Unpaid Severance Pay to Foreign Teachers Jung, Bongsoo, “Unpaid Severance Pay for Foreign Teachers” , 「Labor Law」, Jungang, Feb 2009


1. Summary

International School A (hereafter refer to as ‘the School’) established in 1999 in accordance with the Elementary, Middle and High School Act has regular curricula for kindergarten, elementary and middle school. Every year, the school renews employment contracts with foreign teachers for 10 months which does not include the summer vacation period. When the foreign teachers stopped working at the school, the school did not pay them severance pay. As a result, 7 foreign teachers (hereinafter refer to as “the Teachers”) who resigned in July 2008 visited Kangnam Labor Law Firm to seek legal assistance in claiming unpaid severance pay on the grounds that they had been providing their labor service continuously for at least a year to the school but the school had not paid them the severance pay to which they were entitled.

2. The School’s claim

Every year, the school begins a new academic year in August and finishes it in June of the following year. In order to be in line with such an educational schedule, the employment period was therefore contracted for 10 months from August each year to June of the following year, where summer vacation from July to August was not considered as an employment period. Every year, the school discussed such employment contracts with the teachers, and the new employment contracts took effect only with their agreement. In the two months following the end of each annual employment contract, no wages were paid to the teachers. In the School’s opinion, as their employment ended properly and as the employment terms were contracted according to their free will, severance pay was therefore not paid.

3. Teachers’ Claim

In the Teachers’ opinion, however, as they have been renewing their annual contracts in the capacity as employees and as they have also been continuously working for at least a year, the school should be paying them severance pay in accordance with the law.
Every year, they sign a 10 month contract with the school in their capacity as teachers, and except for the summer vacation period, they continuously provided labor service As the teachers are short-term contract employees, the Private Teachers’ Pension Act is not applicable to them. The awarding of severance pay to persons holding the position of teacher should duly be in accordance with any employees receiving due protection from the Employee Retirement Benefit Security Act. The teachers’ working hour started at 7:45 in the morning and finished at 3:30 in the afternoon from Monday to Friday, and they receive a fixed wage, comprising of basic pay and a performance incentive. It appears that the objective for the school to make a 10-months employment contract that is annually renewable is to evade their obligation to pay severance pay. On average, each teacher participating in the appeal has worked for four years, and unless there is an apparent drop in their abilities, the school continues to renew the contracts. The contents of these contracts have been the same every year except for wage increases wages and the academic level of which each teacher is in charge.

4. Analysis of Related Administrative Interpretations

(1) Standard governing length of continuous employment service of a short-term contract teacher (Jun. 1, 2001, Kungi 68207-1780)
With the exception of vacation period where there is no class, if a short-term contract employee has repeated working periods, their previous employment period may be deemed as part of continuous work. However, the vacation period when the teacher did not provide any labor service shall be excluded from the calculation of continuous employment service.
(2) With the exclusion of vacation period, repeated employment period also may be deemed as continuous work but vacation period where no actual work is provided may not be included in the computation of severance pay. (Jun. 7, 2004, Kungi-2811)
A school has been hiring temporary teachers and has repeatedly employed them except during vacation periods. With the exception of vacation period, previous employment period in repeated employment periods may be deemed continuous work in the computation of severance pay.

5. Opinion

In conclusion, the Labor Office, based on the above mentioned administration interpretations, instructed that the school would have to pay the teachers severance pay.



Unpaid Severance Pay to Company Directors Jung, Bongsoo, “Unpaid Severance Pay for Directors”, 「Labor Law」, Jungang, February 2009.

1. Summary

Company D (“the Company”) introduced an annual salary system for all its directors in January 2000 and paid interim severance pay for their service provided until that time. Thereafter, the Company did not pay any severance pay in accordance with the annual salary contract which clearly includes severance pay for each year of service. When three retired directors (“the Directors”) of the company recently heard of a related judicial ruling that severance pay shall not be paid together with monthly wages, they visited Kangnam Labor Law Firm and commissioned us to file a legal claim for the severance pay they did not receive.

2. Company D’s Claim

When the Directors became directors, the Company paid an interim adjustment of severance pay as a formality to confirm that they no longer held the status of employee. Employees up to Bujang (department head level) are subordinate to the employer’s direction and supervision, but when an employee becomes a director, they receives assignment from the Company within a certain work scope and takes initiative and leadership in handling such work scope. In addition, a director also carries the name card of a “director” and, in the capacity as a person in-charge of “business development”, represents the Company in external associations or organizations. In particular, the director can attend executive meetings while Bujang or lower positions are not allowed to do so. Even in the aspect of welfare, directors are different from employees, as the directors receive director’s welfare systems with subsidies for comprehensive medical exams and car maintenance allowances. Directors can also use the corporate card for their expenses. Therefore, as company directors cannot be regarded as employees, the Company has no obligation to pay severance pay to its directors.

3. Directors’ Claim

When Directors A and B were working as directors around Jan 2000, the Company, of its own accord, instructed payment of interim severance pay and also drew up annual salary contracts with severance pay included therein. For Director A, although he was working as a director of the research institute, which is equivalent to a company executive director, he was actually working in subordination to the company president’s direction and supervision. He resigned on notification by the Vice President of the cancellation of his employment contract in June 2006. As for Director B, while he was working as General Manager of Company D, he was registered as a Vice President of the Company’s subsidiary under the direction of Company D, and he received salary paid by that subsidiary. However, in actual fact, he had been working under the direction and supervision of Company D until his resignation in March 2006.
In the case of Director C, he held the position of Bujang in Company D before being promoted to Senior Director in April 2004. At the request of the Company, he then accepted interim severance pay and went on to conclude an annual salary contract which included severance pay. Employee C resigned in January 2007.

4. Related Judicial Rulings

Persons who provide specific service under the direction and supervision of others such as directors and who receive a fixed pay as remuneration can be regarded as employees defined by the Labor Standards Act. (Supreme Court, 2002 da 64681)
Whether it is appropriate to regard a director as an employee defined by the Labor Standards Act has nothing to do with the manner in which the contract is made but should be judged based on whether the director was paid to provide a service that requires him to be in subordination. Regardless of whether they holds the position or title of company director or auditor in the real sense or just in name, as long as they receives remuneration as compensation for providing a specific labor service under the direction and supervision of the employer or receives remuneration as compensation for taking charge of specific labor service under the direction and supervision of persons such as the representative director in addition to the duties assigned to him/her by the company, such director can be regarded as an employee as defined by the Labor Standards Act.
Even if the company pays, as part of the employment contract, a severance pay in advance with annual salary, such payment does not have the same effect as the lawful severance pay stipulated in Article 34 of the Labor Standards Act. (Daegu District Court, 2006 kadan 2947)

5. Opinion

The labor inspector interviewed the Company and the Directors who filed for the appeal. It was concluded that Directors A and C were employees. However, Director B was judged as not an employee because he was a registered director of a subsidiary and received salary from the subsidiary. Following this, it was concluded that the Company must pay severance pay to Directors A and C.