Introduction

In a wrongful termination suit brought by two employees who were terminated for using corporate cards for personal expenses – including paying for traffic citations and visits to massage parlours – the Seoul High Court held for the employees, relying on what the court believed to be relatively small personal expenditures as the basis for its decision. Therefore, an employee's repeated personal use of his or her corporate card, in and of itself, may not always constitute sufficient just cause for termination, according to this recent high court decision.

Facts

During a firm-wide audit, the employer (a logistics company) discovered that a manager of its local shipping facility had spent roughly W2 million (approximately $2,000) in personal expenses using his corporate card over three-and-half years and across 37 separate transactions. The employer also confirmed that another employee (a manager of its car rental office) had used his corporate card to pay around W500,000 (approximately $500) in personal expenses during a similar three-year span. The employer terminated the employees, who then filed petitions alleging wrongful termination to the Labour Relations Commission (LRC). Both the regional and central LRCs held for the employees and the Administrative Court subsequently affirming the LRC decisions. The employer then appealed to the Seoul High Court.

Decision

In finding for the employees and affirming the Administrative Court's ruling, the Seoul High Court reasoned that while the employees' personal use of their corporate cards qualified as grounds for disciplinary actions, this use did not constitute sufficient just cause for termination under Korean law. The court explained that based on the employer's internal policy, disciplinary actions ranging from suspension to termination were permissible against employees who caused damage to the company exceeding W1 million (approximately $1,000). Although the total personal expenditure exceeded the W1 million threshold, the annual average of the personal expenditures fell short of W1 million (ie, approximately $500 and $200 per year for each respective employee). And in light of the lack of prior disciplinary actions against the employees, the court held that the employer had abused its discretion and the terminations were unjust.

Comment

The court's ruling is an adverse precedent that may have an impact on many businesses as they consider whether to terminate an employee for personal use of corporate cards. However, this case is now pending before the Supreme Court.

For further information on this topic please contact Sang Hoon Lee or William Woojong Kim at Lee & Ko by telephone (+82 2 772 4000) or email (sanghoon.lee@leeko.com or william.kim@leeko.com). The Lee & Ko website can be accessed at www.lawleeko.com.

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