Dismissal of an Unfair Dismissal Remedy Application by the Labor Relations Commission: A Case Analysis
Bongsoo Jung, Labor Attorney / KangNam Labor Law Firm

This case involves three main issues. First, it must be determined whether the workplace where the employee worked had at least five employees. The Labor Relations Commission’s unfair dismissal remedy only applies to workplaces with five or more employees. Second, the key issue is whether two directors of the company qualify as employees. If they are not regarded as employees, then the total number of employees would be fewer than five. Third, it is important to establish the relevant point in time at which the number of employees is assessed in determining whether the workplace has fewer than five employees. These three questions became the central issues in this case.

I. Summary
The applicant (hereinafter referred to as “the Employee”) had been working for a Japanese company selling Taekwondo uniforms (hereinafter referred to as “the Company”) and was dismissed on August 20, 2024, for poor work performance and negligence. The Employee, claiming that he had always worked hard and dismissal was unfair since he had never made any mistakes, applied to the Seoul District Labor Relations Commission (hereinafter referred as “the Labor Commission”) for remedy. The Company claimed that it had given several verbal warnings to the Employee for negligence, but there had been no improvement, and that, particularly, the Company was not subject to application for remedy for unfair dismissal according to the Labor Standards Act (LSA) because it had only 3 employees. The Employee claimed that there were 6 employees while he was working, including a Japanese director, but the Company claimed that two were a marketing director and general affairs director who were not employees because they worked on a commission-only basis according to their contracts. These issues meant the key point of this dispute was that the Labor Commission needed to estimate whether application for remedy for unfair dismissal could be made, before determining whether the dismissal was fair or not.

II. Employee Claims
The Employee was hired November 9, 2023 and had been engaged in marketing and sales support. He had never refused company orders, but worked hard regardless of time and place. He took business trips that included weekly holidays (Sundays), worked overtime and even during holidays, but never received extra payment for this. He also did not take any vacations. The Employee was dismissed unfairly by the Japanese managing director in August 2024, for poor work performance and disobedience. However, these reasons for dismissal - poor work performance and disobedience – were not true. The Company just blamed its lowest-ranking employee for poor business. If the Company planned to dismiss the Employee for the reasons they claimed, the Company should have given sufficient opportunity for the Employee to improve, but no chance was ever given.
There were 6 employees at the time of his dismissal: a marketing director, a general affairs director, the Employee, an assistant manager, and a newer employee. As a company with 5 or more employees, the LSA was applicable.

III. Company Claims
The Company was established in May 2023 and hired the Employee to supplement marketing, but due to his inexperience in this field (he had been a cook previously), the Company had him work in sales support. This start-up company needed positive and aggressive sales activity from the Employee, but instead, the Employee read newspapers from 9 am (the time he arrived at the office) to 10:30, and then usually went out to take care of his personal banking for the rest of the morning. In the afternoon he would call his friends, and generally show a clear lack of enthusiasm for his sales responsibilities. He would not fill out daily sales reports, would not use honorific words when addressing the Japanese managing director simply because they were the same age, and did not like to obey his superiors, so the Employee was dismissed.
The Company only employed three persons including the Employee, so, according to the LSA, application for remedy for unfair dismissal could not be made. The marketing director and the general affairs director were not employees (there was no employment contract with the Company), but rather business partners who worked on commission. They received commissions of six million won per month each and had agreed in their contracts to receive 10% of company stock when stock volume increased. Recently, the Company had not been able to pay commissions to these directors due to deterioration in sales. The directors had submitted a petition to the Labor Office to receive unpaid wages, but they were denied by the Labor Inspector after he concluded they were not employees according to the LSA. At the time of this application for remedy, the two directors had begun filing a civil suit against the Company to receive their commissions.

IV. The Labor Commission’s Decision
As the two parties were in dispute as to the reasons for dismissal, the Labor Commission determined that the key point of this case was whether the Company had 5 employees or more. This needed to be done by judging if the marketing director and general affairs director were employees to which the LSA applied.
The marketing director and the general affairs director had signed a service commission contract with the Company, and worked accordingly. In more detail, the general affairs director was also working for another company at the same time, and in fact neither director worked exclusively for the Company, so their attendance was not strictly controlled. They worked on commissioned tasks independently at their discretion rather than receiving specific and direct orders, and just reported their progress to the employer. Accordingly, they were commissioned with a certain authority to give work orders to or supervise and direct employees, including the Employee concerned in this case. According to the commission contract, the marketing and general affairs directors received commissions and reimbursement of their expenses, and were to receive a certain number of stocks when the company increased them in the near future, unlike the other employees, including the Employee in this case. What they received or would receive in commissions for work cannot be regarded as remuneration in return for labor service. Furthermore, they were not registered for the four social security insurances. Considering all these factors, the marketing director and the general affairs director cannot be treated as employees providing a labor service under the employer’s supervision.
When excluding the marketing director and the general affairs director, the Company had hired fewer than five employees, which means that the Company is exempt from application of Article 23 (1) of the LSA: evaluation of unfair dismissal. Therefore, the application for remedy for unfair dismissal shall be rejected.