I. Summary

The applicant (hereinafter referred to as “the Employee”) had been working for a Japanese company selling Taekwondo uniforms (hereinafter referred to as “the Company”) and was dismissed on August 20, 2010, for poor work performance and negligence. The Employee, claiming that he had always worked hard and dismissal was unfair since he had never made any mistakes, applied to the Seoul District Labor Relations Commission (hereinafter referred as “the Labor Commission”) for remedy. The Company claimed that it had given several verbal warnings to the Employee for negligence, but there had been no improvement, and that, particularly, the Company was not subject to application for remedy for unfair dismissal according to the Labor Standards Act (LSA) because it had only 3 employees. The Employee claimed that there were 6 employees while he was working, including a Japanese director, but the Company claimed that two were a marketing director and general affairs director who were not employees because they worked on a commission-only basis according to their contracts. These issues meant the key point of this dispute was that the Labor Commission needed to estimate whether application for remedy for unfair dismissal could be made, before determining whether the dismissal was fair or not.

II. Employee Claims

The Employee was hired November 9, 2009 and had been engaged in marketing and sales support. He had never refused company orders, but worked hard regardless of time and place. He took business trips that included weekly holidays (Sundays), worked overtime and even during holidays, but never received extra payment for this. He also did not take any vacations. The Employee was dismissed unfairly by the Japanese managing director in August 2010, for poor work performance and disobedience. However, these reasons for dismissal - poor work performance and disobedience – were not true. The Company just blamed its lowest-ranking employee for poor business. If the Company planned to dismiss the Employee for the reasons they claimed, the Company should have given sufficient opportunity for the Employee to improve, but no chance was ever given.
There were 6 employees at the time of his dismissal: a marketing director, a general affairs director, the Employee, an assistant manager, and a newer employee. As a company with 5 or more employees, the LSA was applicable.

3. Company Claims

The Company was established in May 2009 and hired the Employee to supplement marketing, but due to his inexperience in this field (he had been a cook previously), the Company had him work in sales support. This start-up company needed positive and aggressive sales activity from the Employee, but instead, the Employee read newspapers from 9 am (the time he arrived at the office) to 10:30, and then usually went out to take care of his personal banking for the rest of the morning. In the afternoon he would call his friends, and generally show a clear lack of enthusiasm for his sales responsibilities. He would not fill out daily sales reports, would not use honorific words when addressing the Japanese managing director simply because they were the same age, and did not like to obey his superiors, so the Employee was dismissed.
The Company only employed three persons including the Employee, so, according to the LSA, application for remedy for unfair dismissal could not be made. The marketing director and the general affairs director were not employees (there was no employment contract with the Company), but rather business partners who worked on commission. They received commissions of four million won per month each and had agreed in their contracts to receive 10% of company stock when stock volume increased. Recently, the Company had not been able to pay commissions to these directors due to deterioration in sales. The directors had submitted a petition to the Labor Office to receive unpaid wages, but they were denied by the Labor Inspector after he concluded they were not employees according to the LSA. At the time of this application for remedy, the two directors had begun filing a civil suit against the Company to receive their commissions.

IV. Related Laws, Judicial Rulings and Guidelines

1. Reasons for rejection given in the judgment hearing: Reference – Regulations of the Labor Commission (Article 60):
(1) eligible period for redress according to the related laws has passed;
(2) the applicant has not submitted any required documentation despite being asked two or more times;
(3) the parties are determined to be ineligible;
(4) the specific details of the applicant’s situation are determined to not be subject to orders for remedy by the Labor Commission;
(5) the identified applicant submits repeated applications for remedy for the same situation, resubmits an application for remedy for a situation already finalized in a judgment hearing, or submits an application again after the related case has been closed after judgment;
(6) the stated remedy in the application cannot be realized by law or in reality, or there is no benefit to the applicant; or
(7) the applicant twice fails to attend the hearing, the mailed notice to attend is returned two times or more due to the address being unknown or the applicant simply did not see it, or the applicant admits he/she has given up on the case for other reasons.

2. Criteria for determining employee characteristics
(Supreme Court ruling on Sep 11, 2008, 2008 da 27035)
Whether a person is considered an employee under the LSA shall be decided by whether that person offers work to the employer as a subordinate of the employer in a business or workplace to earn wages in actual practice, regardless of whether the type of contract is an employment contract or service agreement under Civil Law. Whether a subordinate relationship with the employer exists or not shall be determined by collectively considering: 1) whether the Rules of Employment or service regulations apply to a person whose duties are decided by the employer, and whether the person has been supervised or directed during his/her work performance specifically and individually by the employer; 2) whether his/her working hours and workplaces were designated and restricted by the employer; 3) whether his/her position can be substituted by a third party hired by the person; 4) who owns the equipment, raw material or working tools; 5) whether payment is remuneration for work and whether basic wage or fixed wage is determined in advance; 6) whether work provision is continuous and exclusive to the employer; 7) whether the person is registered as an employee by the Social Security Insurance Acts and other laws, and the economic and social conditions of both sides.

3. Criteria for determining ordinary number of employees (Kungi 01254-150, Feb 1, 1993)
(1) The LSA applies to all businesses or workplaces in which five or more employees are ordinarily employed. “Ordinarily employed” means that, in objective estimation based upon socially accepted ideas, if the company hires five persons or more regularly on average, it is regarded that the company hires five persons or more, even though the number of employees is less than five at times. When evaluating violations of the LSA per separate working condition, the applicable period related to each case shall be considered. That is, as for the dismissal case, the “number of employees” shall be considered the ordinary number of employees working for the month prior to the dismissal date.
(2) The Civil Code (Article 49) stipulates that the director shall register his/her name and address in the corporate registration certificate, and the Commercial Law (Article 382-(2)) regulates that relations between the company and