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                   Key Issues and Lessons from a Dismissal During the Probationary Period

Bongsoo Jung (Labor Attorney, KangNam Labor Law Firm)

I. Introduction

A company cannot freely terminate an employment relationship merely because the probationary period has ended. In particular, where a company cites insufficient English proficiency?an issue that was not problematic at the time of hiring?as a ground for dismissal after a change in its business plan, the legitimacy of the dismissal must be carefully examined. This case concerns a dismissal in which both the assessment of a probationary employee’s job suitability and the company’s organizational restructuring were at issue.

One of the key issues foreign-invested companies must consider when managing personnel in Korea is the legitimacy of dismissal. Article 23 of the Labor Standards Act prohibits dismissal without justifiable cause, while Article 24 sets forth the requirements for dismissals for managerial reasons. Accordingly, before dismissing an employee, a company must first distinguish whether the dismissal is based on the employee’s individual job performance or misconduct, or whether the employee’s position has disappeared due to the company’s managerial circumstances.

Companies commonly evaluate newly hired employees for a certain period to determine their suitability for the job. Some companies use fixed-term employment contracts for this purpose, while others, taking into account an applicant’s expectation of employment stability, enter into an indefinite-term employment contract that includes a three-month probationary period. However, a probationary period does not exempt the company from the legal restrictions applicable to dismissal. In a trial-employment relationship established for the purpose of assessing job suitability, the employer may be granted broader discretion to terminate the relationship than in an ordinary dismissal, but even then there must be objectively reasonable grounds and the termination must be acceptable under generally accepted social norms.[1]

For an evaluation of a probationary employee to satisfy these standards, merely establishing evaluation criteria is not enough. The employee should be evaluated based on the duties actually assigned, deficiencies should be explained specifically, and the employee should be given an opportunity to improve. Periodic evaluations and feedback help support the objectivity of the evaluation and enable the employee to understand the results. However, the mere fact that such procedures were followed does not automatically establish the legitimacy of the dismissal.

This article examines the process by which a company reached a settlement with a probationary employee who had been dismissed following the closure of its domestic sales department. Based on that case, it then reviews four issues in detail: the probationary evaluation, written notice of the grounds for dismissal, dismissal for managerial reasons, and misconduct raised only after the dismissal. It also presents practical lessons for preventing similar disputes.

II. Conflict with the Dismissed Probationary Employee and Its Resolution

1. Background of the Case

Recently, an HR manager at the U.S. headquarters of a pharmaceutical company contacted me regarding the dismissal of a probationary employee. The Korean office had notified the employee of dismissal at the end of the probationary period, but the employee objected to the unilateral dismissal and demanded compensation equivalent to one year’s salary. The company cited unsatisfactory job performance during the probationary period as the ground for dismissal. However, after reviewing the circumstances, I concluded that before assessing the employee’s job suitability, it was necessary to examine the company’s change in business plan and the circumstances surrounding the closure of the department.

The employee joined the Korean office, which had approximately 15 employees, on May 18, 2026, and the employment contract provided for a three-month probationary period. The company hired the employee for a sales position in order to market in Korea a pharmaceutical product that had completed clinical trials. The hiring decision was based on the employee’s prior experience in the pharmaceutical industry.

Business documents at the Korean office and reports to headquarters were generally prepared in English. However, because the employee’s assigned position was domestic sales, limited English proficiency did not materially interfere with the performance of the sales duties. The company was aware of this at the time of hiring and did not require English proficiency as an essential qualification for the position.

Subsequently, the pharmaceutical product failed to receive domestic marketing approval, preventing the company from proceeding with its original sales plan, and the sales department was therefore closed. The company considered transferring the probationary employee to another department. However, it concluded that reassignment would be difficult because the remaining departments required the ability to perform work in English. Ultimately, at the end of the probationary period, the company notified the employee that the employment relationship would be terminated due to lack of job suitability.

I concluded that it would be difficult to characterize the employee as unsuitable for the job solely on the basis of limited English proficiency, because the company had already known of this limitation when hiring the employee and had not treated English proficiency as an essential requirement of the employee’s original position. The first material change in this case was not a deterioration in the employee’s job performance, but the closure of the sales department. Accordingly, rather than treating the matter solely as an issue of the employee’s probationary evaluation, it was necessary first to consider whether the termination amounted to an employment adjustment arising from the company’s managerial circumstances. In light of these legal risks, I advised the company to resolve the dispute through a settlement with the employee.

During the negotiations, the company also raised an issue concerning the employee’s use of the corporate credit card. According to the company, a background check revealed that the employee had been encouraged to resign from the previous employer after using a corporate card for personal purposes, and the current company also discovered personal use of its corporate card during the probationary period. However, because these matters had not been stated as grounds for the initial dismissal, they required separate legal review.

2. The Settlement Process and Remaining Legal Issues

The employee concluded that actual reinstatement would be difficult, given that the sales department had been closed and that the remaining departments required the use of English. The employee therefore reduced the original demand for compensation from one year’s salary to six months’ salary. On September 13, 2026, the company made a formal written offer to pay an additional amount equivalent to two months’ salary. The written offer also referred to the corporate-card issues at both the employee’s former employer and the current company.

The employee did not accept the company’s offer. The employee argued that it was unfair for the company to raise English proficiency after the fact when it had not been required at the time of hiring, and that the corporate-card issue had not been included among the original grounds for dismissal. The employee maintained the demand for six months’ salary and stated that, if no settlement were reached, an application for remedy for unfair dismissal would be filed with the Labor Relations Commission.

The company determined that the negotiations were unlikely to progress further and informed the employee that, if an application for remedy were filed, it would seek a settlement during the Labor Relations Commission proceedings. The employee subsequently proposed settlement on the condition that the company pay the full amount of three months’ salary on a pre-tax basis and cooperate with the administrative procedures required for the employee’s application for unemployment benefits. The company accepted these terms, and the dispute was concluded by agreement between the parties.

This was not a case in which the Labor Relations Commission or a court determined the legitimacy of the dismissal; rather, the dispute was resolved through an agreement between the parties. Accordingly, the settlement amount of three months’ salary does not constitute a statutory standard applicable to similar cases. In determining an appropriate settlement amount, the parties should comprehensively consider the likelihood of proving the grounds for dismissal, procedural risks, the time and cost required to resolve the dispute, and the intentions of the parties. In addition, a settlement payment made to resolve a dispute must be distinguished from the statutory obligation to provide advance notice of dismissal or pay dismissal notice allowance.[2]

Although the dispute ended through settlement, the case requires a distinction between evaluation of the employee’s job suitability and employment adjustment resulting from the closure of the department. It is also necessary to consider whether the corporate-card issue raised after the dismissal could support the legitimacy of the original dismissal. The relevant statutory and judicial standards are as follows.

III. Statutory and Judicial Standards Relevant to This Case

1. Dismissal of Probationary/Trial Employees or Refusal of Regular Employment

The terms “probation” and “trial employment” are often used interchangeably in practice, but a distinction should be made between a period intended simply for learning the job and a trial-employment arrangement in which the employer reserves the right to terminate the employment relationship after assessing the employee’s suitability. The mere fact that an employment contract states “three-month probationary period” does not permit unrestricted dismissal. The contents of the employment contract and the rules of employment, the circumstances of hiring, the evaluation procedure, and the process for deciding whether to confirm regular employment must all be considered comprehensively.

Even in a trial-employment relationship, there must be justifiable cause under Article 23 of the Labor Standards Act. The Supreme Court has held that, in light of the purpose of a trial-employment system?to observe and assess an employee’s job ability, qualifications, character, diligence, and other qualities?the employer may be afforded broader discretion to dismiss the employee during the trial period or to refuse regular employment upon its expiration than in the case of an ordinary dismissal. Nevertheless, such a decision must be based on objectively reasonable grounds and must be considered acceptable under generally accepted social norms.[3]

The fact that an evaluation was conducted and the question of whether that evaluation was legitimate must be distinguished. The mere existence of an evaluation score sheet is insufficient. Important considerations include: (1) whether the evaluation criteria are related to the duties actually performed; (2) whether there are specific facts regarding work performance that support the evaluation results; and (3) whether the evaluation was conducted fairly in accordance with the established method. Companies should therefore clearly define the competencies required for each position and the probationary evaluation criteria at the hiring stage, and should maintain records of the evaluation results and feedback provided.

A circumstance that could weigh against the company in this case is that it knew of the employee’s limited English proficiency at the time of hiring and did not consider it a fundamental impediment to the employee’s original sales duties. Based on the facts presented, greater significance should be placed not on whether the employee objectively underperformed in the original position, but on the fact that English proficiency became an issue only because another position required it after the sales department had been closed.

Accordingly, an employee who is unsuitable for the position originally assigned should be distinguished from an employee for whom no position remains available because of an organizational change. In the latter case, rather than explaining the dismissal solely through the probationary evaluation results, the company should examine whether the requirements for dismissal for managerial reasons have been satisfied.

2. Written Notice of the Grounds for Dismissal

Article 27 of the Labor Standards Act requires an employer who dismisses an employee to provide written notice of the grounds for dismissal and the effective date of dismissal; the dismissal becomes effective only upon such written notice. The same rule applies when an employer refuses regular employment upon expiration of a trial period. The Supreme Court has held that the employer must provide specific and substantive reasons in writing so that the employee can understand the reasons for the refusal of regular employment and respond to them.[4]

Accordingly, if a notice of dismissal merely cites a provision of the rules of employment or uses expressions such as “expiration of the probationary period” or “unsatisfactory job performance,” the employee may have difficulty identifying the specific grounds for dismissal. What matters is not the company’s internal reasoning, but whether the written notice delivered to the employee enabled the employee to understand the specific reasons for termination of the employment relationship.[5]

However, a dismissal does not always become invalid merely because the wording of the notice is abbreviated. The Supreme Court has assessed the specificity of written notice by considering whether the employee had detailed knowledge of the facts at issue and had a sufficient opportunity to explain them, and whether the employee had received written materials such as meeting minutes setting out the relevant details. The point is that the materials delivered together with the dismissal notice and the circumstances of the explanation given at the time should be considered as a whole. This does not mean that an oral explanation can substitute for written notice, or that sending materials after the dismissal automatically cures a pre-existing defect.[6]

The result in this case could likewise depend on the specific contents of the dismissal notice and the materials provided in advance. If the notice stated only “unsatisfactory job performance during the probationary period” and no materials were delivered from which the employee could understand what that meant, a procedural defect could be raised. On the other hand, if detailed evaluation results and the company’s review of possible reassignment were provided in writing, enabling the employee to respond adequately, those circumstances could be considered in determining whether the written-notice requirement was satisfied.

3. Closure of Part of the Business and Dismissal for Managerial Reasons

As a general rule, the closure of part of a business constitutes a reduction of the business rather than the closure of the entire enterprise. Therefore, where employees in the affected business unit are dismissed for managerial reasons, the requirements of Article 24 of the Labor Standards Act must, in principle, be satisfied. Whether exceptional circumstances exist such that the closure of a particular business unit may be treated as equivalent to closure of the entire business is determined by comprehensively considering factors such as the operational independence of the unit’s personnel and physical organization, its financial and accounting independence, the compatibility of work with the remaining business operations, and the possibility of reassignment. The employer bears the burden of proving the legitimacy of the dismissal.[7]

In a dismissal for managerial reasons, the relevant issues include: (1) urgent managerial necessity; (2) efforts to avoid dismissal; (3) reasonable and fair selection of employees to be dismissed; and (4) prior notice to and good-faith consultation with the employee representative. Article 24(3) of the Labor Standards Act requires the employer to notify the employee representative of the methods for avoiding dismissal and the criteria for selecting employees to be dismissed, and to consult in good faith, no later than 50 days before the intended date of dismissal. The Supreme Court also examines whether, in light of the size and circumstances of the business, the employer considered feasible measures to minimize the scope of dismissal, such as transfers, reassignments, and restrictions on new hiring.[8]

In this case, the employment adjustment was caused by the closure of the sales department after domestic marketing approval was not obtained. Therefore, rather than emphasizing the employee’s limited English proficiency after the fact, it is important for the company to explain specifically which positions disappeared, which positions remained, why English proficiency was essential for the remaining positions, and what measures were considered for reassignment.

4. Scope of Use of Misconduct Not Stated in the Dismissal Notice

When reviewing the corporate-card issue, it is necessary to distinguish among: (1) evidence used to prove the original grounds for dismissal; (2) a new and independent ground for dismissal; and (3) circumstances considered in determining the appropriate level of disciplinary action. Even the same evidence may have a different legal meaning and scope of review depending on what it is submitted to prove.

The Supreme Court has held that, absent special circumstances, an employer may not add a new disciplinary ground during an internal disciplinary review procedure when that ground was not relied upon in the original disciplinary action. By contrast, misconduct occurring before or after the disciplinary ground, the employee’s usual conduct, work performance, and similar circumstances may be considered as reference materials in determining the type and severity of disciplinary action.[9]

In this case, the company initially terminated the employment relationship on the ground of unsatisfactory job performance during the probationary period, and only later raised the corporate-card issue during settlement negotiations. The circumstances at the former employer require separate examination of the underlying facts and their relevance to the current employment relationship. The employee’s use of the corporate card at the current company likewise requires confirmation of the circumstances of use, the company’s internal rules, and the employee’s explanation.

In particular, this case was not originally characterized as a disciplinary dismissal based on misuse of the corporate card. Therefore, it would be difficult to use case law concerning the proportionality of disciplinary measures to replace the original ground of dismissal based on lack of job suitability. The company must first distinguish whether the materials raised after the dismissal support the original ground or instead concern separate misconduct. Moreover, the mere submission of such materials does not automatically cure any defect in the original written notice. For these reasons, the employee’s use of the corporate card and the legitimacy of the original dismissal should be reviewed separately.

IV. Implications and Conclusion

Even when dismissing an employee during a probationary period, the company must first identify the actual reason for seeking to terminate the employment relationship. In this case, the company cited the employee’s limited English proficiency as evidence of lack of job suitability. In the background, however, the company had closed the sales department after the pharmaceutical product failed to obtain domestic marketing approval following the employee’s hiring. If the issue of the employee’s job suitability is not distinguished from changes in the company’s business circumstances, it becomes difficult to explain the grounds for dismissal properly and to select the appropriate legal procedure. The principal lessons from this case are as follows.

First, a probationary evaluation should be based on the position agreed upon at the time of hiring and on the employee’s actual work performance. If a competency that was not essential at the time of hiring becomes necessary for a different position after organizational restructuring, the assessment of suitability for the original position must be distinguished from the assessment of whether reassignment is possible. To this end, it is important to establish evaluation criteria in advance, document specific facts regarding work performance, and provide the employee with feedback and an opportunity to improve.

Second, where the employee’s position disappears because a department is closed, the dismissal issue should not be treated simplistically merely because the employee is still in a probationary period. The company should examine the requirements for dismissal for managerial reasons and genuinely consider measures to avoid dismissal, including reassignment. In a small organization, the difficulty of finding an alternative position may be taken into account, but specific supporting materials and lawful procedures are also required.

Third, the grounds for dismissal and the materials supporting them should be organized at the stage when the dismissal is decided and notified. The written notice must state specific grounds for dismissal and the effective date so that the employee can understand and respond. Corporate-card misuse discovered after the fact may itself require separate review. However, merely raising such circumstances does not justify the grounds or procedure of the original dismissal.

Fourth, settlement can be a means of resolving a dispute while taking into account legal risks and the practical needs of the parties. In this case, the agreement to pay three months’ salary was the solution chosen by the parties. It does not represent a generally applicable compensation standard for dismissing probationary employees or a determination that the dismissal was legitimate. Even in settlement negotiations, the payment conditions should be clearly defined, and the administrative procedures concerning unemployment benefits should be handled consistently with the actual circumstances of the employee’s separation.

A probationary period is not a period during which the legal restrictions on dismissal can be avoided; it is a period during which the company and the employee assess suitability for the position. Accordingly, to prevent disputes involving probationary employees, the company should establish clear criteria at the time of hiring and conduct fair evaluations during employment rather than searching for additional grounds after a dismissal has occurred. If the employment relationship is terminated, the company must also follow the legal standards and procedures applicable to the actual reason for termination. By doing so, the company can preserve the proper purpose of the probationary system and prevent unnecessary dismissal disputes.