Paragraph 1 of Article 30 of the Labor Standards Act of Korea (“LSA”) states that “An employer shall, without justifiable cause, not dismiss, lay off, suspend, transfer a worker, reduce wages, or take other punitive measures against a worker”
So what is exactly “justifiable cause” under LSA? For instance, when is an employer deemed to have a “justifiable cause” if the employer wants to reduce salary of its employee(s)? In such situation, a “justifiable cause” would be deemed to arise for the purposes of Article 30 of LSA if an employee has committed an act which would require a disciplinary action by the employer or if such reduction of salary has been necessitated by reasons related to management of the employer’s business.
It should be noted here that Korean courts strictly construe the phrase “justifiable cause.” For instance, if an employer has to reduce the employees’ salary due to the management reasons, the level of management difficulty has to be such that the company’s survival would be jeopardized if the salary reduction were not implemented.
If there is no “justifiable cause” found as required under the relevant law for unilateral reduction, then an alternative way of implementing the salary cut is obtaining prior consent from the employees (assuming that this is a company-wide reduction, not a reduction made on some individual employees).
In other words, under LSA, the reduction of the salary would represent the “amending the terms of employment unfavorably to workers.” In such case, if there is a labor union within the company composed of more than a majority of total number of employees, the employer must obtain the labor union’s consent. If there is no union as such, the employer must obtain consent from the majority of workers at an employee meeting.
As for the employee affected by the salary cut, (s)he may seek a remedy from the labor committee (an independent committee created by the labor ministry) and/or file a claim with the labor superintendent under the labor ministry who is granted with law enforcement authorities.