GROUNDS ON WHICH AN EMPLOYER MAY UNILATERALLY TERMINATE A LABOR CONTRACT

An employer is entitled to unilaterally terminate a labor contract, but must do so on a legally recognized ground; otherwise, the termination will be deemed an unlawful unilateral termination, giving rise to adverse legal consequences.

1. Grounds on Which an Employer Is Entitled to Unilaterally Terminate a Labor Contract

Clause 1, Article 36 of the 2019 Labor Code sets out seven (7) circumstances in which an employer is entitled to unilaterally terminate a labor contract:

• The employee habitually fails to perform the work under the labor contract, as determined in accordance with the criteria for evaluating work performance set out in the employer’s internal regulations. Such regulations must be issued by the employer following consultation with the representative organization of employees at the grassroots level, where such an organization exists.
• The employee has suffered illness or accident and has undergone treatment for twelve (12) consecutive months in the case of an indefinite-term labor contract, for six (6) consecutive months in the case of a definite-term labor contract with a term of twelve (12) to thirty-six (36) months, or for more than one-half of the contract term in the case of a definite-term labor contract with a term of less than twelve (12) months, and the employee’s working capacity has not yet been restored. Once the employee’s health has recovered, the employer shall consider entering into a new labor contract with the employee.
• Due to a natural disaster, fire, dangerous epidemic, enemy sabotage, or relocation or downsizing of production or business operations at the request of a competent state authority, where the employer has exhausted all remedial measures but is nevertheless compelled to reduce the number of available positions.
• The employee fails to be present at the workplace within fifteen (15) days from the date of expiry of a period of suspension of the labor contract, save where otherwise agreed.
• The employee has reached retirement age as prescribed by law.
• The employee voluntarily abandons his or her work without justifiable reason for five (5) or more consecutive working days.
• The employee provides untruthful information regarding full name, date of birth, gender, place of residence, educational qualifications, vocational skill level, health status, or other matters directly relevant to the conclusion of the labor contract that the employer requested at the time of contracting, where such untruthful information has affected the employer’s recruitment decision.

2. Circumstances in Which an Employer Is Prohibited from Terminating a Labor Contract

By reference to Article 37 of the 2019 Labor Code, employers should take note of the following circumstances in which termination of a labor contract is prohibited:

• The employee is undergoing treatment or convalescence for illness, occupational accident, or occupational disease as directed by a competent medical examination and treatment establishment.
• The employee is on annual leave, personal leave, or other leave with the employer’s consent.
• The employee is a woman who is pregnant, or is on maternity leave, or is raising a child under twelve (12) months of age.

3. Legal Consequences of an Unlawful Termination

Pursuant to Article 41 of the 2019 Labor Code, where termination is effected on an invalid ground or without compliance with the required advance notice period, the employer must reinstate the employee, and pay wages together with social insurance, health insurance, and unemployment insurance contributions for the period during which the employee was not permitted to work, in addition to compensation of not less than two (2) months’ wages. Where the employee does not wish to return to work, the parties may agree on further compensation, which must likewise be not less than two (2) months’ wages, in addition to the corresponding severance allowance.

4. Practical Considerations

Employers should retain complete records substantiating the ground relied upon for termination (such as performance evaluation records and attendance records), as the burden of proving a lawful ground for termination rests with the employer in the event of a dispute. Employers should also clearly distinguish between unilateral termination of a labor contract under Article 36 and dismissal as a form of labor discipline under Article 125, as the two are governed by distinct grounds, sequences, and procedures, and care should be taken to avoid misapplying one in place of the other.