I. Introduction
The Labor Standards Act (LSA) applies to all workplaces in which five or more employees are ordinarily employed, while for workplaces which ordinarily employ fewer than five employees only some provisions of the LSA apply. In particular, those provisions that directly affect employee working conditions such as unfair dismissal, eligibility for severance pay (for the period before December 2012), additional allowances for overtime / night work / holiday work, annual leave and others do not apply.
For companies with headquarters located overseas, there has been confusion in determining the number of ordinarily-employed workers, as questions arise about whether to include the employees working at headquarters. Recent administrative interpretations and Labor Commission judgments in cases where unfair dismissal has been claimed show that the number of employees working at the foreign company headquarters will be considered unless the Korean office has independence in their operations. These decisions have greatly impacted the labor market. These decisions have greatly impacted the labor market, because up until recently, only the number of employees working for the foreign company’s sales office or liaison office were counted, based upon the principle of “territorial privilege for jurisdiction” that is applicable to the number of employees ordinarily hired in foreign company sales offices.
In this article, I would like to review how the new criteria have been applied in actual practice and present related documents.

II. Related Administrative Interpretation & Labor Commission Judgments
1. Related Administrative Interpretation
Article 11 of the LSA regulates that all provisions of the LSA shall apply to all workplaces in which five or more employees are ordinarily employed, and the number of regular employees shall follow the calculation method stipulated by Article 7-2 of the LSA’s Enforcement Decree.
The Administrative Interpretation is as follows.
(1) The LSA shall apply in cases where the entity whose head office is located overseas operates a branch office (sales office) that is regarded as the business or workplace, and shall follow the calculation method for the number of workers ordinarily employed according to Article 7-2 of the LSA’s Enforcement Decree. This means the number of employees at the head office shall be included. 2) On the other hand, in cases where a foreign company directly hires an employee in the company’s home country, and assigns him/her to a branch company and directly controls the personnel and labor management of the person, the LSA does not apply to the person in principle. However, despite this application, if the employee consistently provides labor service ordinarily in Korea, the employer cannot deprive the employee of the protections provided by Article 28 of the Act regarding the Conflict of Laws.
Accordingly, 1) in cases where a foreign company has registered their corporation in Korea, has received a business license and established a local branch, but the business has hired fewer than 5 employees and has no operational independence, all provisions of the LSA (e.g. application for remedy for unfair dismissal, severance pay) normally applying to employees of businesses and workplaces that ordinarily employ five or more workers shall also apply to all employees working for the foreign company’s local sales branch.
(2) In cases where the foreign company has established a liaison office designed to support simple communication or market surveys, and used the services of fewer than five employees with whom it had made employment contracts, the LSA shall apply to those employees working in the liaison office, and they are eligible to apply for remedy for unfair dismissal against the parent company.

2. Related Judgments by the Labor Commission
(1) Appeal by SS Global regarding decision of unfair dismissal
“All decisions regarding the employee’s employment and dismissal and related processes have been implemented not by SS Global’s Seoul office, but by SS Global’s head office. In reviewing the aforementioned processes, the Seoul office cannot be seen as an independent business or workplace. Accordingly, even though there are fewer than five employees working for the Seoul office on average, SS Global’s employees working in its overseas head office shall be included when determining whether this business or workplace has five employees or more. Therefore, the protection provisions of the Labor Standards Act against unfair dismissal apply to the employees of the Seoul office.” This decision makes it clear that even though a foreign-invested company’s sales office is composed of fewer than five employees, all provisions under the LSA shall apply if the sales office is not in fact an independently-operated entity. Therefore, because this employer did not satisfy the legal procedural requirements for managerial dismissal, the dismissal was not accepted as justifiable.
(2) Appeal by Rareetan Computer regarding decision of unfair dismissal
“Rareetan Computer Korea ordinarily employs fewer than five workers but cannot be deemed as an independent workplace because this Korean entity is only the foreign company’s domestic liaison office. Therefore, the LSA applies to the Korean office and determination of whether the company ordinarily employs five workers or more shall include the employees at the overseas head office.”

III. Application in a Related Case
1. Facts and Questions
State Government A in Australia hired a Korean resident (Person B) on July 11, 2011 and entered into a Service Agreement for the purpose of surveying Korean companies and cultivating a Korean market towards promotion of investment in the Australian state that State Government A represents. Person B has performed her duties under the supervision and direction of the regional office manager located in Japan (responsible for both Korea and Japan), with fixed working hours at a designated workplace and receiving a fixed salary of AUS$ 5,800 every month. During working hours, she was not allowed to engage in other work. On July 1, 2012, her contract was renewed for another year, but from July 1, 2013, she began working without a contract. Since a Korean branch manager was assigned to the Korean office, she reported her performance to that manager and worked under his supervision and direction. In addition, the employment contract she had worked under stated that settlement of any legal conflicts arising between employer and employee would be according to Australian law.
These days the Korean branch manager is pushing Person B to quit. Is Person B protected by the LSA from unfair dismissal? Is Person B entitled to severance pay?

2. Legal Review and Response
There are three points of dispute in the questions. First, when a service contract is entered into, is Person B considered an independent business owner or an employee? Second, is Person B entitled to apply for remedy for unfair dismissal and also to severance pay, since she was employed by a domestic workplace with fewer than five employees? Third, does the fact that both parties agreed that the law governing any legal disputes would be Australian law have any impact on whether labor disputes should be resolved according to Australian law or Korean law in actual fact?
(1) When a service contract is entered into, is Person B considered an independent business owner or an employee?
The LSA regulates the term, “employee” as “a person who offers work to a business or workplace to earn wages, regardless of the kind of job he/she is engaged in.” This means the employee is a person who offers work in a subordinate re