Of the total labor cases brought to the Labor Relations Commission (hereinafter referred to as “the Labor Commission”), the percentage of those resolved through compromise has gradually increased: 25% in 2010, 32% in 2011, 34% in 2012 and 34 % in 2013. Ministry of Employment & Labor, “White Paper on Labor and Employment, 2014.”
This reflects the Labor Commission’s view that compromise is one of the most important methods to resolving labor disputes, a view it has held since the provision ‘Compromise’ was introduced into the Labor Commission Act in April 2007. Lee, Sungil/Cho, Sungkwan, “A Study on the Improvement of Operations of the Labor Relations Commission”, 「Thesis Papers on Labor Laws」 No. 27, Comparative Labor Law Society, 2013.
Labor Commission judgments result in one party winning all the benefits, while the other loses all, which may result in an appeal that extends the labor dispute beyond what was expected. Compromise plays a role in preventing delays in resolution of labor cases, and aims for amicable conclusion between the company and employee concerned. Despite this important role, the compromise system is regarded as a method of “anything goes” to solve disputes in actual practice. Accordingly, it is necessary to understand the use of compromise through actual labor cases resolved reasonably in such a way, and seek how to make more frequent use of it.

I. The Legal Status of Compromise and its Use

1. The legal status of compromise

The Civil Act stipulates (in Articles 731 and 732) that a compromise shall become effective when the parties have agreed to terminate a dispute between them by mutual concession. A contract of a compromise shall have the effect that the rights conceded by one of the parties are thereby extinguished and the other party will, in turn, acquire the pertinent rights by virtue of the compromise. Judicial rulings have agreed that when reaching a compromise, the previous agreement is extinguished by virtue of the newly established effects of the compromise, and the compromise becomes legally binding regardless of any contradicting content in the previous agreement. Supreme Court ruling on Sep 22, 1992: 92da25335

According to Article 16-3 of the Labor Commission Act, a Labor Commission may recommend conciliation or present a proposal for such at the request of the parties concerned or by virtue of its authority before a judgment, order or decision is rendered pursuant to Article 84 of the Labor Union & Labor Relations Adjustment Act or Article 28 of the Labor Standards Act. The conciliation statement shall have the same effect as a compromise imposed by the courts in accordance with the Civil Procedure Act.

2. Use of compromise

(1) Designing the compromise
The compromise process in an unfair dismissal case brought to the Labor Commission begins with the necessary time to consider the compromise, when a judge in the judgment hearing has suggested a compromise and one of the parties has accepted it. In general, the party requesting a compromise in the course of an unfair dismissal case is regarded as having a weaker claim, and so a compromise is seldom requested before the judgment hearing starts.

If the employer feels likely to lose the case, a compromise is quite acceptable. This is the case also if the employer feels he has the potential to win the case, if the cost of settlement is much lower, as the compromise will prevent the employee from appealing. From the employee’s viewpoint, a compromise is desirable if he/she does not wish to continue working for the employer, has gotten a new job, or feels he/she cannot win the case.

(2) Settlement money
Settlement money is normally calculated based upon the employee’s wage. In cases where the employee has a favorable position in the dismissal case, he/she requests monetary compensation up to one year’s wages, considering the wages that should have been received during the dismissed period and the ability to earn more upon reinstatement at the workplace. However, if the employee has an unfavorable position in the dismissal case, he/she usually accepts a compromise with the settlement money covering only the period of dismissal. Accordingly, after the Labor Commission has investigated the facts related to the justification of dismissal in the judgment hearing, it will suggest a compromise including a cash settlement.

Should a considerable gap exist between what each party feels is acceptable, the Labor Commission will endeavor to narrow the gap through mediation to encourage settlement. Nevertheless, if there is no compromise reached, the Labor Commission tends to avoid a quick judgment and instead opts to give both parties time to consider ways to reach a compromise.
(3) Compromise form

In actual practice, compromises require filling out a ‘Settlement Agreement’ form similar to the one below.

Seoul Labor Relations Commission – Letter of Compromise
Case number: Seoul2014buhae2689 000 Korea, Application for Remedy for Unfair Dismissal
Employee: 000
Company: 000 Korea
Conditions for Settlement
1. The employee and the company in this case agree that employment is terminated as of September 15, 2014.
2. By Wednesday, November 26, 2014, the company will transfer 00.0 million won (in actual payment) to the employee’s bank account as settlement money that includes severance pay.
3. When the above conditions are fulfilled, both parties in this case will not take further civil, criminal or other administrative actions regarding the termination of this employment.
We, the undersigned, agree on the above conditions regarding this labor case of application for remedy for unfair dismissal, and hereby confirm that this conciliation statement shall have the same effect as a compromise imposed by the courts in accordance with the Civil Procedure Act in accordance with Article 16-3 (5) of the Labor Relations Commission Act.
November 19, 2014.
Employee’s labor attorney: O O O (Signature)
Employer’s labor attorney: O O O (Signature)
Seoul Labor Relations Commission – Commissioner, 0000 (Signature)

3. Difference between a compromise and monetary compensation

Monetary compensation is a system where the company shall provide the employee with monetary compensation if the employee does not desire reinstatement upon such a verdict in an unfair dismissal case (Article 30 of the Labor Standards Act). Any requirement for monetary compensation shall begin when an employee receives notification of the judgment hearing date, with the calculation period for compensation calculated from dismissal date to judgment date (Articles 64 and 65 of the Labor Relations Regulation). Accordingly, monetary compensation can be claimed for wages missed during the period after dismissal, and as this amount cannot include compensation for emotional damage, the compensation is relatively low and limited. Cho, Sunghye, “Critical Review of the Monetary Compensation System for Unfair Dismissal”, 「Labor Strategy Studies」, 2009, vol. 9, p. 154.


On the other hand, since a compromise is not related to the level of monetary compensation, the greater the possibility for unfair dismissal to be determined, the higher the compensation request will be, while the lower the possibility for unfair dismissal to be determined, the lower the compensation request will be: for example, one month’s wage, equivalent to the one month compensation requirement for a failure to give advance notice of dismissal.


II. Labor Cases Resolved through Compromise

1. A case brought against “Company A”

“Company A”, a Taiwanese semiconductor company with five Korean employees at its Korean branch is selling semiconductor components to Korean electronics companies. For the past few years, this company has been in deficit, and determined that the branch manager’s poor sales skills were to blame. The company dismissed the branch manager without notice, and paid him the required one month compensation in August 2014. The branch manager then applied to the Labor Commission for remedy for unfair dismissal.

The Labor Commission held a judgment hearing on November 19, 2014 where the branch manager claimed that the poor sales performance that the company claimed was partly due to the high prices of the company’s semiconductors, his legal status was not as an employer since he only worked as a sales manager, and the Korean branch was a sales office and not an autonomous organization. These claims greatly weakened the company’s chances to win the case.

The Labor Commission estimated that as the branch manager had lost the company’s confidence, he would be unable to work effectively upon reinstatement, and suggested a compromise be reached, which both parties accepted. In the judgment hearing, the employee demanded 12 months’ wages as a condition for settlement, while the company responded with an offer for 3 months’ wages in consideration of the already-paid compensation for no advance notice of dismissal, and the labor attorney’s service fees. The Labor Commission judge then proposed compensation equal to 8 months’ wages to both parties, but the company rejected it. The Labor Commission then explained that the parties would have one week to consider methods for settlement, and that a judgment would be made if the two parties were unable to reach agreement by that time.

When the company’s labor attorney explained to the company that the Labor Commission was more in favor of the employee’s claims and additional costs would result if they appealed a verdict of unfair dismissal, the company agreed to increase the settlement to 5 months’ wages. The company’s labor attorney then persuaded the employee’s labor attorney (whose client had already accepted the judge’s proposal for 8 months’ wages) that the employee’s severance pay would be reduced by two months considering that there had been fewer than 5 employees for some years previously. The employee then reduced his claim by an additional two months and accepted 6 months’ wages as a settlement. At the time, the company’s labor attorney persuaded the company to accept this small difference, and also accept the employee’s compromise. Ultimately, 5 1/2 months’ wages in compensation was accepted by both parties.

2. A case brought against “Company B”

“Company B” is a Korean branch office of a multinational company with head offices in Switzerland. The employee was assigned to the Korean branch office as a senior director on December 1, 2012, signing a two year contract. He had adjusted to Company B very well and worked faithfully, but suddenly received a letter of dismissal from Company B on August 30, 2013. The reason given for dismissal was suspicion that the employee had been involved in unfair price transactions with a customer while working at the head office in 2012. However, Company B did not investigate the incident thoroughly, and simply dismissed the employee immediately pursuant to a request from the head office. The judgment hearing at the Labor Commission was held for this case on December 17, 2013.

As the company had dismissed the employee pursuant to a request from the head office without observing the disciplinary process stipulated in the rules of employment, it was very clear that unfair dismissal would be the verdict. The Labor Commission Chairman suggested the parties settle the case, to which both parties agreed.

However, settlement was difficult due to significant difference of opinion on adequate compensation. The employee was unwilling to return to work, while the company could not win the case. When he considered that there were only 11 months left in his contract and he was unsure about continuing to work at the head office after completing the contract, the employee decided to accept 9 months’ average wage as compensation. The company agreed, and the settlement was finalized as 9 months’ average wage.


III. Conclusion

The compromise system in the Labor Commission is advantageous to a verdict in terms of preventing one party from losing entirely, maintaining an amicable relationship afterwards, and terminating a dispute. However, each party’s objective circumstances and subjective emotions can determine whether a compromise is acceptable or not, making it an at-times difficult solution to labor disputes. In order to reduce uncertainties regarding compromise, it is necessary to improve the monetary compensation system so that it grants additional compensation for an employee’s number of service years plus compensation for the period after dismissal. Combining compromise with this improved monetary compensation system will greatly increase its use.