I. Introduction

In every company there are employees who perform very well, and those who perform poorly. Companies pay incentives to good workers, while they apply disciplinary measures to poor employees to ensure better performance in the future. In some instances companies may dismiss poorly-performing employees, and in such cases, the labor laws have strict standards designed to protect employees. Generally, disciplinary dismissal requires justifications in 1) reason for dismissal, 2) the severity of disciplinary actions, and 3) disciplinary procedures in order to be justifiable dismissal. Justification for dismissing under-performing employees should be determined by considering not only the criteria required for normal disciplinary dismissal, but also occupational characteristics related to poor sales performance by the particular employee. In order to dismiss employees with poor sales records, a company needs to maintain a detailed checklist to verify that it has provided sufficient opportunities for improvement to these employees and that the poor sales have been ongoing for a long period of time (refer to Table 1).
I would like to look at a sample checklist of what would be necessary for justifiable dismissal of low performers, and then, based upon the criteria described in the checklist, I will review a case of dismissal due to poor sales performance in which I was recently involved as a labor attorney.

Checklist: Meeting Requirements for Justifiable Dismissal of Poor Performers

1. Are the criteria for determining poor performers objective and reasonable?
1) Objective criteria should be applied.
2) Poor performance should be sustained for a reasonable time.
3) Sales are not expected to show much improvement.

2. Is the evaluation of poor performers objective and impartial?
1) Objective and impartial evaluation must be used.
2) Multiple evaluators should be used to assess the sales performance.
3) Absolute evaluation is preferable to relative evaluation.

3. Does the company endeavor to motivate poor performers to improve?
1) Sufficient advance warning must be given to the low performer.
2) A Performance Improvement Program (PIP) should be in operation.
3) Continuous improvement coaching and mentoring shall be provided.
4) Occupational support for poor performers shall be available.

4. Are there any guidelines regarding the dismissal of poor performers in the collective bargaining or rules of employment?

1) Rules for handling poor performers should exist.
2) Sufficient explanation regarding the dismissal of poor performers should be provided.
3) Systematic procedures such as evaluation of sales performance, notification of evaluation results, and work expectations should be implemented.
5. Is the poor performance serious enough to deserve termination of employment according to social norms? 1) The poor performance must be serious enough to be accepted as such according to social norms.
2) The company must consider many factors, such as the company’s business situation, the employee’s working conditions, and past practices of disciplinary action.

II. A Case of Dismissal due to Poor Sales Performance

1. Summary
A company based in Germany (hereinafter referred to as “the Company”), which employs 30 local people in its Korean office, provides a standard authentication service for industrial machinery, electronics, automobiles, etc. The Company was introduced to a manager (hereinafter referred to as “the Employee”) of a competitor company through a recruiting agency, and this Employee submitted a written target sales plan in which he promised a yearly sales increase of 5 billion won, beginning with an increase of 2 billion won in sales in the first year. The Company, trusting the Employee’s submitted proposal, hired him as an executive director with an annual salary of 100 million won. The Company expected him to play a vital role in increasing sales, and assigned him to the head position of a new project, but his sales results were remarkably low, at only 2 percent of target for the first 6-month period. As a result, the Company abolished the new project team, and re-assigned him to the Sales team. Even as part of the Sales team his sales were very low, as a result of which the Company dismissed him. The Employee then applied for remedy to the Labor Relations Commission, claiming that he was dismissed unfairly.

2. Claims of Each Party
(1) Employee’s Claim
The Employee joined the Company on January 11, 2013, where he worked as a managing director in charge of the new project team. The Employee was transferred to the Sales team on July 2, 2013, and was then dismissed unfairly on December 2, 2013.

1) The Company exercised its managerial (personnel) right in a one-sided manner without stipulated rules for disciplinary action or procedures in the rules of employment.
2) When notifying him of his dismissal, the Company did not define any specific reason for dismissal, and so violated Article 27 of the Labor Standards Act.
3) While dismissing the Employee due to his low sales results, there were no evaluation criteria, and the Company even ignored some sales achievements. As a result, this dismissal is an abuse of managerial rights. In addition, the Employee, along with other employees, had submitted a letter detailing the Company president’s unethical behaviors to the German headquarters, which was the real reason for the dismissal. Therefore, this dismissal is unfair.

(2) Employer’s Claim
The Company decided to pay this Employee an annual salary of 100 million won and assigned him to the new project team after trusting in his target sales plan, which described how the Employee would increase sales by 200 million won by the first quarter of 2013, and then increase sales by 2 billion won by December 2013. However, in reality, his sales only reached 36 million won (2 percent of the target) by June 30, 2013. After the abolition of the new project team, he was assigned to the Sales team in order to provide him with another opportunity. The Employee then proposed a new target, which was to bring in 400 million won by December 2013, but his actual sales were 3.6 million won in August 2013 and 700,000 won in September 2013. As his sales performance was significantly lower than what he promised in his target sales plan, the Company was justified in dismissing the Employee. The dismissal procedure was justified when the Company provided written notification of dismissal, stipulating the effective date of and reason for dismissal.

3. Actual Events
(1) The Employee submitted a business plan in which he stated that, based on his 17 years of experience with a competitor company, if the Company hired him, he would increase sales by 5 billion won every year through organization of the project team, to which plan he attached verification of his performance in his previous company. Trusting this target sales plan, the Company hired him in the position of managing director in charge of the new project team.
(2) At the ‘Kick-off meeting’ on January 18, 2013, the Employee announced his target sales plan in which he would hire 7 engineers by February 2013 and increase sales by 200 million won in the first quarter, increasing to sales of 2 billion won by December 2013.
(3) The Employee’s new project team obtained only 2 percent (36 million won) of the targeted amount by the end of June 2013.
(4) In combination with 8 other employees, the Employee submitted a Letter of Request to the German headquarters, detailing the Korean branch’s negative working environment and irregularities within the Company.
(5) The new project team which the Employee was in charge of was abolished, after w