[Plaintiff, Appellee] The successor to the litigation of the Seoul Arts Center Foundation, Seoul Arts Center (Attorney Ko Seung-deok, Counsel for the Plaintiff)
[Defendant, Appellant] Chairman of the National Labor Relations Commission
[Defendant's Intervenor] Defendant's Intervenor 1 (Attorney Lee Kyung-woo and 1 other, Counsel for the Intervenor)
[Defendant's Intervenor, Appellant] Defendant's Intervenor 2 (Attorney Kim Byung-heon, Counsel for the Intervenor)
[Judgment Below] Seoul High Court Decision 2000Nu5601 dated November 8, 2000
[Order]
All appeals are dismissed. Of the costs of appeal, the portion arising from the intervention shall be borne by Defendant's Intervenor 2, and the remainder shall be borne by the Defendant.
[Reasoning]
1. Summary of the Judgment Below
According to the reasoning of the judgment below, the court below found, based on the evidence adopted, as follows: the Seoul Arts Center Foundation (재단법인 예술의전당), whose main sources of revenue, apart from performance business, were public interest funds and government subsidies {on September 9, 2000, the Seoul Arts Center succeeded to all rights, obligations, and property of the Seoul Arts Center Foundation, as well as the employment relationships with its employees, pursuant to Articles 4 and 5 of the Addenda to the Culture and Arts Promotion Act (문화예술진흥법, as amended by Act No. 6132 on January 12, 2000); hereinafter referred to as "Plaintiff Foundation"}, after receiving a request from the Minister of Culture and Tourism for budget cuts and personnel expense reductions for 1998, was instructed on or around July 23, 1998 to reduce personnel by approximately 20% in 1998 and 30% in 1999; that the Plaintiff Foundation held eight labor-management council meetings from August 7, 1998 to September 23, 1998, and on September 23, 1998, agreed with the labor union to reduce the authorized headcount of 168 to 135 by the end of September 1998, but that in practice, 20 of the then-current 155 employees (1 executive, 9 at Grade 3 or above, 5 at Grade 4 or below, 4 contract employees, and 1 person expected to retire due to age) would be reduced; that as a method of selecting the 5 employees at Grade 4 or below to be reduced, one member each would be selected from among Grade 1-3 employees and two members each from among Grade 4-6 employees to serve as organizational restructuring committee members, forming a nine-member Organizational Restructuring Committee which would select the persons subject to layoff; that each committee member would select, by secret ballot, 10 employees whom they judged to meet the selection criteria set forth below, and the persons to be laid off would be determined in order of the highest number of votes received; and that the selection criteria were agreed to be as follows: (1) cases where a position has been eliminated due to organizational restructuring; (2) unproductive personnel whom all employees would agree are such; (3) personnel lacking professional expertise and corresponding competence and qualifications for their work; (4) personnel lacking creativity, drive to accomplish tasks, and initiative in their work; (5) personnel who have joined factional cliques and lack a sense of community as members of the organization; (6) personnel without principles who cannot adapt to the organization; and (7) personnel who show no professional effort or intention to develop themselves for their future. Thereafter, as the selection of restructuring committee members was delayed because the committee members selected by the labor union side declined the position, the Plaintiff Foundation, on October 7, 1998, selected, with the agreement of the labor union, the remaining 6 restructuring committee members other than the 3 already-selected Grade 1-3 members; on October 8, 1998, the Organizational Restructuring Committee held a meeting and conducted a secret ballot vote, the results of which were: Nonparty 1 (Grade 5, technical position) and Defendant's Intervenor (hereinafter "Intervenor") 2 (Grade 6, administrative position) each received 9 votes; Nonparty 2 (Grade 5, administrative position) and Intervenor 1 (Grade 5, administrative position) each received 7 votes; Nonparty 3 received 6 votes; and Nonparty 4, Nonparty 5, and Nonparty 6 each received 5 votes. The Organizational Restructuring Committee then resolved to delegate to the Chairman of the Board, who held the authority over personnel matters, the selection of the persons to be laid off from among those who received 5 or more votes, and reported the above results to the Chairman of the Board of the Plaintiff Foundation. As one employee at Grade 4 or below took voluntary retirement, the Plaintiff Foundation decided to dismiss 4 of the above vote recipients; among the 5 persons who received 6 or more votes, the above Nonparty 2 was excluded on the ground that she majored in English and was specialized personnel in charge of exhibition guidance, telephone duties, and telemarketing work, and Nonparty 1, the Intervenors, and Nonparty 3 were selected as the persons to be dismissed and were placed on standby assignment on October 10, 1998 with respect to these persons. Thereafter, as Nonparty 1 and one additional employee at Grade 4 or below took voluntary retirement, the Plaintiff Foundation proposed to the Intervenors and Nonparty 3 that if the three of them would agree among themselves and select one person, the selected person would be exempted from the layoff, but as the three failed to reach agreement, the Plaintiff Foundation dismissed all of them by way of layoff on December 19, 1998. The court below also found that the Plaintiff Foundation had not, as a general practice, prepared personnel performance evaluation data or attendance records for its employees, and that matters of reward and punishment were also not considered as factors in selecting the persons to be dismissed, due to the labor union's opposition on the ground that such matters were unreasonable as criteria for evaluating employees' performance.
Having found the foregoing facts, the court below held that, in order for a so-called layoff carried out by an enterprise due to managerial necessity to be found justified, it must be recognized, upon overall and comprehensive consideration of various circumstances—including whether there was an urgent managerial necessity, whether the employer made reasonable efforts to avoid the dismissal, whether the persons to be dismissed were selected according to objective and reasonable criteria, and whether there was sincere consultation with the labor union or the workers' side, among other matters—that the dismissal in question possesses objective reasonableness and social propriety. On this premise, the court below held: that the Plaintiff Foundation, due to a deficit from its 1997 performance business and other activities and the reduction of government subsidies resulting from the 1998 foreign exchange crisis, had no choice but to reduce its expenditure budget, including personnel expenses; that as the government demanded personnel reductions, the Plaintiff Foundation had objective reasonableness in taking the necessary measures to respond to such demands, and thus an urgent managerial necessity for the layoff is recognized; that the fact that the Plaintiff Foundation, prior to carrying out the layoff at issue in this case, reduced its own operating expenses, discontinued renewal of contracts with contract employees, and implemented voluntary retirements, should, in light of the Plaintiff's establishment purpose and character and its sources of financial revenue, be deemed to constitute taking all appropriate measures to avoid the layoff; that, with respect to the criteria and method for selecting the persons subject to layoff, it is not necessary that the criteria be based solely on employees' work ability, and it is also permissible to use criteria such as the employees' living circumstances and fairness among employees, so that the employer has considerable discretion, and in particular, selection criteria and methods determined with the consent of the labor union cannot be denied reasonableness unless they are excessively arbitrary or unreasonable; that since the Plaintiff Foundation, due to the labor union's opposition, had no personnel performance evaluation data or attendance records, and could not use matters of reward and punishment as selection criteria for the persons to be dismissed, it cannot be concluded that relying on the subjective judgment of the restructuring committee members was an arbitrary or unreasonable method; that the Organizational Restructuring Committee was composed by grade, and the selection of its members was made with the consent of the labor union; that as the Plaintiff Foundation had only about 150 employees who rotated positions at intervals of 1-2 years, it appears that the employees were well acquainted with one another's work ability and personal circumstances, and thus it was reasonable to select a certain number of employees by grade to form the Organizational Restructuring Committee; that since the restructuring committee members selected the persons to be dismissed based on their subjective judgment drawing on information they had previously acquired, it cannot be concluded that there was insufficient time to carry out their task merely because they were selected one day before the meeting was held; and that although the content of the selection criteria for the persons to be dismissed in this case was somewhat abstract, it contained nothing unreasonable or arbitrary, and thus the method and criteria for selecting the persons subject to the layoff in this case possessed reasonableness and validity. Accordingly, the court below determined that the layoff in this case, possessing objective reasonableness and social propriety, was justified, and that the Defendant's decision on reexamination, which dismissed the Plaintiff Foundation's application for reexamination on the ground that the layoff in this case was unjust, was itself unjust.
2. Judgment of the Supreme Court
Under Article 31, paragraphs 1 through 3 of the Labor Standards Act (근로기준법), where an employer intends to dismiss an employee for managerial reasons, there must be an urgent managerial necessity, the employer must make every effort to avoid the dismissal, the persons subject to dismissal must be selected according to reasonable and fair criteria, and the employer must notify the methods for avoiding dismissal and the criteria for dismissal, among other matters, to the labor union organized by a majority of the employees or to the employees' representative no later than 60 days before the date of implementing the dismissal, and must engage in sincere consultation. Here, "urgent managerial necessity" is not limited to cases necessary to avoid the enterprise's bankruptcy, but should be construed to include cases where personnel reduction is objectively recognized as reasonable as a means of preemptively responding to a crisis that may arise in the future; and since the specific content of each of the above requirements is not fixed or static but is determined flexibly in relation to the degree of fulfillment of the other requirements in a given case, whether a particular dismissal for managerial reasons in a specific case satisfies all of the above requirements and is thus justified must be determined by comprehensively considering the individual circumstances constituting each of the above requirements.
A. As to the Grounds of Appeal Regarding Urgent Managerial Necessity
The Plaintiff Foundation is a non-profit public interest corporation whose revenue sources, apart from performance business proceeds, include government subsidies including public interest funds, and thus there are circumstances under which the concept of profit and loss cannot be viewed the same as for a general enterprise; furthermore, since contract employees are hired depending on whether salary payment is possible within the personnel expense budget, whether the current headcount falls short of the authorized headcount should be calculated including the number of contract employees. Therefore, the mere fact that the Plaintiff Foundation's 1998 income statement showed a net profit of approximately KRW 515,170,000, or that the number of regular employees at the time fell short of the authorized headcount, cannot be said to mean there was no necessity for personnel reduction. As the layoff in this case was carried out in accordance with the reduction of government subsidies and the demand for personnel reduction by the Minister of Culture and Tourism under the IMF bailout regime, this constitutes a case where the personnel reduction is objectively recognized as reasonable, and thus there was an urgent managerial necessity for the layoff in this case. Accordingly, the judgment of the court below on this point is justified in light of the legal principles set forth above, and there is no error of misapprehending the legal principles as argued in the grounds of appeal. This argument in the grounds of appeal by Intervenor 1 on this point cannot be accepted.
B. As to the Grounds of Appeal Regarding Efforts to Avoid Dismissal
Measures such as wage reductions or unpaid leave require the consent of the employees; the record shows that the reason the Plaintiff Foundation could not implement measures such as wage reductions or unpaid leave was that the labor union opposed such measures, having proposed, around May 1998, a wage increase proposal amounting to a 5.6% increase in the total wage bill. Also, it can be seen that although the Plaintiff Foundation, after carrying out the layoff in this case, newly hired 2 house managers and 3 parking management personnel as contract employees, and renewed the contracts of 15 out of 23 contract employees whose contract terms had expired, the duties of these employees were not duties that could be replaced by administrative staff. Therefore, the mere facts that the Plaintiff Foundation was unable to take measures such as wage reductions or unpaid leave, or that it newly hired contract employees, cannot be deemed to show that the Plaintiff Foundation failed to make every effort to avoid the dismissal. Accordingly, the judgment of the court below on this point is justified, and there is no error such as misapprehension of the legal principles regarding efforts to avoid dismissal or violation of the rules of evidence that affected the outcome of the judgment, as argued in the grounds of appeal. This argument in the grounds of appeal by Intervenor 1 on this point also cannot be accepted.
C. As to the Grounds of Appeal Regarding the Reasonable and Fair Selection of Persons to Be Dismissed
Although the criteria for selecting persons to be dismissed, agreed upon between the Plaintiff Foundation and the labor union, are somewhat ambiguous, they cannot be regarded as arbitrary. Since the Plaintiff Foundation had no personnel performance evaluation data prepared as a matter of course, and could not use reward and punishment matters as criteria for selecting persons to be dismissed due to the labor union's opposition, it had no choice but to use the method agreed upon with the labor union—namely, selecting Organizational Restructuring Committee members by grade from among the employees to select the persons to be dismissed—and there was no other reasonable and fair method available for selecting the persons to be dismissed. Given that the Plaintiff Foundation's employees were well acquainted with one another's work ability and interpersonal relationships, and given that the restructuring committee members were selected with the consent of the labor union, the mere fact that such selection took place one day before the committee meeting was held cannot render the selection of persons to be dismissed by such method unreasonable. Accordingly, the judgment of the court below on this point is also justified, and there is no error such as misapprehension of the legal principles regarding the reasonable and fair selection of persons to be dismissed, insufficient deliberation, or violation of the rules of evidence that affected the outcome of the judgment. The arguments in the grounds of appeal by the Defendant and the Intervenors on this point also cannot be accepted.
3. Accordingly, all appeals are dismissed, and of the costs of appeal, the portion arising from the intervention shall be borne by Intervenor 2, and the remainder shall be borne by the Plaintiff. This judgment is rendered as stated in the Order by the unanimous opinion of the participating Justices.
Justices Seo Seong (Presiding Justice), Lee Yong-woo, Bae Ki-won (Justice in charge), Park Jae-yoon