission (hereinafter referred to as “the Labor Commission”), the percentage of cases resolved through compromise has gradually increased: 25% in 2010, 32% in 2011, 34% in 2012 and 34 % in 2013. This reflects the Labor Commission’s view that compromise is one of the most important methods to resolving labor disputes, a view it has held since the provision ‘Compromise’ was introduced into the Labor Commission Act in April 2007. Labor Commission judgments result in one party winning all the benefits, while the other loses all, which may result in an appeal that extends the labor dispute beyond what was expected.
Compromise plays a role in preventing resolution of labor cases from such delays, and aims for amicable conclusion between the company and employee concerned. Despite this important role, the compromise system is regarded as a method of “anything goes” to solve disputes in actual practice. Accordingly, it is necessary to understand the use of compromise through actual labor cases resolved reasonably in such a way, and seek how to make more frequent use of it.

II. The Legal Status of Compromise and its Use

1. The legal status of compromise
The Civil Law stipulates (in Articles 731 and 732) that a compromise shall become effective when the parties have agreed to terminate a dispute between them by mutual concessions. A contract of a compromise shall have the effect that the rights conceded by one of the parties are thereby extinguished and the other party will, in turn, acquire the pertinent rights by virtue of the compromise. Judicial rulings have agreed that when reaching a compromise, the previous agreement is extinguished by virtue of the newly established effects of the compromise, and the compromise becomes legally binding regardless of any contradicting content in the previous agreement.
According to Article 16-3 of the Labor Commission Act, a Labor Commission may recommend conciliation or present a proposal for such at the request of the parties concerned or by virtue of its authority before a judgment, order or decision is rendered pursuant to Article 84 of the Labor Union & Labor Relations Adjustment Act or Article 28 of the Labor Standards Act. The conciliation statement shall have the same effect as a compromise imposed by the courts in accordance with the Civil Procedure Act.

2. Use of compromise
(1) Designing the compromise
The compromise process in an unfair dismissal case brought to the Labor Commission begins with the necessary time to consider the compromise, when a judge in the judgment hearing has suggested a compromise and one of the parties has accepted it. In general, the party requesting a compromise in the course of an unfair dismissal case is regarded as having a weaker claim, and so a compromise is seldom requested before the judgment hearing starts.
If the employer feels likely to lose the case, a compromise is quite acceptable. This is the case also if the employer feels he has the potential to win the case, if the cost of settlement is much lower, as the compromise will prevent the employee from appealing. From the employee’s viewpoint, a compromise is desirable if he/she does not wish to continue working for the employer, has gotten a new job, or feels he/she cannot win the case.
(2) Settlement money
Settlement money is normally calculated based upon the employee’s wage. In cases where the employee has a favorable position in the dismissal case, he/she requests monetary compensation up to one year’s wages, considering the wages that should have been received during the dismissed period and the ability to earn more upon reinstatement at the workplace. However, if the employee has an unfavorable position in the dismissal case, he/she usually accepts a compromise with the settlement money covering only the period of dismissal. Accordingly, after the Labor Commission has investigated the facts related to the justification of dismissal in the judgment hearing, it will suggest a compromise including a cash settlement.
Should a considerable gap exist between what each party feels is acceptable, the Labor Commission will endeavor to narrow the gap through mediation to encourage settlement. Nevertheless, if there is no compromise reached, the Labor Commission tends to avoid a quick judgment and instead opts to give both parties time to consider ways to reach a compromise.

(3) Compromise form
In actual practice, compromises require filling out a ‘Settlement Agreement’ form similar to the one below.

Seoul Labor Relations Commission – Letter of Compromise

Case number: Seoul2014buhae2689 000 Korea, Application for Remedy for Unfair Dismissal
Employee: 000
Company: 000 Korea
Conditions for Settlement
1. The employee and the company in this case agree that employment is terminated as of September 15, 2014.
2. By Wednesday, November 26, 2014, the company will transfer 00.0 million won (in actual payment) to the employee’s bank account as settlement money that includes severance pay.
3. When the above conditions are fulfilled, both parties in this case will not take further civil, criminal or other administrative actions regarding the termination of this employment.
We, the undersigned, agree on the above conditions regarding this labor case of application for remedy for unfair dismissal, and hereby confirm that this conciliation statement shall have the same effect as a compromise imposed by the courts in accordance with the Civil Procedure Act in accordance with Article 16-3 (5) of the Labor Relations Commission Act.
November 19, 2014.
Employee’s labor attorney: O O O (Signature)
Employer’s labor attorney: O O O (Signature)
Seoul Labor Relations Commission – Commissioner, 0000 (Signature)

3. Difference between a compromise and monetary compensation
Monetary compensation is a system where the company shall provide the employee with monetary compensation if the employee does not desire reinstatement upon such a verdict in an unfair dismissal case (Article 30 of the Labor Standards Act). Any requirement for monetary compensation shall begin when an employee receives notification of the judgment hearing date, with the calculation period for compensation calculated from dismissal date to judgment date (Articles 64 and 65 of the Labor Relations Regulation). Accordingly, monetary compensation can be claimed for wages missed during the period after dismissal, and as this amount cannot include compensation for emotional damage, the compensation is relatively low and limited. On the other hand, since a compromise is not related to the level of monetary compensation, the greater the possibility for unfair dismissal to be determined, the higher the compensation request will be, while the lower the possibility for unfair dismissal to be determined, the lower the compensation request will be: for example, one month’s wage, equivalent to the one month compensation requirement for a failure to give advance notice of dismissal.

III. Labor Cases Resolved through Compromise

1. A case brought against “Company A”
“Company A”, a Taiwanese semiconductor company with five Korean employees at its Korean branch is selling semiconductor components to Korean electronics companies. For the past few years, this company has been in deficit, and determined that the branch manager’s poor sales skills were to blame. The company dismissed the branch manager without notice, and paid him the required one month compensation in August 2014. The branch manager then applied to the Labor Commission for remedy for unfair dismissal.
The Labor Commission held a judgme