[Plaintiff, Respondent]
[Defendant, Appellant] POSCO ROJAE Co., Ltd. (formerly: Keoyang Rogong Industrial Co.) (Litigation Representative: Dongseo Law Firm, Attorney in Charge Park Woo-dong)
[Judgment Below] Daegu High Court Decision 93Na4404 rendered on October 5, 1994
[Order]
The portion of the judgment below against the Defendant is reversed, and this part of the case is remanded to the Daegu High Court.
[Reasoning]
The grounds for appeal are examined.
1. In order for a so-called "restructuring dismissal" (整理解雇), whereby an enterprise dismisses employees due to management necessity, to be deemed justified, it must be recognized as having objective rationality and social reasonableness upon overall and comprehensive consideration of all relevant circumstances, including: whether it was based on urgent management necessity; whether the employer made reasonable efforts to avoid dismissal; whether the persons subject to dismissal were selected according to objective and reasonable criteria; and whether sincere consultation with the labor union or employees was conducted, among other matters. Here, "urgent management necessity" is not necessarily limited to cases where it is necessary to avoid the bankruptcy of the enterprise; where a reduction in personnel is objectively recognized as reasonable, urgent management necessity shall be deemed to exist (see Supreme Court Decisions 91Da8647 rendered on December 10, 1991; 92Da16973 rendered on August 14, 1992; 90Nu9421 rendered on May 12, 1992; and 92Nu3076 rendered on January 26, 1993, among others).
2. Turning to examine the present case, the record reveals the following facts: the Defendant company was established with 100% investment by the non-party school foundation Cheoncheol Hagwon (hereinafter "the non-party foundation"), which was itself established through a full endowment by non-party POSCO Co., Ltd. (hereinafter "the non-party company"), and the Defendant company serves as a partner/cooperating company of the non-party company (see the testimony of Witnesses 1 and 2 at the first instance trial, among others). The Defendant company's principal business sectors are broadly divided into the cooperative work sector and the construction work sector (see the sales composition portions of each profit and loss statement in Exhibits Eul No. 18-2 through 4; according to these, of the Defendant company's total sales, the cooperative work sector accounted for 84% and the construction work sector for 15% in 1989; the cooperative work sector accounted for 67% and the construction work sector for 32% in 1990; the cooperative work sector accounted for 78% and the construction work sector for 21% in 1991; and the cooperative work sector accounted for 65% and the construction work sector for approximately 34% in 1992, such that these two sectors together accounted for approximately 99% of total sales). Almost all of the work related to these sectors arises from transactions with the non-party company (see the testimony of the aforementioned Witnesses 1 and 2). In the Defendant company's case, the cooperative work sector consists of work for the repair and maintenance of various furnaces within the non-party company's Pohang Steel Works and Gwangyang Steel Works (thus, the cooperative work sector is in turn divided into the Pohang cooperative work sector and the Gwangyang cooperative work sector). The Defendant company suffered an operating loss of over 200 million won in the cooperative work sector in 1989, an operating deficit of approximately 1.05 billion won in the cooperative work sector in 1990, and a deficit of approximately 200 million won in 1991 (see the entries in Exhibit Eul No. 18-2, Exhibit Eul No. 19-1, 2, 3, and the testimony of Witness 2), and had also suffered a deficit of over 280 million won as of August 31, 1992, just prior to the personnel reduction at issue in this case, even in 1992 (see the entry in Exhibit Eul No. 11-2). Such deficits in the cooperative work sector arose from a combination of internal and external management factors, including wage increases for employees engaged in the cooperative work sector, increases in contributions to retirement benefit reserves and bonuses and other welfare expenses due to the progressive severance pay system, and, in the course of the contract renewal made on April 1, 1992 with the non-party company (which accounted for the vast majority of the Defendant company's transactions), the freezing of contract unit prices and the reduction of work volume (see the entry in Exhibit Eul No. 11-2, and the testimony of Witness 2 and Witness 3 at the first instance trial). The Defendant company had, until then, offset such deficits in the cooperative work sector with profits from the construction work being carried out by the Defendant company at the non-party company's Gwangyang Steel Works (see the testimony of Witness 2). Meanwhile, the construction work at the Gwangyang Steel Works, which accounted for approximately 90% of the Defendant company's construction work sector sales and served as an important source of income offsetting the deficits in the cooperative work sector, was completed at the end of September 1992, and no further construction work orders had been received or were scheduled thereafter (see the testimony of Witness 2 and Witness 3 at the court below). As the Defendant company had continued to suffer deficits in the cooperative work sector for nearly four years since 1989, it determined that improvement and change of the management method for the cooperative work sector was necessary, and decided to implement a subcontracting arrangement (the so-called "SUB-CON system") whereby other companies would be subcontracted to carry out that business sector. As this subcontracting arrangement inevitably resulted in surplus personnel among the office and technical staff of the Furnace Section, Chemical Processing Section, and Ironmaking Section engaged in that business sector, the Defendant company first recruited voluntary retirees between August 10, 1992 and September 9, 1992, resulting in the retirement of employees amounting to approximately 10% of the target, and further, with regard to office staff for whom reassignment was possible, implemented reassignment to other departments in principle. As for technical staff, since there were already 83 excess technical staff apart from those engaged in the cooperative work sector at the time (see the entry in Exhibit Eul No. 11-2), the Defendant company established a policy of dismissing all technical staff for whom such reassignment was difficult, and, having gone through consultation with the labor union, obtained the union's consent to the necessity of implementing the subcontracting system and to the personnel reduction (see the entries in Exhibit Eul Nos. 3-1, 2 and Exhibit Eul No. 4). Accordingly, of the 287 persons subject to reduction in the cooperative work sector who were notified of this company policy, 25 technical staff decided to resign outright without transferring to another subcontracting company arranged by the Defendant company, while approximately 90%, or 259 technical staff, decided to transfer to a subcontracting company arranged by the Defendant company, and all of them submitted letters of resignation by September 30, 1992. Except for one person who was placed on leave, only the Plaintiff and non-party 4 (a total of two persons) refused to resign or transfer. The Defendant company continued to persuade the Plaintiff and the other person to transfer, but when they did not comply, the Defendant company convened a personnel committee on October 30 of that year and dismissed them (see the entries in Exhibit Eul Nos. 5, 6, Exhibit Eul No. 11-2, and Exhibit Eul Nos. 12, 13-1, 2).
If so, in the cooperative work sector, which accounted for 65% to 84% of the Defendant company's total sales—among the cooperative work sector and construction work sector that together accounted for approximately 99% of the Defendant company's total sales—the aforementioned combination of internal and external management factors resulted in continuous deficits for nearly four years since 1989, and such continuous deficits cannot simply be regarded as a temporary phenomenon caused by strikes or the like. Moreover, in a situation where the construction work at the Gwangyang Steel Works, which had been an important source of income offsetting the deficits in that sector, was itself completed at the end of September 1992, with no further construction work orders scheduled thereafter, the Defendant company's reduction of surplus personnel arising from its decision to implement a subcontracting system in that business sector, in order to resolve the management difficulties caused by the deficits in the cooperative work sector, must be regarded as objectively reasonable, and therefore cannot but be deemed to have been based on urgent management necessity (as noted above, the Defendant company's labor union also approved this personnel reduction as being based on urgent management necessity).
The Supreme Court Order 89Dagka24445 dated March 13, 1990 (which the court below cited as "89Dagka2445 Decision," apparently in error), cited by the court below, was based on a case in which the deficit in a portion of the enterprise's business sector and the decrease in the enterprise's overall net profit scale were regarded as a temporary phenomenon, and it is not appropriate to invoke that precedent in the present case. The fact that the Defendant company recorded profits in other business sectors, resulting in the annual net income as found by the court below for each year from 1990 to 1992 overall, does not mean that the personnel reduction in this case was not based on urgent management necessity. Furthermore, even if the Defendant company made contributions to the non-party foundation each year during the same period, which could formally be regarded as profit, as found by the court below, the record shows that these contributions to the non-party foundation were made pursuant to an agreement under which, in concluding subcontracting agreements with the non-party company—upon which the Defendant company depended critically in terms of business revenue, as the non-party company accounted for almost the entirety of the transactions in the cooperative work and construction work found by the court below to constitute approximately 99% of the Defendant company's sales—a certain percentage of contributions to the non-party foundation would be made based on sales amount or unit prices (see the testimony of Witness 1 at the first instance trial and Witness 5 at the court below; the Plaintiff himself also asserted in the brief dated May 16, 1994 that the Defendant company had contributed approximately 10% of its sales amount to the non-party foundation each year since 1990). In light of the relationship among the Defendant company, the non-party company, and the non-party foundation as set out above, such contributions were merely expenditures made by the Defendant company pursuant to the subcontracting agreements in receiving orders for cooperative work or construction work from the non-party company, with which the Defendant company had a critical management relationship, and thus were in substance business expenses. Therefore, even if such contributions continued as found by the court below, this does not mean that the personnel reduction in this case was not based on urgent management necessity.
Nevertheless, the court below, based solely on the evidence it cited, found only the facts as stated in its judgment, and, treating the deterioration of the balance of accounts in the Defendant company's cooperative work sector as merely a temporary phenomenon, and on the basis that the Defendant company's overall business performance had never recorded a deficit and that the Defendant company had made the contributions found in its judgment, determined that the Defendant company's dismissal of the Plaintiff, who had continued to refuse the transfer request following the implementation of the subcontracting system in the cooperative work sector, could not be regarded as based on urgent management necessity or objective rationality, and thus concluded that the dismissal of the Plaintiff in this case was without justifiable cause and therefore null and void. In so doing, the court below either misunderstood the legal principles regarding restructuring dismissal, or failed to fully examine all the relevant circumstances for determining the justifiability of restructuring dismissal, thereby violating the rules of evidence and erring in its fact-finding regarding the justifiability of the restructuring dismissal, which affected the judgment. Therefore, the argument in the grounds for appeal pointing this out is well-founded.
3. Therefore, the portion of the judgment below against the Defendant is reversed, and this part of the case is remanded to the court below, the opinions of the Justices involved being unanimous, and it is so ordered.
Presiding Justice Park Man-ho, Justice Park Jun-seo, Justice Kim Hyeong-seon (Presiding Judge for Report), Justice Lee Yong-hun