The Seoul Central District Court recently ruled that it was justifiable for a company to take disciplinary action against an employee who failed to improve his performance despite several training sessions under a performance improvement program that was implemented due to his poor performance (Seoul Central District Court Decision 2021Gahap507733, August 10, 2023).
 
Since 2009, the Defendant company in this case has implemented a performance improvement program (“PIP”) for senior employees who received low scores in their personnel evaluation. The PIP has been conducted as follows: (i) selecting senior employees ranked in the bottom one to two percent of the company’s personnel evaluations for the last three years as those subject to the PIP based on evaluations by the department head and the verification committee, (ii) implementing the first PIP session, sending the subject employees back to the field to perform their first on-site performance evaluation, and if their work capability or attitude has improved, reinstating the employees, (iii) if this fails, implementing the second PIP session and the second on-site performance evaluation to assess the total score, and if the score was higher than the internal standard, reinstating the employees without disciplinary action, but (iv) if the total score fell short of the internal standard, referring them to the disciplinary action committee after assessing the employees’ effort to improve their capability and work performance through interviews.
 
The Plaintiff in this case was subject to a PIP for nine consecutive years from 2012 to 2020, having failed to improve his work performance or attitude despite repeated training sessions and evaluations, and thus was subject to a progressive range of disciplinary actions on four occasions, including a salary reduction and suspension without pay.
 
The Court held that the reason for disciplinary action imposed on the Plaintiff shall be acknowledged on the grounds that (i) the Plaintiff had scored in the bottom 15% of performance evaluations except in two occasions since 2003, when he joined the company, and despite a number of the PIP sessions, his total score fell short of the standard, (ii) given that the employer has the right to conduct a personnel evaluation of its employees, the employer should have considerable discretion as to the method of the personnel evaluation, and considering the nature of such personnel evaluation, even if qualitative elements were included, they may not be definitively regarded as arbitrary criteria or abuse of authority, (iii) there is no reason to find that the company failed to be fair or objective beyond the scope of its discretion for personnel management in the course of the personnel evaluation or the PIP, and (iv) the disciplinary action against the Plaintiff was imposed on the ground that the Plaintiff had no will to improve his performance despite the PIP.
 
In February 2021, the Supreme Court recognized the legitimacy of a disciplinary dismissal by a shipbuilding company based on the implementation of a PIP for its low performers that continued to yield poor results in their work performance (Supreme Court Decision 2018Da253680, February 5, 2021). Earlier this year, in a case where employees of a semiconductor company claimed that the company’s PIP for low performers was intended to lay off those who refused the company’s early retirement plan and was a deviation or abuse of its personnel right, the Supreme Court found that the PIP was legitimate and did not constitute the company’s deviation or abuse of the personnel right because it was implemented as part of the company’s managerial action to improve the company’s sales performance (Supreme Court Decision 2022Da281194, January 12, 2023).
 
Despite such court precedents, we note that dismissals may only be recognized as legitimate where such dismissals are attributable to the employee concerned to the extent it is impossible to maintain employment in light of social norms. Accordingly, it is advisable to determine the dismissal of low performers carefully considering various circumstances such as (i) whether the personnel evaluation and PIP had been fair and reasonable, (ii) whether sufficient opportunities were provided, including the repeated implementation of the PIP and relocation, and (iii) how remarkably poor the employee’s work performance and attitude was despite such opportunities to improve.

[Korean Version]