Corporate trends / Performance record
Case on Unfair Dismissal Relating to “Urgent Managerial Necessity (Capital Impairment of KRW 770 Million)” (Unfair Dismissal 462)
- Date2026/05/19 09:51
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[Case Information]
This case is a decision in which the employee prevailed in full on the issue of “urgent managerial necessity (capital impairment of KRW 770 million).”
Adjudicating Body: Jeonbuk Regional Labor Relations Commission 2026Buhae68 ○ ○ ○ Application for Remedy for Unfair Dismissal
2026.03.24 · Case Result: Employee’s claim fully upheld
Summary of Key Issues:
A. Whether there was an urgent managerial necessity
The employer in this case asserted that, due to deterioration in its management and financial condition, it had fallen into a state of capital impairment of approximately KRW 770 million and that overlapping duties had arisen in certain positions. However, it failed to provide concrete proof of any urgent managerial necessity at the company level. Accordingly, it was difficult to confirm the existence of urgent managerial necessity at the time of the collective dismissal in this case.
1. Legal Implications
This post reviews how the Labor Relations Commission assessed a collective dismissal (restructuring dismissal) dispute over alleged unfair dismissal, and what practical implications arise, based on the practical experience of Labor Law Firm Law&. In particular, this case is an important reference in unfair dismissal and collective dismissal disputes, as the Labor Relations Commission strictly examined the existence of urgent managerial necessity and compliance with collective dismissal procedures, despite the employer’s assertion of capital impairment.
Ⅰ. Case Overview
In this case, the employer carried out a collective dismissal on the grounds that the company’s management and financial condition had deteriorated to the point of capital impairment of approximately KRW 770 million, and that overlapping work had arisen in certain positions. The employee filed an application for remedy with the Labor Relations Commission, claiming that the collective dismissal constituted an unfair dismissal that did not satisfy the requirements under the Labor Standards Act.
Ⅱ. Issues
The issue in this case is:
“In a collective dismissal based on capital impairment and partial overlap of duties, where the requirements of Article 24 of the Labor Standards Act—namely, urgent managerial necessity, efforts to avoid dismissal, reasonable and fair selection of dismissal targets, and prior notice to and good-faith consultation with the employees’ representative—are not satisfied, does the collective dismissal constitute an unfair dismissal?”
Ⅲ. Summary of the Labor Relations Commission’s Findings
The adjudicating panel in this case found that the employer merely asserted managerial difficulties, including capital impairment of approximately KRW 770 million, but failed to submit financial data or specific indicators capable of proving a company-wide managerial crisis and the inevitability of workforce reduction. It also found that the employer had made no efforts whatsoever to avoid dismissal, such as a hiring freeze, reassignment, or voluntary retirement; that there were no criteria at all for selecting employees for collective dismissal, making it difficult to view the selection as objective, reasonable, and fair; and that the employer had not implemented any of the statutory procedures under the Labor Standards Act, such as prior notice to the employees’ representative of the timing, scale, and criteria of the dismissal and of measures to avoid dismissal, followed by good-faith consultation.
In light of the above, the panel held that the dismissal in this case constituted an unfair dismissal that failed to satisfy both the substantive and procedural requirements for managerial dismissal.
Ⅳ. Practical Points (From the Employee’s Perspective)
From the employee’s perspective, it is important to clearly recognize that an employer’s mere reference to “deficits” or “capital impairment” does not automatically render a collective dismissal lawful. In practice, one must comprehensively examine the company’s overall managerial situation, the existence or absence of efforts to avoid dismissal, the criteria and procedures for selecting dismissal targets, and whether consultation with the employees’ representative was carried out. Therefore, if unfair dismissal is suspected, employees should secure as much relevant material as possible (dismissal notices, internal announcements, HR documents, etc.) and then consider filing an application for remedy with the Labor Relations Commission.
Ⅴ. Practical Points (From the Employer’s Perspective)
From the employer’s perspective, deterioration in financial indicators such as capital impairment alone does not readily establish urgent managerial necessity. Employers must be prepared to prove the crisis and the need for workforce reduction based on objective data, such as financial statements before and after restructuring, the ratio of labor costs, and the status of workforce management. In addition, employers should actually implement dismissal-avoidance measures such as a hiring freeze, reassignment, voluntary retirement, and wage adjustments, and document those processes. They must also strictly comply with the procedures set out in Article 24 of the Labor Standards Act, including providing notice to the employees’ representative 50 days prior to the dismissal and conducting good-faith consultations.
In collective dismissal cases of this kind, it should be borne in mind that four pillars—urgent managerial necessity, efforts to avoid dismissal, reasonable and fair selection of dismissal targets, and consultation with the employees’ representative—are interlinked and assessed together.
2. Matters Adjudicated
A. Case Overview and Procedural History
A. Whether there was an urgent managerial necessity
The employer in this case asserted that, due to deterioration in its management and financial condition, it had fallen into a state of capital impairment of approximately KRW 770 million and that overlapping duties had arisen in certain positions. However, it failed to provide concrete proof of any urgent managerial necessity at the company level. Accordingly, it was difficult to confirm the existence of urgent managerial necessity at the time of the collective dismissal in this case.
B. Whether there were efforts to avoid dismissal and whether the selection of dismissal targets was reasonable and fair
The employer made no efforts whatsoever to avoid dismissal, and there were no criteria for selecting dismissal targets. It was therefore difficult to regard the selection of targets as reasonable or fair.
C. Whether there was prior notice to and good-faith consultation with the employees’ representative
The employer in this case did not implement the procedures prescribed by the relevant laws.
3. Summary of the Decision
A. Summary of the Labor Relations Commission’s Findings
A. Whether there was an urgent managerial necessity
The employer in this case asserted that, due to deterioration in its management and financial condition, it had fallen into a state of capital impairment of approximately KRW 770 million and that overlapping duties had arisen in certain positions. However, it failed to provide concrete proof of any urgent managerial necessity at the company level. Accordingly, it was difficult to confirm the existence of urgent managerial necessity at the time of the collective dismissal in this case.
B. Whether there were efforts to avoid dismissal and whether the selection of dismissal targets was reasonable and fair
The employer made no efforts whatsoever to avoid dismissal, and there were no criteria for selecting dismissal targets. It was therefore difficult to regard the selection of targets as reasonable or fair.
C. Whether there was prior notice to and good-faith consultation with the employees’ representative
The employer in this case did not implement the procedures prescribed by the relevant laws. /
[See More Related Decisions]
- “Case on Unfair Dismissal Relating to ‘Failure to Meet Requirements for Collective Dismissal (Workout Company)’”
- “Case on Unfair Dismissal Relating to ‘Non-Formation of Hiring Commitment (Absence of Offer Letter)’” – Date of Decision: – Case Number: Initial Decision Upheld
- “Case on Unfair Dismissal Relating to ‘Expression of Intent to Resign (Resignation Remark Made by Telephone)’”
[Tags]
Unfair dismissal, urgent managerial necessity (capital impairment of KRW 770 million), restructuring, Labor Law Firm Law&, large labor law firm, Samseong-dong labor law firm, Samseong Station labor law firm, Gangnam labor law firm
※ This post is part of the “Unfair Dismissal Case Law” series by Labor Law Firm Law&.
※ The previous post, “Case on Unfair Dismissal Relating to ‘Denial of Employee Status (Job Trainee Linked to Hiring)’,” can be viewed in a new window.
※ The list of decisions relating to urgent managerial necessity (capital impairment of KRW 770 million) can be viewed together at “List of Decisions Relating to Urgent Managerial Necessity (Capital Impairment of KRW 770 Million).”
※ Korean version of this case: Korean article
This case is a decision in which the employee prevailed in full on the issue of “urgent managerial necessity (capital impairment of KRW 770 million).”
Adjudicating Body: Jeonbuk Regional Labor Relations Commission 2026Buhae68 ○ ○ ○ Application for Remedy for Unfair Dismissal
2026.03.24 · Case Result: Employee’s claim fully upheld
Summary of Key Issues:
A. Whether there was an urgent managerial necessity
The employer in this case asserted that, due to deterioration in its management and financial condition, it had fallen into a state of capital impairment of approximately KRW 770 million and that overlapping duties had arisen in certain positions. However, it failed to provide concrete proof of any urgent managerial necessity at the company level. Accordingly, it was difficult to confirm the existence of urgent managerial necessity at the time of the collective dismissal in this case.
1. Legal Implications
This post reviews how the Labor Relations Commission assessed a collective dismissal (restructuring dismissal) dispute over alleged unfair dismissal, and what practical implications arise, based on the practical experience of Labor Law Firm Law&. In particular, this case is an important reference in unfair dismissal and collective dismissal disputes, as the Labor Relations Commission strictly examined the existence of urgent managerial necessity and compliance with collective dismissal procedures, despite the employer’s assertion of capital impairment.
Ⅰ. Case Overview
In this case, the employer carried out a collective dismissal on the grounds that the company’s management and financial condition had deteriorated to the point of capital impairment of approximately KRW 770 million, and that overlapping work had arisen in certain positions. The employee filed an application for remedy with the Labor Relations Commission, claiming that the collective dismissal constituted an unfair dismissal that did not satisfy the requirements under the Labor Standards Act.
Ⅱ. Issues
The issue in this case is:
“In a collective dismissal based on capital impairment and partial overlap of duties, where the requirements of Article 24 of the Labor Standards Act—namely, urgent managerial necessity, efforts to avoid dismissal, reasonable and fair selection of dismissal targets, and prior notice to and good-faith consultation with the employees’ representative—are not satisfied, does the collective dismissal constitute an unfair dismissal?”
Ⅲ. Summary of the Labor Relations Commission’s Findings
The adjudicating panel in this case found that the employer merely asserted managerial difficulties, including capital impairment of approximately KRW 770 million, but failed to submit financial data or specific indicators capable of proving a company-wide managerial crisis and the inevitability of workforce reduction. It also found that the employer had made no efforts whatsoever to avoid dismissal, such as a hiring freeze, reassignment, or voluntary retirement; that there were no criteria at all for selecting employees for collective dismissal, making it difficult to view the selection as objective, reasonable, and fair; and that the employer had not implemented any of the statutory procedures under the Labor Standards Act, such as prior notice to the employees’ representative of the timing, scale, and criteria of the dismissal and of measures to avoid dismissal, followed by good-faith consultation.
In light of the above, the panel held that the dismissal in this case constituted an unfair dismissal that failed to satisfy both the substantive and procedural requirements for managerial dismissal.
Ⅳ. Practical Points (From the Employee’s Perspective)
From the employee’s perspective, it is important to clearly recognize that an employer’s mere reference to “deficits” or “capital impairment” does not automatically render a collective dismissal lawful. In practice, one must comprehensively examine the company’s overall managerial situation, the existence or absence of efforts to avoid dismissal, the criteria and procedures for selecting dismissal targets, and whether consultation with the employees’ representative was carried out. Therefore, if unfair dismissal is suspected, employees should secure as much relevant material as possible (dismissal notices, internal announcements, HR documents, etc.) and then consider filing an application for remedy with the Labor Relations Commission.
Ⅴ. Practical Points (From the Employer’s Perspective)
From the employer’s perspective, deterioration in financial indicators such as capital impairment alone does not readily establish urgent managerial necessity. Employers must be prepared to prove the crisis and the need for workforce reduction based on objective data, such as financial statements before and after restructuring, the ratio of labor costs, and the status of workforce management. In addition, employers should actually implement dismissal-avoidance measures such as a hiring freeze, reassignment, voluntary retirement, and wage adjustments, and document those processes. They must also strictly comply with the procedures set out in Article 24 of the Labor Standards Act, including providing notice to the employees’ representative 50 days prior to the dismissal and conducting good-faith consultations.
In collective dismissal cases of this kind, it should be borne in mind that four pillars—urgent managerial necessity, efforts to avoid dismissal, reasonable and fair selection of dismissal targets, and consultation with the employees’ representative—are interlinked and assessed together.
2. Matters Adjudicated
A. Case Overview and Procedural History
A. Whether there was an urgent managerial necessity
The employer in this case asserted that, due to deterioration in its management and financial condition, it had fallen into a state of capital impairment of approximately KRW 770 million and that overlapping duties had arisen in certain positions. However, it failed to provide concrete proof of any urgent managerial necessity at the company level. Accordingly, it was difficult to confirm the existence of urgent managerial necessity at the time of the collective dismissal in this case.
B. Whether there were efforts to avoid dismissal and whether the selection of dismissal targets was reasonable and fair
The employer made no efforts whatsoever to avoid dismissal, and there were no criteria for selecting dismissal targets. It was therefore difficult to regard the selection of targets as reasonable or fair.
C. Whether there was prior notice to and good-faith consultation with the employees’ representative
The employer in this case did not implement the procedures prescribed by the relevant laws.
3. Summary of the Decision
A. Summary of the Labor Relations Commission’s Findings
A. Whether there was an urgent managerial necessity
The employer in this case asserted that, due to deterioration in its management and financial condition, it had fallen into a state of capital impairment of approximately KRW 770 million and that overlapping duties had arisen in certain positions. However, it failed to provide concrete proof of any urgent managerial necessity at the company level. Accordingly, it was difficult to confirm the existence of urgent managerial necessity at the time of the collective dismissal in this case.
B. Whether there were efforts to avoid dismissal and whether the selection of dismissal targets was reasonable and fair
The employer made no efforts whatsoever to avoid dismissal, and there were no criteria for selecting dismissal targets. It was therefore difficult to regard the selection of targets as reasonable or fair.
C. Whether there was prior notice to and good-faith consultation with the employees’ representative
The employer in this case did not implement the procedures prescribed by the relevant laws. /
[See More Related Decisions]
- “Case on Unfair Dismissal Relating to ‘Failure to Meet Requirements for Collective Dismissal (Workout Company)’”
- “Case on Unfair Dismissal Relating to ‘Non-Formation of Hiring Commitment (Absence of Offer Letter)’” – Date of Decision: – Case Number: Initial Decision Upheld
- “Case on Unfair Dismissal Relating to ‘Expression of Intent to Resign (Resignation Remark Made by Telephone)’”
[Tags]
Unfair dismissal, urgent managerial necessity (capital impairment of KRW 770 million), restructuring, Labor Law Firm Law&, large labor law firm, Samseong-dong labor law firm, Samseong Station labor law firm, Gangnam labor law firm
※ This post is part of the “Unfair Dismissal Case Law” series by Labor Law Firm Law&.
※ The previous post, “Case on Unfair Dismissal Relating to ‘Denial of Employee Status (Job Trainee Linked to Hiring)’,” can be viewed in a new window.
※ The list of decisions relating to urgent managerial necessity (capital impairment of KRW 770 million) can be viewed together at “List of Decisions Relating to Urgent Managerial Necessity (Capital Impairment of KRW 770 Million).”
※ Korean version of this case: Korean article
