Removing an Executive vs. Dismissing an Employee at a Korean Subsidiary or Branch

When a foreign parent decides to part ways with the head of its Korean operation, it usually treats the move as a corporate governance decision: remove the director, update the registry, and the matter is closed. That works for a genuine registered director. It often fails for everyone else with an executive title, such as an unregistered “Managing Director,” a “VP” hired on a headquarters-drafted executive contract, or the Korea representative of a branch office. Which set of rules applies depends on how the person actually worked, not on the title on their business card.

Two Legal Tracks That Look Similar and Work Completely Differently

The Corporate Track
A registered director holds office under a mandate from the company, not an employment contract. Shareholders appoint and remove directors under the Commercial Act and the articles of incorporation. Removal needs no just cause, triggers no labor-law notice period, and the Labor Relations Commission has no jurisdiction.

The Labor Track
A worker is anyone who provides labor for wages under someone else’s direction, whatever the contract calls them. At a workplace with five or more regular employees, a worker:

• can be dismissed only for just cause;
• must get written notice of the grounds and the effective date;
• must get 30 days’ notice or pay in lieu;
• can challenge the dismissal before the Labor Relations Commission within three months;
• is entitled to statutory severance pay.

Why the Distinction Carries So Much Weight
On the corporate track, the cost is usually the pay for the rest of the director’s term. On the labor track, the company can face a reinstatement order, full back pay, and penalties for not complying.

Removing a Registered Director: Easy to Do, Not Free

Removal at Any Time
Shareholders can remove a registered director at any time by special resolution. For a wholly owned subsidiary, the foreign parent can do this quickly and doesn’t have to give a reason.

The Damages Exposure
A director removed before the end of a fixed term without just cause can claim damages, generally the pay they would have earned for the rest of the term. Courts treat just cause as objective circumstances that seriously impair the director’s ability to do the job. A controlling shareholder simply losing confidence generally isn’t enough. In 2023 the Supreme Court held that facts existing at the time of removal can support just cause even if the company didn’t know about them yet.

Term Design
The damages track the remaining term, so a maximum three-year term or unusually high pay increases the potential payout.

When an “Executive” Is Legally a Worker

Substance Over Title
In November 2017, the Supreme Court held that an unregistered executive is a worker if, in substance, they worked under the company’s direction in return for wages instead of independently running the business matters delegated to them.

Factors Courts Look At

• The size and structure of the company
• How and why the person was appointed
• Whether they signed an executive contract and were excluded from the employee work rules
• Whether their pay and benefits were clearly different from employees’
• Whether they had real authority over decisions and hiring
• Whether they took part in management-level decision-making

Why Foreign Subsidiaries Are Especially Exposed
Korean subsidiaries tend to be small, and their senior people often report to a regional manager who sets their targets, budgets, hires, and pay. That reporting line points toward a worker relationship. In exceptional cases, even a registered representative director whose directorship is nominal can be treated as a worker.

Headquarters Contract Terms That Won’t Hold
At-will clauses, short-notice termination rights, and foreign governing-law clauses don’t override mandatory Korean labor protections for someone who habitually works in Korea.

Dual Status: The Director Who Is Also an Employee

Two Relationships, Two Terminations
Sometimes a long-serving employee is added to the registry as a director but keeps running the same function. If the employment relationship continued, for example because no severance was paid at the appointment, then removing them as a director ends only the directorship. Ending the employment needs a separate dismissal under the Labor Standards Act.

The Common Mistake
The company passes the removal resolution and assumes the person is gone. The person then files an unfair dismissal claim, arguing they were never lawfully dismissed as a worker.

Branch Offices: No Board, No Removal Mechanism, Mostly Labor Law

The Korea Representative Is Not a Corporate Director
A branch has no Korean board or shareholders’ meeting, so the Commercial Act’s removal mechanism doesn’t apply. Changing the registered representative is a separate registry step from ending the working relationship.

Labor Law Usually Governs
The branch representative is usually, in substance, an employee of the foreign company working in Korea. That brings the full labor-law process, and a foreign governing-law clause doesn’t remove those protections.

The Five-Employee Threshold and the Group Headcount Trap

Why Small Offices Assume They Are Exempt
The just-cause requirement and Labor Relations Commission remedies apply only at workplaces with five or more regular employees.

The 2024 Supreme Court Decision
In October 2024, the Supreme Court treated a Korean subsidiary and the Korean branch of a sister company, both under the same foreign parent, as a single workplace. They did the same kind of business, had unified personnel management, and operated as one organization. Three employees plus six went over the threshold, and the dismissal was found unfair.

Practical Sequencing Before Letting a Senior Person Go

1. Classify the person first, based on how they actually worked, not on their title or the contract form headquarters used.
2. Check whether a registered director still has an employment relationship, especially one promoted from within without a severance payout.
3. For a genuine registered director, assess just cause and the pay owed for the remaining term before passing the resolution, and document the objective reasons.
4. For anyone likely to be a worker, run the full Labor Standards Act process: just cause, written notice, 30 days’ notice or pay in lieu, and severance.
5. Count employees across related Korean entities where offices, management, or staff are shared.
6. Consider a negotiated separation agreement with a clear release.