Hello, this is Attorney Choi Jong-ha at Cheongchul Law Firm.

A "fixed-term" employment contract—commonly referred to as "non-regular employment"—is a contract that specifies a termination date. Such a contract terminates automatically upon expiration of the agreed term, and continuing one's status as an employee thereafter generally requires entering into a new contract. However, Korean courts do not accept this simple scheme as it stands when it comes to employment contracts. When certain conditions are met, a worker may form a trust that "this contract will be renewed," and that trust can operate as a legally protected right known as the "renewal expectation right" (갱신기대권).

Where a renewal expectation right is recognized, an employer's refusal to renew without reasonable grounds is treated the same as wrongful dismissal. This is why an employer cannot rely on the mere appearance of "term expiration."

1. Establishment of the Renewal Expectation Right — What Courts Look At

The Korean Supreme Court has held: "Where an employee has entered into a fixed-term employment contract, the employment status in principle terminates automatically upon expiration of the term, and even without an express refusal to renew, the employee is deemed to retire by default if the contract is not renewed. However, where the employment contract, work rules, or collective agreement provides that the contract will be renewed if certain requirements are met despite term expiration, or even absent such provisions, where—taking into account the content of the contract, the motive and circumstances of its conclusion, the criteria for renewal and the existence and actual practice of renewal procedures, the nature of the work performed, and other relevant circumstances surrounding the employment relationship—a relationship of trust has been formed between the parties that the contract will be renewed if certain conditions are satisfied, so that the employee has a legitimate expectation that the contract will be renewed, an employer's unjustified refusal to renew in breach of that expectation is, like a wrongful dismissal, of no effect, and in such case the employment relationship after the expiration of the term is treated as if the prior contract had been renewed" (Supreme Court Decision 2012Du1402, Feb. 13, 2014, among many others).

2. The Fixed-Term Workers Act and the Renewal Expectation Right

When the Act on the Protection, etc. of Fixed-Term and Part-Time Workers (the "Fixed-Term Workers Act") took effect on July 1, 2007, there was a view that "now that we have a two-year use-period cap and a deemed-permanent rule, the separate doctrine of renewal expectation rights is no longer necessary." The Supreme Court, however, held that the previous doctrine of renewal expectation rights continues to apply even after the Fixed-Term Workers Act came into force (Supreme Court Decision 2013Da51674, Feb. 13, 2014).

The rationale of that ruling is that the use-period cap under the Fixed-Term Workers Act is intended to prevent abuse of fixed-term employment, not to deny the renewal trust that may form within that period. The practical impact, however, has been substantial. Where a worker has been employed for two years and a renewal expectation right has formed, the worker can now expect not merely "renewal" but rather "permanent status."

As a result, employers seeking flexible workforce management must (1) take care that a renewal expectation right does not arise in the first place, and (2) where recognition of such a right is unavoidable, rigorously establish standards under which they can reasonably decline renewal.

3. Cases Where the Renewal Expectation Right Is Denied

Of course, the renewal expectation right is not recognized in every fixed-term contract. The Supreme Court has held that a general clause in an employment contract stating "the parties may extend the contract term by mutual consultation," or a recruitment notice stating "extension possible depending on future performance," is insufficient by itself to give rise to a renewal expectation right (Supreme Court Decision 2019Du40680, Aug. 30, 2019). Mere phrases that leave open an abstract possibility—without specific renewal requirements, procedures, or actual renewal practices—may not constitute an objective basis for trust.

Ultimately, the renewal expectation right is recognized through a combination of: (i) renewal requirements explicitly set forth in documents such as the employment contract, work rules, or collective agreement; (ii) absent such documentation, established practice of renewing when certain conditions are met; (iii) the specificity of evaluation or review procedures; and (iv) the continuity and permanence of the duties performed. There must be an objective foundation from which the prospect of renewal can be reasonably predicted.

4. Even Where the Renewal Expectation Right Is Recognized, Refusal May Still Be Justified

Recognition of a renewal expectation right does not mean that an employer must unconditionally renew the employment contract. The Supreme Court has held: "Whether the reasons and procedures for refusing renewal are objective, reasonable, and fair in light of social norms must be determined by comprehensively considering the employer's business purpose and nature, workplace conditions, the circumstances surrounding the conclusion of the employment contract, the actual operation of the renewal system, the position of the relevant employee and the content of the duties performed, suitability for the work, whether the employee bears responsibility for any fault, and other circumstances surrounding the employment relationship. The burden of proving such circumstances rests with the employer" (Supreme Court Decision 2018Du62492, June 29, 2023).

An example in which such reasonable grounds were recognized involves a government-funded research council that abolished its in-house research projects, shifted its policy direction toward external outsourced projects, offered alternative duties to a research specialist who refused, and then declined to renew the contract. The Supreme Court recognized the reasonableness of the refusal only after comprehensively considering the objective necessity of the business restructuring, the effort made up to the proposal of alternative duties, and the absence of circumstances suggesting any lack of fairness in the evaluation (Supreme Court Decision 2013Da47125, July 29, 2016). In other words, since the reasons and procedures for refusing renewal will be reviewed retrospectively through a comprehensive evaluation, employers are expected to thoroughly build out, in advance, the three axes of business necessity, availability of alternatives, and fairness of evaluation.

In a fixed-term contract, the mere appearance of "term expiration" is not an automatic absolution that justifies a refusal to renew. From the employer's perspective, one must organize how the renewal criteria are set in the contract or company rules, how those criteria have been operated through evaluation and review procedures, and whether the refusal decision is supported by reasonable grounds and procedures. From the employee's perspective, examining which parts of one's own contract, recruitment notice, company rules, and workplace practices may serve as a basis for a renewal expectation right is the starting point of any dispute.