Mandatory Retirement Age Under Korean Law
by Brendon Carr
Every once in a while we’ll get an inquiry concerning some company with an older, male employee who has basically “retired on the job”. Hired long ago for his supposed industry connections, which have withered away over time, this employee becomes a problem because under the Labor Standards Act, “just cause” is necessary to terminate the guy—and he’s not done anything wrong. He’s just no longer useful (yes, usually he’s a big jerk). Yet because Korean society elevates older people to an unchallenged status, younger employees feel quite burdened by having him around since he doesn’t contribute but they can’t say anything. It’s a managerial challenge: How to get this uncool older guy to leave? Do we need to start playing techno music all day?
This problem could be avoided by specifying a mandatory retirement age. I know, I know—it’s unfair and possibly age discrimination to turf out people who are still in the prime of their lives! I’m 38 and therefore not completely useless yet. So I can afford to be callous. But the surprise is, I may only have a few good working years left. Read on for the reason why…
Neither the Labor Standards Act nor related subject-specific employment laws, including the Act on Promotion of Employment Opportunities for the Aged (the “Employment Opportunities Act"), currently states any specific age for mandatory retirement. Therefore, under Korean law an employer is free to designate and enforce a mandatory retirement age. The Employment Opportunities Act, at its Art. 19, does state a normative standard—of 60—as the recommended lowest mandatory retirement age. But this provision is a recommendation, and not binding on any company. Supreme Court precedents uphold an employer’s right to set a lower mandatory retirement age as low as 52.
This retirement age would be effective once stated in the company’s collective agreement (usually the Work Rules, which are mandatory for workplaces with 10 or more employees) and in an employee’s individual employment agreement.
In our practice, which includes a significant M&A component which gives us opportunities to compare many employers’ standards, we most commonly see 60 as the mandatory retirement age in company Work Rules—but when consulted about what’s a best practice, we usually recommend a lower ago of 55, 57 or 58 “just because you can”. Since we’ve seen 52 is allowed, we’ve amended our recommendation. But once that mandatory retirement age is set, you’re pretty much stuck with it.
Under LSA Art. 97, most changes to existing Work Rules require collective approval from your workforce. However, when introducing Work Rules for the first time, the company is only required to “consult” the workforce and consider employees’ opinions; they do not have the veto power to reject some changes. This means that where your company does not currently have Work Rules, you have considerable freedom to establish standards to your liking, including the retirement age.
We reviewed scholarly discussion of the idea that changes to Work Rules made to target one employee, or a certain class of employees, constitute an unfair labor practice even though the change has received collective approval from the workforce. And we found a case on this point (Supreme Court 96 da 2507; decision of June 16, 1997)—this seems both reasonable and fair. If you change your Work Rules just to get one guy, that would not be upheld in court.
We did not find any case that held as unfair an employer’s initial adoption of Work Rules with provisions targeting or falling upon one employee or certain class of employees. However, it is not unreasonable to presume that the same principle may be held to apply to the adoption by your company of new Work Rules which just happen to have a retirement age of 60 or below, at the very same time you have this guy you want to leave.
That does not necessarily mean that a complaint will necessarily follow if you adopt a mandatory retirement age by amendment of existing Work Rules. Only you can read the character of your staff. We have direct experience working with a foreign company which dealt with an unwanted employee by adopting Work Rules containing a retirement age below the employee’s then-current age—and no complaint ensued. The employee quite peacefully departed the company at that point.
What happens in the case an employer has no Work Rules, and the individual employment agreement also has no statement of retirement age? Should the employee then get to stay forever? In this regard, we note again the normative standard age of “not less than 60” in the Employment Opportunities Act. It is our opinion that because of this recommendation, an employer shall have a reasonable argument to be able to enforce retirement starting at age 60 even in the absence of a clear statement in the employment documents. But we have not done a comprehensive case search on this point. Hey, answers on a blog can’t be a substitute for real legal advice anyway.
In today’s Korea Times it’s reported that Korean banks currently have their mandatory retirement ages below 60 but are considering a raise to 60. This is a harbinger of official government action, as the banks are still under strong (albeit informal) government control. If you want your retirement age to be less than 60, better get on it!
In February 2007, the government announced its intent to ”raise the retirement age from 57 to 62”. The “retirement age” being discussed in the article is the average retirement age in the marketplace based on ages enforced by a variety of businesses under their Work Rules, and not a statutory requirement. In May, the idea was floated that from 2010, companies should be barred from setting a mandatory retirement age. It should be noted, however, that these policy intent announcements are not the equivalent of law. There may be a statute passed in the future, but there is none now; probably there is not even a draft available.
Comments
Comments Policy: Comments to Korea Law Blog are moderated. This means abusive, or just plain stupid comments will be deleted. So don't be a jerk. It also means there may be some delay from the time you post a comment to the time it shows up here. If your comment wasn't against the policy, it will show up in a little bit.
-
About Korea Law Blog
Korea Law Blog is brought to you by Brendon Carr, an American lawyer working as a foreign legal consultant for more than 10 years in Seoul. (Brendon is not admitted as an attorney in Korea. But you knew that.) -
Contact Details
-
Tel. +82 (0)2 772 2734
Fax +82 (0)2 772 2800
Mobile +82 (0)10 8788 0750 -
Download My FREE Korea Employment Law FAQ
-
Korean Media
-
Blogroll
-