Corporate trends / Performance record
Unfair Dismissal Decision on “Employee Status and Personnel Transfer (Excessive Pay Cut Beyond Statutory Limit)” (Unfair Dismissal 96)
- Date2026/01/12 13:31
- Read 208
[Case Information]
- Case Title: Unfair dismissal decision on “Employee Status and Personnel Transfer (Excessive Pay Cut Beyond Statutory Limit)”
- Date of Decision:
- Case Number: Dismissed
- Decision-Making Body: Incheon Regional Labor Relations Commission 2025Buhae510 ○ ○ ○ Application for Remedy for Unfair Dismissal
2025.11.19
- Summary of Outcome:
A. Whether the workers fall under the category of “employees” as defined in the Labor Standards Act
It was held that, at the time of the personnel transfer and pay cut disposition, the workers were providing labor for the purpose of receiving wages under substantial direction and supervision of the employer, and therefore qualified as “employees” under the Labor Standards Act.
1. Legal Implications
This article examines an unfair dismissal and personnel transfer case handled by the Incheon Regional Labor Relations Commission, focusing on how the Commission distinguishes and assesses (i) employee status under the Labor Standards Act, (ii) the legitimacy of personnel transfers, and (iii) the lawfulness of pay cut dispositions. As this is an area in which parties frequently seek assistance from experts such as Labor Law Firm Law&, it may be useful for those considering similar restructuring-type personnel measures or disciplinary actions.
Ⅰ. Case Overview
In this case, the workers filed an application for remedy with the Labor Relations Commission, claiming that the employer’s personnel transfer order and pay cut disposition constituted unfair dismissal and unfair personnel measures. The Commission first examined whether the applicants qualified as “employees” under the Labor Standards Act, and then sequentially reviewed (i) the legitimacy of the personnel transfer and (ii) whether the pay cut disposition violated Article 95 of the Labor Standards Act (Limit on Reduction of Wages).
As a result, the Commission recognized their employee status and found the personnel transfer to be a legitimate exercise of the employer’s managerial prerogative, but held that part of the pay cut disposition exceeded the statutory limit and was therefore unfair.
Ⅱ. Issues
The issues in this case were: “(i) whether the workers, who were subject to substantial direction and supervision by the employer, qualified as ‘employees’ under the Labor Standards Act; (ii) on that premise, whether the personnel transfer constituted an unfair transfer or reassignment amounting to an abuse of rights; and (iii) whether the pay cut disposition was invalid for violating the upper limit on wage reduction prescribed in Article 95 of the Labor Standards Act.”
Ⅲ. Summary of the Labor Relations Commission’s Reasoning
The decision panel found that the workers provided labor for the purpose of receiving wages under substantial direction and supervision by the employer at the employer’s business site, and that they were in a subordinate position subject to the employer’s work rules and personnel regulations. On this basis, the panel held that the workers qualified as “employees” under the Labor Standards Act.
With respect to the personnel transfer, the panel held that (i) there was a business necessity for the personnel order, (ii) it was difficult to view the disadvantages in the workers’ living conditions resulting from the transfer as significantly exceeding the level ordinarily to be borne by employees, and (iii) there were no circumstances indicating a serious violation of procedures required under the principle of good faith in the course of issuing the personnel order. Accordingly, the personnel transfer was deemed to fall within the scope of a legitimate exercise of the employer’s personnel authority.
By contrast, regarding the pay cut disposition, the panel found that (i) the amount of the pay cut imposed on one worker exceeded the statutory upper limit on wage reduction under Article 95 of the Labor Standards Act (“an amount not exceeding one day’s average wage per instance and a total amount not exceeding one-tenth of the wages”), and (ii) because a pay cut is a form of disciplinary action that can significantly disadvantage the worker’s livelihood, the statutory limit must be interpreted strictly. On this basis, the panel held that the pay cut disposition in question violated the Labor Standards Act and was unfair.
Ⅳ. Practical Points (From the Employee’s Perspective)
Regardless of whether the relationship is styled as an employment contract, consignment, or subcontracting, if in substance you have continuously provided labor for the purpose of receiving wages under the employer’s direction and supervision, you may be recognized as an “employee” under the Labor Standards Act by the Labor Relations Commission. Also, even if you are dissatisfied with a personnel transfer, it is difficult for it to be found an unfair personnel measure if there is a business necessity and the disadvantage to your living conditions does not exceed the ordinarily tolerable level. Conversely, disciplinary measures such as pay cuts must be examined separately and carefully to determine whether they exceed the upper limit set out in Article 95 of the Labor Standards Act.
If you have been subjected to a pay cut, you should accurately calculate the rate and duration of the pay cut and the total reduction amount relative to your average wage, verify whether the statutory limit has been exceeded, and, if there is any excess, consider challenging the invalidity of that excess portion through an application for remedy to the Labor Relations Commission or through litigation.
Ⅴ. Practical Points (From the Employer/Company’s Perspective)
From the employer’s perspective, when planning personnel transfers, reassignments, or relocations, it is important to comprehensively review, in line with Supreme Court precedents, (i) business necessity, (ii) the extent of disadvantage to the employee’s living conditions, and (iii) procedural fairness (including whether consultation took place), and to retain objective documentation supporting these grounds. If a personnel transfer is found to be legitimate, this often has a favorable impact on subsequent determinations of the legitimacy of disciplinary actions or additional personnel measures, so it is advisable to design the structure of the exercise of personnel authority carefully from the outset.
With respect to pay cut dispositions, employers must clearly set out the criteria and procedures for pay cuts in their work rules and personnel regulations, and strictly comply, in actual implementation, with the upper limit under Article 95 of the Labor Standards Act (an amount not exceeding one day’s average wage per instance and a total amount not exceeding one-tenth of the wages). Employers should note that any pay cut exceeding this limit may itself constitute an unlawful and unfair disposition, even where there is sufficient cause for discipline.
To prevail in this type of case, it is necessary to have a precise understanding of the criteria for determining employee status, the legal principles governing the legitimacy of personnel orders, and the rules on the upper limit for pay cuts, and to have the capability to systematically organize and prove the facts that satisfy each requirement.
2. Matters Decided
A. Case Overview and Procedural History
A. Whether the workers fall under the category of “employees” as defined in the Labor Standards Act
It is determined that, at the time of the personnel transfer and pay cut disposition, the workers were providing labor for the purpose of receiving wages under substantial direction and supervision of the employer, and therefore qualified as “employees” under the Labor Standards Act.
B. Whether the personnel transfer was legitimate
The personnel transfer is deemed to have been a legitimate exercise of the employer’s personnel authority, as it was carried out within the scope of that authority, no disadvantage to the workers’ living conditions occurred that significantly exceeded the level they are ordinarily expected to bear, and it is difficult to view the procedures required under the principle of good faith as having been violated to a serious extent. Accordingly, the personnel transfer is legitimate.
C. Whether the pay cut disposition violated Article 95 of the Labor Standards Act
The pay cut disposition imposed on Worker 1 violated the statutory upper limit on the amount of wage reduction under the Labor Standards Act, and therefore constitutes a violation of the Labor Standards Act and is unfair.
3. Summary of Decision
A. Summary of the Labor Relations Commission’s Reasoning
A. Whether the workers fall under the category of “employees” as defined in the Labor Standards Act
It is determined that, at the time of the personnel transfer and pay cut disposition, the workers were providing labor for the purpose of receiving wages under substantial direction and supervision of the employer, and therefore qualified as “employees” under the Labor Standards Act.
B. Whether the personnel transfer was legitimate
The personnel transfer is deemed to have been a legitimate exercise of the employer’s personnel authority, as it was carried out within the scope of that authority, no disadvantage to the workers’ living conditions occurred that significantly exceeded the level they are ordinarily expected to bear, and it is difficult to view the procedures required under the principle of good faith as having been violated to a serious extent. Accordingly, the personnel transfer is legitimate.
C. Whether the pay cut disposition violated Article 95 of the Labor Standards Act
The pay cut disposition imposed on Worker 1 violated the statutory upper limit on the amount of wage reduction under the Labor Standards Act, and therefore constitutes a violation of the Labor Standards Act and is unfair. /
[See More Related Decisions]
- “Unfair Dismissal Decision on ‘Excessive Disciplinary Measure (Failure to Conduct Nighttime Checkpoint Searches)’”
- “Unfair Dismissal Decision on ‘Non-Formation of Hiring Commitment (Absence of Offer Letter)’” – Date of Decision: – Case Number: Initial Decision Upheld
- “Unfair Dismissal Decision on ‘Failure to Meet Requirements for Redundancy Dismissal (Workout Company)’”
[Tags]
Unfair dismissal, Employee status and personnel transfer (excessive pay cut beyond statutory limit), disciplinary disposition, employee status, personnel transfer, Labor Law Firm Law&, large labor law firm, Samseong-dong labor law firm, Samseong Station labor law firm, Gangnam labor law firm
※ This article is part of Labor Law Firm Law&’s “Unfair Dismissal Decisions” series.
※ You can view the previous article, “Unfair Dismissal Decision on ‘Excessive Disciplinary Measure (Failure to Conduct Nighttime Checkpoint Searches)’,” in a new window.
※ The list of decisions related to Employee Status and Personnel Transfer (Excessive Pay Cut Beyond Statutory Limit) can be viewed together on the “Employee Status and Personnel Transfer (Excessive Pay Cut Beyond Statutory Limit) Related Decisions” page.
※ Korean version of this case: Korean article
- Case Title: Unfair dismissal decision on “Employee Status and Personnel Transfer (Excessive Pay Cut Beyond Statutory Limit)”
- Date of Decision:
- Case Number: Dismissed
- Decision-Making Body: Incheon Regional Labor Relations Commission 2025Buhae510 ○ ○ ○ Application for Remedy for Unfair Dismissal
2025.11.19
- Summary of Outcome:
A. Whether the workers fall under the category of “employees” as defined in the Labor Standards Act
It was held that, at the time of the personnel transfer and pay cut disposition, the workers were providing labor for the purpose of receiving wages under substantial direction and supervision of the employer, and therefore qualified as “employees” under the Labor Standards Act.
1. Legal Implications
This article examines an unfair dismissal and personnel transfer case handled by the Incheon Regional Labor Relations Commission, focusing on how the Commission distinguishes and assesses (i) employee status under the Labor Standards Act, (ii) the legitimacy of personnel transfers, and (iii) the lawfulness of pay cut dispositions. As this is an area in which parties frequently seek assistance from experts such as Labor Law Firm Law&, it may be useful for those considering similar restructuring-type personnel measures or disciplinary actions.
Ⅰ. Case Overview
In this case, the workers filed an application for remedy with the Labor Relations Commission, claiming that the employer’s personnel transfer order and pay cut disposition constituted unfair dismissal and unfair personnel measures. The Commission first examined whether the applicants qualified as “employees” under the Labor Standards Act, and then sequentially reviewed (i) the legitimacy of the personnel transfer and (ii) whether the pay cut disposition violated Article 95 of the Labor Standards Act (Limit on Reduction of Wages).
As a result, the Commission recognized their employee status and found the personnel transfer to be a legitimate exercise of the employer’s managerial prerogative, but held that part of the pay cut disposition exceeded the statutory limit and was therefore unfair.
Ⅱ. Issues
The issues in this case were: “(i) whether the workers, who were subject to substantial direction and supervision by the employer, qualified as ‘employees’ under the Labor Standards Act; (ii) on that premise, whether the personnel transfer constituted an unfair transfer or reassignment amounting to an abuse of rights; and (iii) whether the pay cut disposition was invalid for violating the upper limit on wage reduction prescribed in Article 95 of the Labor Standards Act.”
Ⅲ. Summary of the Labor Relations Commission’s Reasoning
The decision panel found that the workers provided labor for the purpose of receiving wages under substantial direction and supervision by the employer at the employer’s business site, and that they were in a subordinate position subject to the employer’s work rules and personnel regulations. On this basis, the panel held that the workers qualified as “employees” under the Labor Standards Act.
With respect to the personnel transfer, the panel held that (i) there was a business necessity for the personnel order, (ii) it was difficult to view the disadvantages in the workers’ living conditions resulting from the transfer as significantly exceeding the level ordinarily to be borne by employees, and (iii) there were no circumstances indicating a serious violation of procedures required under the principle of good faith in the course of issuing the personnel order. Accordingly, the personnel transfer was deemed to fall within the scope of a legitimate exercise of the employer’s personnel authority.
By contrast, regarding the pay cut disposition, the panel found that (i) the amount of the pay cut imposed on one worker exceeded the statutory upper limit on wage reduction under Article 95 of the Labor Standards Act (“an amount not exceeding one day’s average wage per instance and a total amount not exceeding one-tenth of the wages”), and (ii) because a pay cut is a form of disciplinary action that can significantly disadvantage the worker’s livelihood, the statutory limit must be interpreted strictly. On this basis, the panel held that the pay cut disposition in question violated the Labor Standards Act and was unfair.
Ⅳ. Practical Points (From the Employee’s Perspective)
Regardless of whether the relationship is styled as an employment contract, consignment, or subcontracting, if in substance you have continuously provided labor for the purpose of receiving wages under the employer’s direction and supervision, you may be recognized as an “employee” under the Labor Standards Act by the Labor Relations Commission. Also, even if you are dissatisfied with a personnel transfer, it is difficult for it to be found an unfair personnel measure if there is a business necessity and the disadvantage to your living conditions does not exceed the ordinarily tolerable level. Conversely, disciplinary measures such as pay cuts must be examined separately and carefully to determine whether they exceed the upper limit set out in Article 95 of the Labor Standards Act.
If you have been subjected to a pay cut, you should accurately calculate the rate and duration of the pay cut and the total reduction amount relative to your average wage, verify whether the statutory limit has been exceeded, and, if there is any excess, consider challenging the invalidity of that excess portion through an application for remedy to the Labor Relations Commission or through litigation.
Ⅴ. Practical Points (From the Employer/Company’s Perspective)
From the employer’s perspective, when planning personnel transfers, reassignments, or relocations, it is important to comprehensively review, in line with Supreme Court precedents, (i) business necessity, (ii) the extent of disadvantage to the employee’s living conditions, and (iii) procedural fairness (including whether consultation took place), and to retain objective documentation supporting these grounds. If a personnel transfer is found to be legitimate, this often has a favorable impact on subsequent determinations of the legitimacy of disciplinary actions or additional personnel measures, so it is advisable to design the structure of the exercise of personnel authority carefully from the outset.
With respect to pay cut dispositions, employers must clearly set out the criteria and procedures for pay cuts in their work rules and personnel regulations, and strictly comply, in actual implementation, with the upper limit under Article 95 of the Labor Standards Act (an amount not exceeding one day’s average wage per instance and a total amount not exceeding one-tenth of the wages). Employers should note that any pay cut exceeding this limit may itself constitute an unlawful and unfair disposition, even where there is sufficient cause for discipline.
To prevail in this type of case, it is necessary to have a precise understanding of the criteria for determining employee status, the legal principles governing the legitimacy of personnel orders, and the rules on the upper limit for pay cuts, and to have the capability to systematically organize and prove the facts that satisfy each requirement.
2. Matters Decided
A. Case Overview and Procedural History
A. Whether the workers fall under the category of “employees” as defined in the Labor Standards Act
It is determined that, at the time of the personnel transfer and pay cut disposition, the workers were providing labor for the purpose of receiving wages under substantial direction and supervision of the employer, and therefore qualified as “employees” under the Labor Standards Act.
B. Whether the personnel transfer was legitimate
The personnel transfer is deemed to have been a legitimate exercise of the employer’s personnel authority, as it was carried out within the scope of that authority, no disadvantage to the workers’ living conditions occurred that significantly exceeded the level they are ordinarily expected to bear, and it is difficult to view the procedures required under the principle of good faith as having been violated to a serious extent. Accordingly, the personnel transfer is legitimate.
C. Whether the pay cut disposition violated Article 95 of the Labor Standards Act
The pay cut disposition imposed on Worker 1 violated the statutory upper limit on the amount of wage reduction under the Labor Standards Act, and therefore constitutes a violation of the Labor Standards Act and is unfair.
3. Summary of Decision
A. Summary of the Labor Relations Commission’s Reasoning
A. Whether the workers fall under the category of “employees” as defined in the Labor Standards Act
It is determined that, at the time of the personnel transfer and pay cut disposition, the workers were providing labor for the purpose of receiving wages under substantial direction and supervision of the employer, and therefore qualified as “employees” under the Labor Standards Act.
B. Whether the personnel transfer was legitimate
The personnel transfer is deemed to have been a legitimate exercise of the employer’s personnel authority, as it was carried out within the scope of that authority, no disadvantage to the workers’ living conditions occurred that significantly exceeded the level they are ordinarily expected to bear, and it is difficult to view the procedures required under the principle of good faith as having been violated to a serious extent. Accordingly, the personnel transfer is legitimate.
C. Whether the pay cut disposition violated Article 95 of the Labor Standards Act
The pay cut disposition imposed on Worker 1 violated the statutory upper limit on the amount of wage reduction under the Labor Standards Act, and therefore constitutes a violation of the Labor Standards Act and is unfair. /
[See More Related Decisions]
- “Unfair Dismissal Decision on ‘Excessive Disciplinary Measure (Failure to Conduct Nighttime Checkpoint Searches)’”
- “Unfair Dismissal Decision on ‘Non-Formation of Hiring Commitment (Absence of Offer Letter)’” – Date of Decision: – Case Number: Initial Decision Upheld
- “Unfair Dismissal Decision on ‘Failure to Meet Requirements for Redundancy Dismissal (Workout Company)’”
[Tags]
Unfair dismissal, Employee status and personnel transfer (excessive pay cut beyond statutory limit), disciplinary disposition, employee status, personnel transfer, Labor Law Firm Law&, large labor law firm, Samseong-dong labor law firm, Samseong Station labor law firm, Gangnam labor law firm
※ This article is part of Labor Law Firm Law&’s “Unfair Dismissal Decisions” series.
※ You can view the previous article, “Unfair Dismissal Decision on ‘Excessive Disciplinary Measure (Failure to Conduct Nighttime Checkpoint Searches)’,” in a new window.
※ The list of decisions related to Employee Status and Personnel Transfer (Excessive Pay Cut Beyond Statutory Limit) can be viewed together on the “Employee Status and Personnel Transfer (Excessive Pay Cut Beyond Statutory Limit) Related Decisions” page.
※ Korean version of this case: Korean article
