Recommended resignation occurs when an employee resigns at an employer’s suggestion. In most cases, employees will refuse to resign, as they do not wish to face the uncertainty and difficulty of finding new employment. In cases where an employee has been chosen as one of those subject to managerial dismissal and is advised to resign through a voluntary early retirement program due to a deterioration of business, the employees tend to accept recommended resignation as the best option. However, in situations that are not urgent, like when managerial dismissal is the alternative to resignation, or when there is no sufficient compensation offered, employees tend to refuse. Therefore, there is a need for employers to prepare thoroughly (such as through employee interviews) before recommending resignation to make it easier for the employees to agree to resign.

The labor case introduced below is an extreme one in which an employer’s recommendation to resign was rejected by the employee, leading to dismissal and a long legal dispute that caused significant difficulties for both the employer and employee. I would like to use this case as an opportunity to look at the necessity of introducing an adequate system for recommended resignations.


I. Summary of the Case

The details of this case are as follows:
i) Company A (hereinafter referred to as “the Company”) employs 150 persons and engages in trading and other business in Seoul.

ii) Employee B (hereinafter referred to as “the Employee”) involved in this case began working for the Company as one of the managers of the General Affairs department in 2008, and then in 2009 she was promoted to general manager and worked as head of the General Affairs department in 2009. The Company proposed a position in Overseas Purchasing, which the Employee accepted as she viewed it as an opportunity to move to Hong Kong in the near future, a place she felt would be good for her children’s education. Her superior also stated that she could return to General Affairs in 6 months if she felt Overseas Purchasing did not fit. However, the Employee’s superior left the Company three months after that, and the head of General Affairs position was filled through internal promotion.

iii) In the early part of 2012 (after 6 months in Overseas Purchasing for the Employee), the Employee felt that Overseas Purchasing did not offer employment security and requested a return to General Affairs. However, as the head position in General Affairs had been filled, the Company turned her down. As the Employee continued to press for a transfer out of Overseas Purchasing, the Company began to reduce her duties. In July 2012, the Company recommended she resign with 6 months’ salary as compensation as there was still no position open in General Affairs.

iv) The Company suspended the Employee with pay from July to September 2012 after the Employee rejected the resignation offer. During this period, the Employee applied to the Company for grievance handling, but the Company responded that their investigation found no violation of personnel management requirements. The Employee submitted a petition to the Ministry of Employment and Labor, claiming that the Company had not established a Labor-Management Council or a Grievance Handling Committee. When the labor inspector audited the Company workplace, he confirmed that the Company had violated labor law and issued an order for correction to the Company.

v) On September 3, 2012, the Company assigned the Employee to a new position as the person responsible for the Accident Recovery Center. However, there was no detailed job description for this new position, and the offered employment contract was for a lower employment rank (from general manager to manager) and a lower annual salary (from 100 million won to 70 million won). The Employee rejected the Company’s offer due to the unfavorable working conditions, and filed an application for remedy with the Labor Relations Commission (LRC) for unfair waiting and unfair transfer conditions. The LRC rejected the Employee’s application on the grounds that suspension with pay and the subsequent department transfer could be somewhat necessary in operation of the business and the absence of financial disadvantage to the Employee. The National Labor Relations Commission (NLRC) also rejected her appeal for the same reasons.
vi) March to April 2013: The Company suspended the Employee with pay again for two months, after which it held a Disciplinary Action Committee hearing and dismissed the Employee for the legal disputes against the Company, revealing company secrets, and repeatedly recording conversations with her superiors. However, once the Employee filed an application for remedy for unfair dismissal with the LRC, the Company could not prove justification for this dismissal as it had been able to after the Employee’s first filing. It agreed to settle with her for a considerable amount.


II. The View from Both Parties, Main Issues & Resolution

When reviewing the situations of the Employee and the employer, it becomes obvious that some resolution was badly needed. A review of the LRC’s judgments and the resolution processes are in order.

1. The view from both sides

(1) The Employee’s situation: The employer had taken strong action to push the Employee to resign: 1) The Employee’s duties were gradually decreased without justifiable reason several months before the Company first recommended she resign; 2) When the Employee refused to resign, the Company suspended her with pay, claiming they did not have any work for her. During this suspended period with pay, the personnel team suggested to her several times to resign; 3) When she came back to work, the Company proposed a temporary position with lower employment rank and a lower annual salary. When the Employee filed with the LRC for remedy for unfair personnel transfer, the Company assigned the Employee to an isolated office, cut her off the Company email network and intranet, and did not provide her with any office items except for a personal computer. She was assigned translation duties for most of her working hours, all while being pushed continuously to resign. 4) When the Employee’s application was rejected, the Company dismissed her.

(2) The Company’s situation: The Employee had voluntarily transferred to Overseas Purchasing, and although showed intention to return as head of General Affairs, this position was filled while she was away, meaning there was nowhere for the Employee to return to. As the Company employed a maximum of 150 employees, it did not have vacant positions to fill out with idle manpower. In light of this, the Company had proposed a monetary bonus with sufficient compensation for resigning, but the Employee refused. The Company then suspended the Employee with pay while looking for a new position for her. The Accident Recovery Center was created to make a place for the Employee who was reinstated with a suitable employment rank and an adjusted annual salary. When the Employee filed an application for remedy with the LRC against the Company which was subsequently rejected, the Company decided to dismiss her for refusing to resign and instead aggressively filed applications against the Company.

2. Estimates of situation, and settlement

(1) Justification for suspension with pay: The Supreme Court Supreme Court ruling Aug 25, 2006, 2006 do 5151
has ruled, “In order for the company to continue to maintain its activities, it is essential to re-assign or adjust the workforce. Personnel management orders including suspension from duties (with pay) are a right the employer has with the authority to manage the workforce. Accordingly, such a personnel management order shall be respected as the employer’s discretionary right within necessary boundaries. This cannot be regarded as illegal except for cases where this violates the Labor Standards Act or amounts to an abuse of this right.” Based on this ruling, the Labor Relations Commission estimated that the Company’s orders for the Employee to wait at home did not abuse its right to manage its personnel in consideration of the following: 1) There is insufficient evidence that the Company truly planned to allow the Employee to return as head of General Affairs from Overseas Purchasing; 2) It would have caused significant difficulty for the Employee to return as head of General Affairs because another employee had already been assigned to that position; 3) The Company could suspend the Employee with pay without disadvantage if such an action is required; 4) There had been no lowering of the Employee’s wages while suspended. NLRC 2012 buhae 1216


(2) Justification for transfer:
The Supreme Court Supreme Court on October 11, 2007, 2007 do 11566
has ruled, “Since transferring the employee is included in the employer’s original authority to manage its workforce, such a personnel management order shall be respected as one of the employer’s discretionary rights. This cannot be regarded as illegal except for cases where this violates the Labor Standards Act or amounts to an abuse of this right. Whether such a personnel transfer amounts to an abuse of this right or not shall be estimated after comparing and considering the necessity of the transfer for operation of the business and financial disadvantage to the employee. If an employee’s financial disadvantage due to the personnel transfer is not unreasonable but is an “ordinary difficulty”, this personnel order shall be deemed a justifiable right to manage personnel, and not an abuse of that right.” Based on this ruling, the LRC estimated that the personnel transfer to the Accident Recovery Center was justifiable and not an abuse. In making this judgment, the LRC considered the following: 1) The Employee’s work was not specified such that she was to deal only with general affairs; 2) There had been prior consultation regarding this personnel transfer between the employer and the Employee; 3) The Employee’s previous position as head of General Affairs was occupied by another employee; 4) The Employee was assigned to a new position in the Accident Recovery Center as the position she wanted was not available; 5) There had been no real disadvantage to the Employee’s wages after the Employee was assigned to this new position. NLRC 2012 buhae 1216


3. Application for remedy for unfair dismissal
As soon as the Employee’s appeal was rejected (after rejection of her application for remedy for unfair waiting and unfair personnel transfer), the employer suspended the Employee with pay, and dismissed her after holding a Disciplinary Action Committee hearing. The reasons were 1) The Employee transferred many of her emails from the Company’s email network, which were classified as confidential, to her personal email account; 2) The Employee filed a petition to the Ministry of Labor for non-existence of a grievance handling committee inside the Company without going through the Company’s internal channels; 3) The Employee recorded conversations with her superiors several times, showing a hostile attitude. However, The Employee claimed to have taken these actions in the course of protecting herself after she filed an application for remedy against the Company, and it would be unreasonably difficult to prove her dismissal was justified. The Company decided to settle with the Employee for a considerable amount of money as compensation for her resignation.


III. Conclusion

The recommended resignation system can be the most desirable method for resolving labor disputes between an employer and employee because there is then mutual agreement to terminate employment relations. As labor laws in Korea do not allow employers to dismiss employees without a justifiable reason, companies use many methods to encourage employees to agree to resign. In cases of employee redundancy, if such an employee refuses to accept a resignation agreement, it becomes very difficult to resolve the situation. The dismissal case in this article might be the worst case that a company may face.

As the recommended resignation system with monetary compensation is only rarely used for companies to resolve particular situations, employees who are pressured to resign suddenly generally feel that the compensation offered is not equal to the uncertainty and urgency of getting another job for the long term. This has usually led to long labor disputes. Accordingly, in order to avoid negative consequences of an employer terminating employment unilaterally without any of the justifiable reasons required by the Labor Standards Act, companies can introduce a mutually agreed-upon monetary compensation package in the rules of employment or the employment contract.