Introduction
Specification of grounds for dismissal
Maintenance of fair standards
Provision of appropriate support and assistance
Avoidance of absolute standards evaluation system
Multifaceted evaluation encouraged
Provision of evaluation results

Proof of continuous poor performance
Provision of opportunities to improve performance
Consideration of precedent
Provision of opportunities for voluntary resignation
Comment


Introduction

Due to the global economic slowdown, many employers are now faced with a greater need to enhance workforce efficiency and productivity. Therefore, management of poorly performing employees has become even more important than before.

However, the dismissal of employees based on poor performance may expose employers to legal risks, liabilities and expenses as the Korean courts have shown a tendency to rule against dismissal based on poor performance. This update sets down 10 issues that every employer should consider before dismissing an employee for poor performance.

Specification of grounds for dismissal

If the work rules or collective bargaining agreement contains an enumerated list of grounds for dismissal, an employer may not dismiss an employee for grounds other than those listed under such work rules or collective bargaining agreement. Thus, it is advisable to state poor performance as grounds for dismissal in the work rules or collective bargaining agreement, or at the very least, include a catch-all provision such as "any other instances where it is difficult to continue the employment relationship for reasons similar to the above".

Maintenance of fair standards

Employees with poor performance should be selected based on standards of evaluation that are specific and appropriate for the nature, type and difficulty of their job functions. For example, if customer management skills of a sales associate are not given proper weight in the evaluation, such standards of evaluation may not be regarded as fair, and accordingly dismissal of an employee based on poor performance according to such standards of evaluation may be held invalid.

Provision of appropriate support and assistance

If an employee's poor performance is largely attributable to lack of support and assistance from the employer, dismissal of such employee based on poor performance is unlikely to be upheld by the court. For example, if an employer sets strict and high sales targets for a sales associate and dismisses such associate based on poor performance without having provided the employee with the office equipment and sales materials necessary to perform his or her job, such dismissal may not be recognised by the court.

Avoidance of absolute standards evaluation system

If a pre-fixed number or percentage of employees is to be selected as poorly performing employees based on an absolute standards evaluation system, such selection is not likely to be justified. In other words, even if the work rules provide that "employees performing in the bottom fifth percentile based on performance reviews shall be dismissed", it would be difficult to dismiss an employee based on such a provision alone, and the employer must be able to prove that the employee's performance is significantly and objectively poor that it would be difficult to continue the employment relationship based on social norms.

Multifaceted evaluation encouraged

It is advisable to have multiple reviewers to evaluate the performance of employees. In addition, the credibility and fairness of an evaluation is more likely to be respected if it includes not only top-down evaluations but also peer-to-peer reviews or reviews by a labour union representing the interests of employees. For example, where an employee's performance was as good as or higher than that of other employees based on peer review, but the employee's overall performance was determined to be poor due to having received the lowest score from the employee's superiors, dismissal of the employee based on poor performance was not upheld by the court. Accordingly, it is important for employers to establish an evaluation system that prevents subjectivity; if the evaluation of the reviewers differ broadly despite having prevented any subjective input, the employer should carefully consider whether such employee should be branded as a poor performer.

Provision of evaluation results

Once an employee has been determined to be an underperformer, based on a reasonable evaluation and selection process, it is important to provide such employee with the evaluation results and clear instructions for improvement and document such results and instructions. Courts have upheld dismissals for poor performance where the employer was able to show documented proof that the subject employee had received a poor evaluation and failed to improve on performance year after year.

Proof of continuous poor performance

Although there is no clear standard for how long poor performance must continue to justify a dismissal, courts have upheld dismissals where an employee underperformed for five or six consecutive years, or where an employee performing a relatively simple and repetitive function continued to fail to improve performance for a few years. Although persistent poor performance is likely to increase the likelihood of the court recognising the validity of a dismissal based on poor performance, the court will also consider the totality of the circumstances, including the position, functions and previous performance evaluations of the dismissed employee in determining whether the period of poor performance is sufficient to warrant a dismissal.

Provision of opportunities to improve performance

There are many reasons why an employee may perform poorly, and it is often difficult to point out a single main reason for poor performance. Accordingly, whether the employer provided the employee with sufficient opportunities to improve performance will be one of the factors considered by the court in determining the validity of a dismissal. These opportunities may be provided in the form of:

  • job retraining;
  • relocation to another department in consideration of the employee's desires;
  • implementation of a performance improvement plan; or
  • continuous monitoring and mentoring of the employee.

With respect to job retraining, to the extent possible an employer should reinstate an employee who successfully completes job retraining to show the employer's genuine intent to provide poor performing employees with an opportunity to improve. For example, if the employees who underwent job retraining score differing results, yet all are subsequently dismissed, such job retraining is likely to be viewed by the court as being nothing more than a pretext for dismissal.

Consideration of precedent

The degree of poor performance that warrants dismissal will be determined by the court on a case-by-case basis in consideration of various factors, including the overall state of the company and the working conditions of its employees. Thus, employers should look to uphold disciplinary measures taken in the past in the industry and take a conservative approach in evaluating whether a dismissal of an underperforming employee would be deemed socially acceptable under the circumstances of the company. However, the employment environment in Korea is generally employee-friendly and courts tend to apply strict standards in determining what would be socially acceptable.

Provision of opportunities for voluntary resignation

Dismissal of an employee based on poor performance often leads to disputes, but just cause, which is required to terminate an employee under Korean law, is not easily recognised in dismissals based on poor performance and the employer has the burden of proof to show just cause for a dismissal. Thus, in order to minimise or avoid prolonged and unnecessary legal disputes ensuing from a dismissal based on poor performance, and to record the company's efforts to avoid a unilateral dismissal (which may be viewed as retaliatory action against an employee under certain circumstances), it is often advisable to provide the underperforming employee with an opportunity to voluntary resign (eg, by offering an early retirement package) before proceeding with a dismissal.

Comment

It is difficult to predict what constitutes a valid dismissal of an underperforming employee, and dismissal of an employee based on poor performance, although not impossible, is not easily recognised by the courts. Thus, before dismissing an employee for poor performance, an employer should carefully consider the above in order to minimise the potential legal risks that may arise from such dismissal.

For further information on this topic please contact Sang Wook Cho or Raymond Kang at Yulchon by telephone (+82 2 528 5200), fax (+82 2 528 5228) or email (swcho@yulchon.com or rkang@yulchon.com).