Hello, I am Attorney Choi Jongha of Law Firm Chungchul.

"Aren't officers not employees?" is the first question HR managers usually think of when reviewing personnel measures for officers. However, simply being an 'officer' under the company's title system does not necessarily mean one is outside the protection of the Labor Standards Act. Even if a person is a registered director, the Supreme Court has held that if the position is formal or nominal, or if the person provided certain labor under the direction and supervision of the representative director, etc., outside the scope of delegated affairs, and received compensation in return, the person may qualify as an employee under the Labor Standards Act (Supreme Court Decision 2002Da64681, decided Sept. 26, 2003). In the end, the criterion is not the title of officer itself, but how the person actually worked.

1. Cases in which an officer may still be recognized as an employee

Whether an officer is an employee is determined by comprehensively considering factors such as: ① whether the employer determines the content of the work; ② whether the person is subject to the employment, service, and personnel rules; ③ whether the person receives specific work-related direction and supervision; ④ whether working hours and place are restricted; ⑤ whether compensation has the character of remuneration for labor; and ⑥ how social insurance is handled, including enrollment in the four major insurances.

For example, in a case where a non-registered director who had been a vice president submitted daily and weekly work reports to the representative director, received frequent reports and instructions via KakaoTalk, and was dismissed through disciplinary procedures under the company’s employment rules, the court found that the officer was in substance an employee and granted the application for relief from unfair dismissal (Seoul Administrative Court Decision 2020GuHap83904, decided Nov. 26, 2021).

Likewise, even if a person was listed in form as a registered director, in a case where he was only registered as an inside director at the request of the representative director when the company was established, but in reality worked as the sales team leader, commuting every day to handle product registration, sales, and vendor management, and all decision-making and final approvals belonged to the representative director, the court recognized the director’s employee status and deemed him eligible for substitute payment under the Wage Claim Guarantee Act (Seoul High Court Decision 2016Nu67778, decided Jan. 19, 2017).

2. Cases in which an officer was not recognized as an employee

On the other hand, if an officer acted as a genuine manager in the true sense, employee status is denied.

In a case where a registered director of a local public corporation was publicly recruited as an executive director, entered into an officer appointment contract, concurrently served as head of headquarters, and attended board meetings to exercise deliberation and voting rights on matters such as capital increase, budget, and safety plans, the court denied employee status, finding that he was appointed for professional management purposes, independently operated the relevant work in charge, and substantially participated in management decision-making (Incheon District Court Decision 2024GuHap52780, decided Oct. 25, 2024).

Also, in a case where a non-registered officer was appointed and received treatment differentiated from ordinary employees, such as the highest level salary and a company car, corporate card, and stock options, while exercising broad authority over the technology development division, including budget and expense final approval authority as well as hiring and evaluation, and was not subject to attendance or commuting control, the court likewise denied employee status (Seoul Southern District Court Decision 2024GaDan239757, decided May 14, 2025).

The common points of the above cases are that ① they substantially participated in management decision-making, ② they oversaw an independent area of work, and ③ they received treatment differentiated from ordinary employees. Employee status of an officer is not determined simply because the title is officer and the person is enrolled in social insurance; the actual manner of performing work is the decisive criterion.

3. Practical implications

Determining whether an officer is an employee is directly linked to important issues such as whether the company has an obligation to pay retirement severance, unused annual leave allowances, and substitute payments, and whether arbitrary termination of an appointment contract is likely to be recognized as unfair dismissal.

Therefore, when a company considers personnel measures for an officer, it must objectively assess how that officer has actually worked. If one judges, merely based on registration status or title, that "because he is an officer, we can freely terminate the appointment," there is a risk that this will later be deemed an unfair dismissal, resulting in obligations to reinstate the person to the former position and pay amounts equivalent to wages. Conversely, subjecting an officer whose substance is that of a manager to procedures that apply unconditionally to employees can undermine the speed of internal decision-making.

The safest risk management approach is to clearly design the scope of duties, authority, compensation structure, and reporting/approval lines from the stage of appointing an officer, and consistently maintain operating practices that distinguish the officer from ordinary employees.