YOON&YANG

Recently, the Seoul High Court overturned the lower court’s decision that had recognized the employee status of a non-registered officer of a semiconductor company developing LED chips and instead ruled in favor of the employer. Contrary to the Labor Relations Commission and the Seoul Administrative Court that had recognized the employee status of the non-registered officer, the High Court clarified that the determination of employee status cannot be based on a simple approach that “registered officers are not employees, while non-registered officers are.”

This decision resonates as an important guidance for future cases, for the Court denied employee status of a non-registered officer after carefully examining the nature of the working relationship and the criteria for determining employee status.

1. Factual Background

2. Yoon & Yang’s Arguments and Court’s Determination

3. Implications

1. Factual Background

The plaintiff was a semiconductor company that develops LED chips, and the dismissed officer was initially a senior researcher in the plaintiff’s EPI (Epitaxy) development group. The senior researcher was later promoted to an unregistered officer serving as the head of EPI development. As an unregistered officer, he was also an executive in charge of VB (Visible Blue) development and responsible for the EPI manufacturing group.

When the plaintiff terminated its executive service agreement with the dismissed officer, he claimed to be an employee and filed an application for a relief from unfair dismissal. The Regional Labor Relations Commission, the Central Labor Relations Commission, and the Seoul Administrative Court all decided in favor of the dismissed officer and recognized him as an employee, thereby ruling that the termination of the executive service agreement with the dismissed officer constituted an unfair dismissal. However, the Seoul High Court (the “Court”) denied his employee status and overturned the decision of the court of the first instance.

2. Yoon & Yang’s Arguments and Court’s Determination

Yoon & Yang, representing the plaintiff, advocated that employee status should not be recognized merely because the individual was a non-registered officer, but rather must be determined based on a substantive assessment of the actual nature of the working relationship.

In particular, Yoon & Yang demonstrated that the dismissed officer:

(i)  held broad and top-level decision-making authority within the company;

(ii)  participated in major management decisions;

(iii)  had approval authority over new product development throughout the entire process of introducing new products to the market;

(iv)  was directly involved in organizational restructuring and personnel appointments;

(v)  was not subject to attendance control or supervision by the company; and

(vi)  unlike regular employees, received MBO (Management By Objectives) bonuses and even chose a “minus option,”resulting in a negative bonus.

Based on these arguments and evidence, Yoon & Yang successfully persuaded the Court to deny the employee status of the dismissed officer.

3. Implications

The pertinent court decision is expected to serve as an important precedent in cases concerning the employee status of non-registered officers, and it is particularly significant for the following reasons:

(i) In the pertinent case, the Court denied the employee status of the non-registered officer by focusing on factors such as the scope of authority and responsibility exercised, participation in key management decisions, whether attendance and working hours were controlled, and whether the dismissed officer bore the risks and rewards of business performance. The Court found that factors such as severance pay settlements or the application of social security schemes were insufficient to establish employee status. The Court faithfully adhered to the legal principles established by the Supreme Court regarding the criteria and burden of proof required for determining employee status, reaffirming a tendency toward a stricter review of employee recognition.

(ii) Unlike previous rulings where the courts displayed tendency to broadly recognize the employee status of non-registered officers, frequently interpreting the process of reporting to and communicating with the representative director as evidence of subordination and supervision as an employee, the Court clearly identified the nature of the executive service agreement in the pertinent case and held that certain directions or supervision from the representative director did not, in themselves, dictate employee status, as such arrangements are also consistent with the nature of an executive service relationship.

Ultimately, the determination of whether a non-registered officer qualifies as an employee depends on the specific factual circumstances constituting the nature of the working relationship. Therefore, a careful legal assessment tailored to the characteristics of each case is required.

Yoon & Yang’s Employment and Labor Practice is comprised of highly experienced attorneys, certified public labor attorneys, and foreign attorneys. We deliver comprehensive advisory services and legal representation across the full spectrum of corporate HR and labor management matters.

We take pride in approaching every engagement from the client’s perspective—proactively leading the dialogue on rapidly evolving labor issues, identifying emerging challenges, and developing practical, strategic solutions. Leveraging our accumulated insights and in-depth knowledge, we provide clients with timely, business-focused advice.

With extensive experience across all areas of labor and employment law, our team effectively manages both individual and collective labor relations. We regularly handle disputes involving dismissal, disciplinary measures, wages, and discrimination, as well as large-scale collective matters such as industrial actions and other forms of labor disputes. Our goal is to help clients navigate complex labor environments with clarity, confidence, and foresight. Please feel free to get in contact with one of our key contacts if you have any queries.