Hello, this is attorney Choi Jong-ha of Cheongchul Law Firm.

In principle, the expiry of the contract period brings an employment contract to an end automatically. Under Korean labour law doctrine, which looks to the substance of the relationship, however, there are cases where a "legitimate expectation of renewal" means the contract cannot be terminated even though the period has expired.

The Supreme Court has held that "even where a fixed-term employment contract has been concluded, if — taking into account the terms of the contract, the motive and circumstances in which it was made, the purpose of fixing a period and the parties' true intentions, the practice governing how such contracts are concluded, and statutes protecting employees — it is found that the fixing of a period is a mere formality, as where short-term contracts have been repeatedly renewed over a long period, then notwithstanding the wording of the contract, an employer's refusal to conclude a renewal without justifiable reason is void in the same way as a dismissal" (Supreme Court Decision 2007Du1729 of 14 April 2011). It went on to hold that "where the employment contract, rules of employment or collective agreement provide that the contract will be renewed if certain requirements are met, or even absent such a provision, where in light of the content of the contract, the motive and circumstances of its conclusion, whether criteria and procedures for renewal have been set and how they operate in practice, and the nature of the employee's duties, a relationship of trust has formed that the contract will be renewed if certain requirements are met, so that the employee has a legitimate expectation of renewal, an employer's unjustified refusal to renew in breach of that expectation has no effect, just as an unfair dismissal has none, and the relationship after expiry is the same as if the previous contract had been renewed" (Supreme Court Decision 2011Du12528 of 13 February 2014).

Importantly, this doctrine is not confined to fixed-term contracts. In a case concerning re-engagement after retirement age, the Supreme Court held that "where a relationship of trust has formed between the parties that an employee who reaches retirement age may be re-engaged as a fixed-term employee if certain requirements are met, the employee has, absent special circumstances, an expectation of being re-engaged after retirement" (Supreme Court Decisions 2018Da275925 of 1 June 2023 and 2018Du62492 of 29 June 2023, among others).

Re-engagement after retirement can therefore be assessed not as "fresh hiring" but as "an extension of the existing relationship of trust". Even a company with no express re-engagement rule may find that an accumulated practice of consistently re-engaging retirees itself grounds a relationship of trust protected in the same way as an expectation of renewal.

Recognition of an expectation of re-engagement does not, of course, oblige the company to re-engage in every case. Just as a refusal to renew is lawful where the employer has reasonable grounds, a refusal to re-engage may be justified where reasonable grounds for refusal exist.

Companies operating systems for renewing fixed-term contracts, or for re-engaging employees who reach retirement age on contract terms, should put legally sound assessment procedures in place in anticipation of later disputes over the grounds for refusal.