[Case Information] This case is a decision that was concluded by upholding the first-instance ruling on the issue of “lack of business necessity (transfer of a poor performer and non-payment of project incentives).” Date of Decision: 2026-07-03 · Decision Body: Central Labor Relations Commission · Case No.: 2026Buhae71 Summary of Key Issues: A. Existence of business necessity Even if general managerial necessity is acknowledged for a transfer targeting a poor performer, where there are no rules on specific criteria and methods for performance appraisal, where the assessment inevitably depends on the evaluator’s subjective judgment, and where even the minimum level of segmented and objectified evaluation items and rating methods that could guarantee the objective rationality and fairness of the evaluation cannot be identified, it is difficult to recognize the suitability of the transfer as a means to achieve managerial objectives, and therefore … 1. Legal Implications In this unfair dismissal case, the key issue before the Central Labor Relations Commission was whether a transfer to a “competency development unit” on the ground of poor performance constituted a legitimate exercise of the employer’s managerial prerogative. Labor Law Firm Law& frequently handles similar disputes involving transfers and redundancies, and this case offers important guidance for those managing poor performers and operating performance appraisal systems. Ⅰ. Case Overview The employer, citing the employee’s low work performance, conducted a performance appraisal and then transferred the employee from the original department to a competency development unit. The company asserted that it had followed a consultation process, including prior notification of the appraisal results and conducting interviews. The employee, however, filed an application for remedy for unfair transfer, arguing that there was no business necessity for the transfer and that it caused significant disadvantages in terms of livelihood. Ⅱ. Issues in Dispute The issues in this case were whether, in transferring a poor performer to a competency development unit after only formally going through consultation procedures and in circumstances where the performance appraisal criteria were unclear, business necessity for the transfer could be recognized, and whether the disadvantages to the employee’s livelihood resulting from the transfer exceeded the level ordinarily to be borne by employees. Ⅲ. Summary of the Labor Commission’s Findings The panel held that, although the employer claimed general managerial necessity for managing poor performers, there were no rules on specific criteria and methods for performance appraisal; the evaluation items and rating methods were not sufficiently segmented or objectified, leaving substantial room for the evaluator’s subjective judgment; and, in this state, it was difficult to view the transfer as a means to enhance the rationality and efficiency of business operations. Accordingly, the panel found it difficult to recognize business necessity for the transfer. The panel further noted that it was difficult to conclude that there was no economic disadvantage at all, given the non-payment of project incentives, and that the mental and social disadvantages suffered by the employee—who continued working in the competency development unit, effectively only receiving training with no fixed date for return—were not insignificant. It therefore held that the disadvantages to livelihood were not minor. On the other hand, the panel acknowledged that the employer had conducted interviews regarding the performance appraisal results and had exchanged views with the employee prior to the transfer, thereby going through the consultation procedures required under the principle of good faith. However, it held that the mere existence of such consultation procedures could not offset the lack of business necessity and the substantial disadvantages to livelihood. Ultimately, the panel held that the dismissal in this case was unfair, on the grounds that the transfer order lacked business necessity and imposed considerable disadvantages on the employee’s livelihood, thereby constituting an abuse of the employer’s managerial prerogative. Ⅳ. Practical Points (From the Employee’s Perspective) From the employee’s standpoint, even where a transfer is based on a poor performance rating, it is important to bear in mind that key issues may include whether the appraisal criteria are objective and sufficiently segmented, whether those criteria were announced and applied in advance, and the extent of any disadvantages to livelihood after the transfer, such as in wages, incentives, and prospects for return. In particular, where a transfer to a competency development unit or training-only department in effect functions as isolation or a “standby” status, the mental and social disadvantages may also be important factors in assessing the legitimacy of the transfer. Ⅴ. Practical Points (From the Employer’s Perspective) From the employer’s perspective, when considering the transfer or redundancy of poor performers, it is crucial to segment and objectify performance appraisal criteria, items, and rating methods in advance, and to sufficiently announce and operate them beforehand to ensure the fairness of evaluations. In addition, where an organization such as a competency development unit is operated, it should not function merely as a space for training or isolation; rather, concrete training programs, schedules, and return pathways should be designed, and the system should be structured so that excessive disadvantages do not arise in terms of wages, incentives, and promotion following a transfer. To prevent disputes of this type and to defend effectively at the Labor Relations Commission stage, employers should systematically accumulate documents and records that can prove business necessity for the transfer, the rationality of personnel selection, measures taken to mitigate disadvantages to livelihood, and the course of the consultation procedures. 2. Matters Decided A. Case Overview and Procedural History This is a case in which the transfer of an employee was found to be unfair on the grounds that, although consultation procedures had been followed, business necessity for the transfer was not recognized and the disadvantages to livelihood could not be regarded as minor. 3. Summary of the Decision A. Summary of the Labor Commission’s Reasoning A. Existence of Business Necessity Even if general managerial necessity is acknowledged for a transfer targeting a poor performer, there are no rules on specific criteria and methods for performance appraisal, the evaluation inevitably depends on the evaluator’s subjective judgment, and even the minimum level of segmented and objectified evaluation items and rating methods that could guarantee the objective rationality and fairness of the evaluation cannot be identified. In these circumstances, it is difficult to recognize the suitability of the transfer as a means to achieve managerial objectives, and thus difficult to acknowledge business necessity. B. Existence of Disadvantages to Livelihood It is difficult to conclude that there was no economic disadvantage at all, given the non-payment of project incentives, and the mental and social disadvantages suffered by the employee—who continued working in the competency development unit, receiving only training with no fixed date for return—were not insignificant. C. Existence of Consultation Procedures The employer appears to have gone through the consultation procedures required under the principle of good faith with the employee, such as conducting interviews regarding the employee’s performance appraisal results and exchanging prior opinions on the transfer. [See More Related Decisions] - “Unfair Dismissal Case on ‘Business Necessity (Reassignment of Cleaners)’” - “Unfair Dismissal Case on ‘Remedial Interest and Refusal to Rehire (Post-Retirement Fixed-Term Employment)’” - “Unfair Dismissal Case on ‘Failure to Meet Requirements for Redundancy (Workout Company)’” [Tags] Unfair dismissal, lack of business necessity (transfer of poor performer · non-payment of project incentives), performance appraisal · poor performance, others, 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. ※ The previous article, “Unfair Dismissal Case on ‘Disciplinary Sanction Level (Unauthorized Sale of Goods · Misuse of Subsidies)’,” can be viewed in a new window. ※ The list of decisions related to lack of business necessity (transfer of poor performer · non-payment of project incentives) can be viewed together in the “List of Decisions on Lack of Business Necessity (Transfer of Poor Performer · Non-Payment of Project Incentives).” ※ Korean version of this case: Korean article