Ⅰ. Limits on Employment Period for Fixed-term Employees
We can distinguish employment contracts into three categories based upon employment period: 1) non-fixed-term contracts, 2) contracts necessary for completion of a project, and 3) short-term employment contracts of up to two years. Since the protection laws for irregular employees have been in effect since July 1, 2007, the employment period is determined within two years, excluding non-fixed-term contracts, and in cases where the labor contract has been repeated so employment exceeds two years, the contract becomes a non-fixed-term contract. Accordingly, as the employment contract reaches the completion of two years, the employer shall decide whether to give the employee a permanent position or terminate employment relations.
Even if the employment contract has been renewed several times previously, employment is estimated to be terminated upon expiration of the contract period if the employer does not renew it. In reality, the employer had to receive a judicial judgment through the labor commission or the court to verify an employment contract without fixed period, even though the employment contract had been renewed repeatedly several times. Generally, in cases where a fixed term employee has worked for about five years and had his/her contract renewed at least four times, the contract is regarded by the courts as expired when it is not renewed; but in cases where the fixed term employee has worked for at least six years and has had his/her contract renewed at least five times, the contract is regarded as having become non-fixed-term employment should renewal fail to occur again. The protection laws for irregular employees set a limit of two years for fixed-term employment to clarify any disputes coming from the employment period. However, even though this is the case, some exceptions have been introduced in light of business characteristics, work characteristics, relations with other laws, and legislative policies.
2. Limit on employment period for fixed-term employees
The Act on the Protection, etc. of Fixed-term and Part-time Employees (hereinafter referred to as the Fixed-Term Employee Act), Article 4, regulates that an employer may hire a fixed-term employee for a period not exceeding two years (for repeated fixed-term labor contracts, the sum of the periods shall not exceed two years). Accordingly, the employer cannot use fixed-term employees more than two years. If doing so, the employees are regarded as regular employees. Accordingly, the Fixed-Term Employee Act was designed to resolve disputes over repeated and renewed employment by stipulating the two-year limit on employment period, and to promote temporary employees moving into regular positions. Many countries have restrictions on the use of fixed-term employees. Korea does not, but protects them through the limit on employment period.
Ⅱ. Employment Period for Fixed-term Employees: Exceptions and Purposes
1. Cases where the period is needed to complete a project or particular task
If a construction project is proved objectively to be a fixed-term business requiring a certain amount of time to complete, an employment contract for the period required is allowed, even for projects exceeding two years. This exception is limited to projects that are temporary or will not be repeated: 1) construction projects; 2) temporary surveyors during statistical survey periods; 3) temporary commissioned projects; and 4) secretary of a part-time director with a contract of up to three years.
2. Cases where a fixed-term employment contract is made with someone close to or beyond the age of retirement
The Employment Promotion for the Aged Act is designed to promote the employment of people close to or beyond retirement, which refers to those 55 years and older. There are no maximum fixed-term contract periods for these “aged” people.
3. Cases where a job requires professional knowledge and skills Such cases refer to those for whom any of the following apply:
① A doctoral degree is needed to be engaged in a particular field;
② A national technical qualification of technician level is needed to be engaged in a particular field; and
③ A professional qualification (in at least 1 of 25 specific fields) is needed to be engaged in a particular field. Those with doctoral degrees, national technical qualifications at technician level, and holders of professional qualifications issued by the government in 1 of 25 specific fields are generally recognized as specialists with professional knowledge and skills in a particular field. This exception was adopted in consideration of the characteristics of those professional specialists. Specifically, a “technician” refers to a person who holds a national technical qualification at technician level pursuant to the National Technical Qualifications Act. A professional certificate holder means a specialist who has been qualified in at least 1 of 25 fields recognized by the government in relevant law.
4. Cases where a separate law defines the employment period for fixed-term workers differently
① Regulations for Contractual Position of Civil Servants regulate that the employment period for contract civil servants shall be the necessary period up to five years.
② The Enforcement Decree to the Staffing Educational Personnel and the Private School Act regulates that the employment period for fixed-term teachers shall be up to one year, and if necessary, can be extended up to 3 years.
③ The Act on the Employment Etc. of Foreign Workers regulates that foreign workers can be employed for up to three years after entering Korea.
5. In cases where justifiable reason exists
① A fixed-term employee is needed to fill a vacancy arising from a worker's temporary suspension from duty or dispatch until the worker returns to work: In cases where the employee took a leave of absence due to giving birth, illness, military service, etc., or is on a long-term dispatch, a fixed-term employee can replace him or her on a temporary basis.
② The period needed for a worker to complete schoolwork or vocational training is defined: When an employee takes the opportunity to develop his/her job skills, such training period during his/her employment shall be exceptional for its limit.
6. Consideration of legislative policies (this exception is gradually extended)
① In cases where earned income falls within the highest 25%
For persons engaged as managers, professionals, and other similar jobs according to the Korean Standard Classification of Occupations and whose earned income falls within the highest 25%, employment period limits do not apply. Earned income is determined by the average annual earned income of the past two years.
② In cases where jobs are provided to develop the public's vocational competency, promote employment and offer necessary social services in accordance with other laws such as the Basic Employment Policy Act and the Employment Insurance Act, employment period limits do not apply.
③ In cases where jobs are provided to promote the employment of discharged soldiers and stabilize their livelihoods pursuant to Article 3 of the Support for Discharged Soldiers Act, employment period limits do not apply.
④ In cases where a person who has professional military knowledge or skills recognized by the Minister of Defense is engaged in the relevant field or where a person teaches national security and military science in a university pursuant to subparagraph 1 of Article 2 of the Higher Education Act, employment period limits do not apply.
⑤ In cases where a person with exceptional experience is engaged in a field related to national security, national defense, diplomacy or unification, employment period limits do not apply.
⑥ Where a person is engaged in work specified in any of the following items in a school under Article 2 of the Higher Education Act (including graduate schools under Article 30 of the same Act), employment period limits do not apply: 1) Work of a teaching assistant under Article 14 of the Higher Education Act; and 2) Work of an adjunct teacher, professor emeritus, part-time instructor, visiting teacher, etc., under Article 7 of the Enforcement Decree to the Higher Education Act.
⑦ In cases where a part-time worker's weekly working hours, under Article 18 of the Labor Standards Act, is evidently short, employment period limits do not apply.
⑧ For athletes under subparagraph 4 of Article 2 of the National Sports Promotion Act and for persons engaged in teaching sports pursuant to subparagraph 6 of the same Article, employment period limits do not apply.
⑨ Where a person is directly engaged in research work or directly involved in research work as an assistant, such as by carrying out experiments, surveys, etc., employment period limits do not apply in any of the following research institutions:
1) National or public research institutions; 2) Government-invested research institutions established under the Act on the Establishment, Operation and Fostering of Government-funded Research Institutions and the Act on the Establishment, Operation and Fostering of Government-funded Science and Technology Research Institutions; 3) Specific research institutions under the Support of Specific Research Institution Act; 4) Research institutions established under the Act on the Establishment and Operation of Local Government-Invested Research Institutes; 5) Public institution-affiliated research institutions under the Act on the Management of Public Institutions; 6) Company- or university-affiliated research institutions; and 7) Research institutions which are corporations established under the Civil Act or any other Act.
Ⅲ. Right of Fixed-term Workers to Expect Employment Contract Renewal
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 employment in cases where fixed-term workers had worked for more than 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 condition: the worker can reasonably expect 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 older workers, which add to confusion on the worksite, making it necessary to establish the details 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.
1. Restrictions on Employment Term in the Fixed-term Workers Act (Article 4) and the Right to Expect Renewal
1) Details in the Fixed-term Workers Act, Article 4
Article 4 of the Fixed-term Workers Act limits the period of use for fixed-term workers to two years. The reason for this limitation is as follows: (1) In Article 16 of the previous version of the Labor Standards Act, the upper limit was set as one year, but there were no restrictions on the total period of use if the labor contract was repeatedly renewed. This enabled employers to repeat fixed-term employment contracts as a means of avoiding the restriction against dismissal according to Article 23 of the LSA. This has increased the number of workers in fixed-term contracts; and (2) It is a principle that employment is terminated automatically upon expiration 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 other various factors need to be considered, it has been pointed out that the workers are not likely to win a dismissal case, and that such dismissal cases are inconsistent, which led to enactment of the Fixed-term Workers Act. 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 maximum 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 a trust in the relationship to expect renewal of the fixed-term contract, 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 of the contract is not specified in the Fixed-term Workers Act, but has been consistently recognized in court rulings, and has the same purpose 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, but it is reasonable to expect contract renewal, if the employer refuses to renew the contract for no justifiable reason, the effect is the same as for unfair dismissal. In this case, any employment after the contract expires shall be regarded as a renewal of the old labor contract.
The Supreme Court concluded, "In the case of a fixed-term employment contract, the employment contract 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; (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.” Since enactment of the Fixed-term Workers Act, the total contract period is limited to two years in principle, resolving the above issue (1) to some degree. However, since issues (2) and (3) arise from the expectation of conditional renewal and the right to expect renewal, disputes have often arisen between workers and employers.
2. Rational Justification for Refusing Renewal after Recognition of the Right to Expect Renewal
1) Reasons to refuse renewal
A court ruling 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 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, with the burden of proof for such matters 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 reasonable justification deemed to be equivalent to the socially-accepted standard, which is a relaxed standard rather than a legitimate reason. This is because it would suggest reasonable justification for replacing the renewal expectation, or suggest that the expectation of renewal has changed.
2) Related labor cases
(i) Cases where there is no reason to refuse to renew the contract
① Worker A signed an employment contract for two years from October 26, 2010 to October 25, 2012. According to the employment contract, the contract 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.
② The company is a foundation that operates social work support projects for unemployed people. Worker A was hired by the company on October 26, 2010, and worked as a team leader who supported the establishment of social enterprise. The enterprise informed Worker A on September 24, 2012 that the employment contract would expire on October 25, 2012. One month before expiration, the company considered whether or not it would switch to full-time employment through personnel evaluation.
③ The 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 is 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 the contract with the drivers. Considering the aforementioned, it is considered that the drivers who belong to this facility management corporation are granted the right to expect that their fixed-term contract will be renewed.
(ii) For exceptional occupations, the right to expect renewal is recognized
① In the case of a certain plaintiff (an in-house lawyer), the labor contract could not be regarded as having no fixed term, as the plaintiff had had the contract renewed four times over five years. The plaintiff had reason to expect renewal as he/she had been responsible for necessary tasks as the lawyer for the company and had the reasonable expectation of the contract being renewed so as long as he/she wished to continue to work.
② The defendant, Gimcheon City, had commissioned the plaintiffs (the symphony orchestra members) as non-permanent members in December 1, 2004, and entered into two-year contracts. However, the City suddenly did not renew the plaintiffs’ contracts after expiration in January 2011, as it had decided to select new members through a new screening process before the final contract expired. In November 2011, it announced the recruitment of the Gimcheon City arts group. The City asked the plaintiffs to take 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.
③ 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 the refusal to renew their contracts amounts to unfair dismissal.
(iii) Cases where the right to expect renewal cannot be established
① A certain employee had been working as a full-time professional commissioner in the Civil Rights Commission with a contract period ending December 31, 2008, and worked as a professional adviser from January 1 to December 31, 2009, after which he had to resign due to 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.”
② 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 contract expiry, 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.
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 case of regular continuous work, the expectation of renewal is recognized even though a fixed-term employment contract was made. For professional workers who are exempted from the maximum employment contract period, and workers who have not retired after the retirement age, there can be an 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 not expected to be subject to renewal of a fixed-term contract.