Labor and Employment Case Updates and Trends March 2025

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Labor and Employment Case Updates and Trends March 2025

Labor and Employment Case Updates and Trends March 2025

March 10, 2025

Notable Court Cases This Month

1. Legitimacy of Employee Transfers

On January 23, 2025, the Supreme Court ruled that transferring an employee to a separate legal entity, even if managed by the same representative or in an affiliated corporate relationship, constitutes a novation(which involves termination of employment with the original employer and reemployment with the new entity). Such a transfer requires the employee’s consent, and if conducted unilaterally, it is deemed unfair. Additionally, if a reassignment were not considered a novation but rather an internal relocation within the same company, the court determined that the measure was unjustified due to the lack of business necessity, the excessive disadvantages imposed on the employees, and procedural flaws. (Supreme Court Case 2024Du57668, January 23, 2025).

Case Summary:

In July 2021, A Company, a maritime passenger transportation firm, reassigned five crew members to a separate entity, B Company, and placed Captain C on unpaid leave. The employees filed for relief with the Labor Commission, claiming unfair personnel actions, and the Central Labor Commission ruled in their favor.
A Company challenged the decision through administrative litigation, but both the first-instance court (Seoul Administrative Court) and the appellate court (Seoul High Court) upheld the ruling.
The Supreme Court concluded that A Company’s reassignment of employees constituted a novation, requiring employee consent, which had not been obtained, making the measure unlawful. Furthermore, even if the action had been a internal relocation, the court found it lacked business necessity, imposed excessive disadvantages on employees, and failed to follow proper procedures, thereby rendering it invalid.

Implications:

This ruling reaffirms that transferring an employee to a separate legal entity requires explicit consent, even if the two entities share the same representative and operate in a similar business domain. Unless there are special circumstances justifying the entities as a single economic unit, such transfers are deemed unlawful if conducted unilaterally.

Additionally, even when the reassignment is considered a relocation within the same company, it may still be deemed unfair if the employer fails to demonstrate sufficient business necessity, imposes excessive disadvantages on employees, or lacks procedural fairness.

Employers should carefully assess these factors when implementing personnel movements to minimize legal risks. This decision provides clearer guidelines for companies handling similar cases, emphasizing the importance of securing employee consent and ensuring procedural legitimacy in personnel transfers. The Dentons Lee Labor Team has extensive experience providing legal advice on such matters, and we encourage companies to seek our guidance as needed.

Labor and Government Trends

1. Ministry of Employment and Labor Discusses Reform of Minimum Wage Determination System

The Ministry of Employment and Labor (MOEL) is pushing for a reform of the minimum wage determination system. Proposed changes include significantly reducing the size of the Minimum Wage Commission, which currently consists of 27 members composed of labor, management, and public interest representatives, or shifting from a direct negotiation model between the labor and management representatives to a system where experts recommended by both sides play a central role in decision-making. The ministry aims to ease labor-management conflicts and establish a more objective wage-setting process that reflects labor market conditions and economic factors more accurately.

However, labor unions strongly oppose the proposed reforms, arguing that the government is unilaterally pushing forward decisions made by a research group that was formed without labor representatives. In contrast, some academic experts argue that the current minimum wage determination system is inefficient, as it leads to intense conflicts between labor and management each year, and that a more rational discussion framework is needed.

The ongoing debate is expected to have a significant impact on how the minimum wage is determined and its future adjustment rates.

2. Legislative Discussions on Workplace Harassment Protection for Freelancers

The National Assembly is actively discussing legislative measures to extend workplace harassment protections to freelancers. Under the current Labor Standards Act, only employees are covered, leaving freelancers such as weathercasters, private academy instructors, and fitness trainers without legal protection against workplace harassment.

In response, the government and the ruling party are promoting a special act a proposed law aimed at protecting freelancers who are not classified as employees. This special act aims to ensure comprehensive protection for all workers by allowing victims to request a review by the Labor Relations Commission if they feel that their employer’s internal investigation is inadequate, and it further stipulates that severe harassment can be punishable even if it occurs only once.

However, some experts point out that the law may be ineffective if the issue of freelancers being forced into contracts that do not reflect their actual working conditions is not addressed. They also caution that enacting the law without sufficient discussion could lead to unintended consequences, such as false reports.

If the government and the National Assembly move forward with these legislative changes, companies and business owners should review their freelancer contracts and workplace harassment policies to ensure compliance with the new regulations.

3. Semiconductor Industry Act: Debate Over R&D Work Hour Exemptions

The Semiconductor Industry Act’s proposed exemption of research and development (R&D) employees from the 52-hour workweek regulation continues to be a point of contention. The government and business sector argue that the nature of R&D work requires intensive, focused efforts, and that flexible work hour arrangements will enhance industrial competitiveness and productivity. They emphasize that since R&D involves highly intellectual labor, allowing researchers to adjust their work hours flexibly will improve efficiency.

However, labor unions oppose the exemption, asserting that the current 52-hour workweek already constitutes excessive working hours. They raise concerns about the negative health effects of irregular, prolonged working hours. Additionally, they argue that existing flexible work arrangements—such as the flexible work hour system, selective work hour system, and special extended work provisions—are already in place, making additional exemptions unnecessary.

As the legislative direction of the Semiconductor Industry Act remains uncertain, debates over work hour deregulation and industrial competitiveness are expected to continue.

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