In July 2016, the Seoul Administrative Court accepted the Labor Relations Commission's determination that the dismissal of an employee who had continuously shown poor performance was justified. See Case No. 2015Guhap12830 (Seoul Admin. Ct. July 14, 2016).

Since 2014, the manufacturing-company defendant had been implementing what it called its "Capacity Advancement Process," a kind of performance-improvement plan for underperforming employees. The employee plaintiff was subjected to the Capacity Advancement Process in 2014 because the employee received the lowest performance grade for three consecutive years from 2011 to 2013. However, the employee's performance did not improve even after completing the Capacity Advancement Process, and the employee was placed in the Capacity Advancement Process for a second time in the same year.

In 2014, this employee received the lowest performance rating again. The company then concluded that the employee was incompetent to continue in his/her position. And the company placed the employee on standby for transfer by removing the employee's assigned responsibilities. Eventually, the company dismissed the employee citing its Rules of Employment, which provide that an employee can be dismissed "in the event that one's service record or job performance is noticeably poor."

The employee then petitioned the Seoul Regional Labor Relations Commission to void the dismissal as unjust, but the claim was dismissed. The employee then filed an appeal to the Central Labor Relations Commission, but the appeal was likewise dismissed. The employee then filed a lawsuit in the Seoul Administrative Court seeking to rescind the Commission's decision.

The court ruled that there was no evidence demonstrating that the defendant company's evaluation was arbitrary or unfair, considering that the employee plaintiff (1) received the lowest performance rating for four consecutive years; (2) did not display any willingness to improve and instead complained about the assignments given or worked on something other than his/her assignments despite poor job performance; and (3) was criticized by superiors over a lack of job capacity, creativity, and ability to proactively communicate.

The genuine purpose of the Capacity Advancement Process also became an issue. The legality of performance-management measures must be assessed in detail case by case, and the purpose and motive behind a performance-management program for underperforming employees may be disputed based on various factors, such as the process by which the program was created, the reasons for implementation, the results of implementation, the rate of participants being found suitable to return to their original post, and the actual training provided in the program.

In this case, the court stated that the purpose of the process was legitimate because (1) the process was introduced based on a considerable amount of discussion and preparation; and (2) more than 50% of those who completed the process successfully returned to the company's workforce.

However, employers should understand that the legitimacy of such programs depends on whether they help underperforming employees to improve their work skills and return to their positions in the workforce.

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