[The Right of Fixed-term Workers to Expect Renewal of their Employment Contract]

The problems related to non-regular workers in Korea have occurred due to the overuse of irregular workers through managerial dismissal and worker dispatch laws, in efforts to cope with the IMF Financial Crisis in 1997. In order to limit the use of non-regular workers and encourage their use as full-time workers whenever possible, the Act on the Protection, etc. of Fixed-term and Part-time Workers (hereinafter referred to as the "Fixed-term Workers Act") was enacted. For the protection of irregular workers, the Fixed-term Workers Act, enacted in 2007, stipulates that fixed-term workers can be used for a maximum of two years, after which the fixed-term worker is regarded as a non-fixed term worker (Article 4 of the Act). This regulation was introduced to limit the use of fixed-term workers and to eliminate employment insecurity by promoting the renewal of their fixed-term employment in cases where fixed-term workers had worked for at least two years.

Article 4 of the Fixed-term Workers Act stipulates that fixed-term workers can be used for two years, with some exceptions. Nevertheless, the right to expect renewal is assured in cases where the fixed-term contract can be renewed, with a renewal condition; the worker expects to have his/her fixed-term contract renewed. In addition, the exemption clauses of fixed-term employment are exceptional for repeated employment contracts for professional workers and elderly workers, which add to confusion in the worksite, making it necessary to establish the contents and specific criteria for this. In this regard, I would like to specifically examine the laws, precedents, and reasons for the right to expect renewal.



I. Restriction on Term in the Fixed-term Workers Act (Article 4) and the Right to Expect Renewal

1. Contents of Article 4 of the Fixed-term Workers Act

  Article 4 of the Fixed-term Workers Act limits the period of use for fixed-term workers to two years. The Fixed-term Workers Act: Article 4 (Employment of Fixed-term Employees)
(1) An employer may employs a fixed-term employee for a period not exceeding two years (in cases where a fixed-term labor contract is repeatedly renewed, the total consecutive employment period shall not exceed two years). Provided that an employer may employ a fixed-term employee for more than two years in any of the following cases:
1. Where the period required for completion of a project or particular task is defined;
2. Where a fixed-term employee is needed to fill a vacancy arising from a worker’s temporary suspension from duty or dispatch;
3. Where the period required for a worker to complete his/her education or vocational training is defined;
4. Where a fixed-term labor contract is made with an aged person as defined in Article 2 Subparagraph 1 of the Aged Employment Promotion Act;
5. Cases prescribed by Presidential Decree, where the job requires professional knowledge and skills or is offered as part of the government’s welfare or measures against unemployment;
6. Other cases prescribed by Presidential Decree, where there are reasonable grounds equivalent to those described in subparagraphs 1 through 5.
(2) If an employer employs a fixed-term employee for more than two years, even though grounds under the proviso to paragraph (1) do not exist or cease to exist, the fixed-term employee shall be considered as a worker who has made a non-fixed term labor contract.
The reasons for this limitation are as follows: ① In Article 16 of the previous version of the Labor Standards Act, the upper limit is set as one year, but there is no restriction on the total period of use through repeated renewal of the labor contract. This enabled employers to repeat an employment contract for less than one year as a means of avoiding the restrictions against dismissal according to Article 23 of the Labor Standards Act(LSA). This has increased the number of workers on fixed-term contracts; and ② it is a principle that employment is terminated automatically upon termination of the contract. However, if an employment contract is renewed several times, it may be interpreted as being an employment contract without a fixed term. In that case, as the habitual practice of the contract, the intention of the parties, the expectation of renewal, the nature of the work, and various other factors need to be considered, it has been pointed out that the workers are not likely to win a case against their dismissal, and that such judgments are inconsistent, which led to enactment of the Fixed-term Workers Act. Labor Law Practice Study,「Labor Standards Act Translation II」ParkYoungsa, 2010, pp. 17-18.
Since adoption of this Act, even if an employment contract is repeated a number of times, there is no such dispute because the term can only be a limit of two years. However, in instances of a fixed-term labor contract where there are conditions for renewal even if there is no provision for renewal, if there is trust in the relationship that the fixed-term contract will be renewed, the right to expect renewal is still valid even after introduction of the Act.

2. The right to expect contract renewal

The right to expect renewal is not specified in the Fixed-term Workers Act, but has been consistently recognized in court rulings, and has the same role as the subsidiary clause of Article 4 of the Fixed-term Workers Act. The right to expect renewal means that if a contract is signed for fixed-term employment, and renewal is reasonably expected, an employer who refuses to renew the contract with no rational justification can be deemed as having unfairly dismissed the employee. In this case, any employment after the contract expires shall be regarded as a renewal of the old labor contract. Kiljoon Noh, 「A Study of the Fixed-term Employment Contract 」, Graduate School of Ajou University (Doctoral thesis), 2018, p. 37.

The Supreme Court concluded, "Fixed-term employment contracts between the parties shall be terminated without waiting for a separate action such as dismissal of the employee when the period expires. However, (1) except in a case where the original period is renewed over a long period of time and the fixed period is only a form; Supreme Court ruling on Feb. 24, 2006, 2005doo 5673.
(2) in cases where there is a provision stipulated in the employment contract and the rules of employment that the fixed-term contract will be renewed if certain requirements are met despite expiration of the period; or (3) if there is a trust relationship between the parties that the employment contract will be renewed if certain requirements are met, even if there is no such specific provision; the refusal to renew the employment contract can be considered dismissal rather than termination of the contract due to expiration of contract period.” Supreme Court ruling on April 14, 2011, 2007doo1729; Supreme Court ruling on Nov. 10, 2016, 2014doo 45765.
Since enactment of the Fixed-term Workers Act, the total contract period is limited to two years in principle, which resolved issue (1) above to some degree. However, since issues (2) and (3) arise from an expectation that the contract will be renewed if certain conditions are met and the consequent right to expect renewal, disputes have often arisen between workers and employers.


III. Rational Justification for Refusing Renewal after Recognition of the Right to Expect Renewal

1. Reasons to refuse renewal

A court ruling Supreme Court ruling Oct. 12, 2017.10.12, 2015doo44493.
provides the criteria: "If a reasonable expectation that an employment contract will be renewed is granted to a worker, it is ineffective for the employer to unfairly refuse to renew the employment contract without reason. If there is reasonable justification to not renew the contract, even if the employee has a reasonable expectation of renewal, such reasons can be evaluated by considering the following: (1) The employer’s purpose and the characteristics of the business, workplace conditions, the employee’s position and job responsibilities; (2) The process of signing an employment contract; ③ Whether or not the requirements and procedures for renewal of the employment contract are set up and its operational status; and ④ Whether the employee bears responsibility or not. The reason for refusal and the procedure should be judged based on socially-accepted standards, on the basis of being objective, reasonable and fair, and the burden of proof for such matters shall be borne by the employer."
Even if legitimate expectation of renewal of a fixed-term worker’s employment contract is recognized, it is sufficient for the employer to refuse to renew the contract if there is a rational justification which is deemed socially-acceptable, which is a relaxed standard rather than a legitimate reason. Seoul Appeal Court ruling September 30, 2010, 2009noo36233.
This is because it would suggest rational justification for replacing the renewal expectation, or suggest that the expectation of renewal has changed.

2. Related labor cases

 (1) Cases where there is no justifiable reason to refuse to renew the contract
(i) Worker A signed an employment contract for two years from Oct 26, 2010 to Oct 25, 2012. According to the contract, it could be renewed one month before the expiry date. One month before expiration of the contract, the company informed worker A that the labor relationship would be terminated on October 25, the expiry date of the employment contract. The company informed worker A that the personnel evaluation results were “not good”, which was the reason for termination of the contract. However, at that time, the company's personnel evaluation criteria were vague, and objectivity was low. Supreme Court ruling on Nov. 10, 2016, 2014doo45765: As there was no objectivity in the personnel evaluation, the case was deemed an unfair dismissal.


(ii) The company is a foundation that operates social work support projects for unemployed people. Worker A joined the company on Oct 26, 2010, and worked as a team leader to support establishment of social enterprises. The foundation informed worker A on September 24, 2012 that the employment contract would expire on October 25, 2012. One month before expiration of the contract, the company considered whether or not it would switch worker A to full-time employment through a personnel evaluation. Seoul Appeal Court ruling Nov. 6, 2014, 2013noo53679: At the end of the term contract, the company evaluated whether to convert worker A to full-time employment through personnel evaluation. The worker had an expectation of renewal, and the company was not fair in its personnel evaluation.


(iii) Seoul Metropolitan Government Facility Management Corporation had concluded contracts for the transportation of persons with disabilities, setting a contract period of one year with the driver, and then did not renew the contract. It stated that the Call Taxi for the Handicapped by the City of Seoul is to renew the contract period on a yearly basis and that the purpose for this is to be able to replace unsatisfactory people. This service for the disabled cannot be regarded as a temporary business and has term extension regulations for contracts with the drivers. Considering the aforementioned, it is considered that the drivers who are employed by this facility management corporation have the right to expect that their fixed-term contract will be renewed. Supreme Court ruling on April 14, 2011, 2007doo1729: It is a regular business which re-contracts on a yearly basis. The company refused to renew the contract after personnel evaluations, in which there was no fairness or objectivity.


(2) In the case of exceptional occupations, the right to expect renewal is recognized
(i) In the case of the plaintiff (an in-house lawyer), the labor contract cannot be regarded as having no fixed term, as the plaintiff worked four terms over five years, renewing the labor contract in between. The plaintiff had reason to expect renewal as he/she had been responsible for necessary tasks as the lawyer for the company and has been renewing the contract with an expectation of doing so as long as he/she wishes to continue to work. Seoul District Court ruling on April 19, 2012: 2011gahap 21933. The right to expect contract renewal applies to workers in professional jobs falling under the exceptions to the limit of 2 year terms in Article 4 of the Fixed-term Workers Act.


(ii) The defendant, Gimcheon City, had commissioned the plaintiffs (members of a symphony orchestra) as non-permanent members since December 1, 2004, and entered into two-year contracts. However, the City suddenly did not renew the plaintiffs’ contracts after the expiration period in January 2011. Gimcheon City had decided to select new members through a new screening process before the final contract expired, and in November 2011, it announced recruitment of the Gimcheon City arts group. The City asked the plaintiffs to apply for the new screening test. The candidates’ current address of Daegu or Gyeongbuk as of the announcement date was added as a qualification requirement for common examination. Because of this, plaintiffs who lived in Seoul, Milyang, and Busan at that time failed to meet the qualification requirements and so Gimcheon City refused to renew their contracts. Supreme Court ruling on October 12, 2017: 2015doo44493. The right to expect contract renewal applies to the exemptions in Article 4 of the Fixed-term Workers Act.


(iii) Company S entered into an employment contract with the plaintiffs for one year in October 2011, after which they worked as a golf course management team with no updated contracts until February 2014. Company S's retirement age was 55, and the plaintiffs had already reached this age before or during the term of the contract. Company S signed an employment contract with the plaintiffs in March 2014 which set the work period for one additional year, and notified the plaintiffs in January 2015 that their contract period would expire in February. In the case of the plaintiffs, it can be said that the retirement age did not convert them into unqualified workers. It could be expected that the labor contract would be renewed, and that there was no reason to refuse the renewal, and so this case is also unfair dismissal. Supreme Court ruling on Feb. 3, 2017: 2016doo50563.


(3) Cases where the right to expect renewal cannot be established
(i) The employee had been working as a full-time professional commissioner in the Civil Rights Commission with a contract period ending December 31, 2008, and had been working as a professional adviser from January 1, 2009 to December 31, 2009. He had to resign upon contract expiration. There was no right to expect renewal because the Commission announced that this job was not a position which would be converted into non-fixed employment, in accordance with ‘Regulations on Irregular Workers in Public Institutions.’ Seoul Appeal Court ruling on August 18, 2011: 2011noo9821.


(ii) Hyundai Motor Company employed a fixed-term worker and renewed the employment contract 14 times over short periods of 2 weeks to a maximum of 6 months. After 2 years, it notified the worker of expiry of the contract, which was not renewed on January 31, 2015. There were no precedent cases in which other irregular workers in the company became full-time workers, and so there was no right to expect renewal because, while the position was constantly needed, it was regarded as a temporary task to fill the vacancies of regular workers. Seoul Administrative Court ruling on October 20, 2016: 2015goohap71068.



V. Conclusion

If there is a statement in a labor contract that provides conditions for the renewal of a fixed-term contract, etc., or if there is a relationship of trust that it will be renewed, and in the event the work is regular and continuous, the right to expect renewal is recognized even though a fixed-term employment contract was made. Professional workers who are exempted from the maximum employment contract period, and workers who have not retired after hitting retirement age can also have the expectation of renewal. Therefore, it is necessary to utilize regular employees whenever possible for permanent jobs. Employers will have to hire fixed-term workers for temporary work only, or for work for which fixed-term contracts are not expected to be subject to renewal.