Corporate trends / Performance record
Unfair Dismissal Case Concerning “Personnel Order (Demotion and Transfer)” (Unfair Dismissal 568)
- Date2026/07/24 04:11
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[Case Information]
This case is a decision in which the employer prevailed (application dismissed) on the issue of a “personnel order (demotion and transfer).”
Decision Committee: Seoul Regional Labor Relations Commission 2026Buhae941 ○ ○ ○ Application for Remedy for Unfair Dismissal
2026-05-22 · Case result: Dismissed
Key Issue Summary: (a)
1. Legal Implications
Ⅰ. Case Overview
In this case, after a personnel order was issued to the employee involving a transfer and demotion in rank, the employee applied to the Labor Relations Commission for relief, arguing that the measure constituted a de facto disciplinary action and an unfair personnel measure equivalent to unfair dismissal.
The Seoul Regional Labor Relations Commission focused its review on whether the personnel order constituted a disciplinary action and, if it was to be viewed as an exercise of managerial prerogative, whether it was justified. The employee’s application was dismissed.
The key issue in this case is whether “a personnel order involving transfer and demotion in rank constitutes a disciplinary action, and further, whether it satisfies the requirements of business necessity, degree of disadvantage to the employee’s livelihood, and procedural fairness as an exercise of managerial prerogative.”
Ⅱ. Summary of Issues
The issues in this case were, first, whether the measures of transfer and demotion in rank were “disciplinary actions” imposed as sanctions for past misconduct, or general “personnel orders” arising from organizational restructuring.
Second, if they were to be viewed as personnel orders, the question was whether they satisfied the requirements under Article 23(1) of the Labor Standards Act—namely, business necessity, the degree of disadvantage to the employee’s livelihood, and the appropriateness of procedures such as prior consultation—so that they would not constitute an abuse of rights.
Ⅲ. Summary of the Labor Relations Commission’s Reasoning
The panel in this case found that the transfer and demotion in rank implemented by the employer were for the purpose of job reassignment following organizational restructuring; that “demotion” was not included among the types of disciplinary action under the rules of employment; and that the rank in question was not directly linked to the wage/compensation system but functioned more as an internal title/position within the organization, with no actual reduction in pay.
In light of these factors, the panel held that the measures were not disciplinary sanctions for past misconduct, but personnel orders falling within the scope of managerial prerogative. Furthermore, it recognized business necessity in the aim of aligning the transfer and rank system for fairness and establishing organizational order; it found it difficult to conclude that the economic and livelihood disadvantages resulting from the personnel order significantly exceeded the level ordinarily to be borne; and it found no circumstances indicating that the procedures related to the personnel change deviated substantially from the standards required by the Labor Standards Act and case law. On this basis, the panel held that there was no abuse of managerial prerogative.
Ⅳ. Practical Points (From the Employee’s Perspective)
From the employee’s standpoint, it should be noted that a transfer or change in rank is not automatically recognized as “disciplinary action” or “unfair dismissal.” Its legal nature will differ depending on whether it is stipulated as a type of disciplinary measure in the rules of employment or collective agreement, and on the extent of any substantive disadvantage in terms of wages, benefits, and the like.
To challenge a personnel order as unfair, the employee must systematically organize and assert specific circumstances before the Labor Relations Commission—such as a lack of business necessity, disadvantages to livelihood that clearly exceed the ordinarily acceptable range, or a complete absence of prior consultation or explanation procedures—and provide supporting evidence.
Ⅴ. Practical Points (From the Employer/Company’s Perspective)
From the company’s perspective, when implementing transfers or rank adjustments in the course of organizational restructuring, it is important to clearly document, in both written records and factual circumstances, that the purpose is grounded in business necessity, such as rationalizing organizational operations and maintaining hierarchical order.
In addition, the rules of employment should clearly distinguish between types of disciplinary action and types of personnel orders; the structure linking ranks/titles to the compensation system should be organized in advance; and procedures for consultation and explanation should be established to minimize changes in wages and benefits and any disadvantages to the employee’s livelihood before and after the personnel change.
To prevail in this type of case, it is essential to have HR and labor-management capabilities that include a prior understanding of the legal criteria distinguishing personnel orders from disciplinary actions, as well as the requirements for the legitimacy of transfers and reassignments (business necessity, disadvantage to livelihood, and procedural fairness), and to design and organize the underlying facts in advance so that they conform to these legal principles.
2. Matters Decided
A. Case Overview and Progress of Procedures
(a) Whether the personnel order constitutes disciplinary action
The transfer and demotion in rank appear to have been for the purpose of job reassignment through organizational restructuring. “Demotion” is not included among the types of disciplinary action under the rules of employment, and there was no reduction in pay. The “rank” in question is therefore assessed as a functional position indicating an internal title within the organization, rather than a rank linked to the compensation system. Accordingly, the measure constitutes a personnel order falling within managerial prerogative, not a disciplinary disposition.
(b) Whether the personnel order is justified (business necessity, disadvantage to livelihood, faithful consultation and compliance with procedures)
(i) The transfer and demotion in rank, aimed at aligning the internal organizational hierarchy and the rank system within the sales division and establishing organizational order, are supported by business necessity...
3. Summary of the Decision
A. Summary of the Labor Relations Commission’s Reasoning
(a) Whether the personnel order constitutes disciplinary action
The transfer and demotion in rank appear to have been for the purpose of job reassignment through organizational restructuring. “Demotion” is not included among the types of disciplinary action under the rules of employment, and there was no reduction in pay. The “rank” in question is therefore assessed as a functional position indicating an internal title within the organization, rather than a rank linked to the compensation system. Accordingly, the measure constitutes a personnel order falling within managerial prerogative, not a disciplinary disposition.
(b) Whether the personnel order is justified (business necessity, disadvantage to livelihood, faithful consultation and compliance with procedures)
(i) The transfer and demotion in rank, aimed at aligning the internal organizational hierarchy and the rank system within the sales division and establishing organizational order, are supported by business necessity... /
[See More Related Decisions]
- “Unfair Dismissal Decision Concerning ‘Lack of Business Necessity (Non-referral under the Personal Information Protection Act)’”
- “Unfair Dismissal Decision Concerning ‘Failure to Meet Requirements for Redundancy Dismissal (Workout Company)’”
- “Unfair Dismissal Decision Concerning ‘Non-Formation of Hiring Commitment (Absence of Offer Letter)’” – Date of Decision: – Case Result: First-instance Decision Upheld
[Tags]
Unfair dismissal, personnel order (demotion and transfer), performance evaluation/poor performance, others, Labor Law Firm Law&, large labor law firm, Samseong-dong labor law firm, Samseong Station labor law firm, Gangnam labor law firm
※ This article is part of the “Unfair Dismissal Decisions” series by Labor Law Firm Law&.
※ You can view the previous article, “Unfair Dismissal Decision Concerning ‘Lack of Business Necessity (Non-referral under the Personal Information Protection Act)’,” in a new window.
※ A list of decisions related to personnel orders (demotion and transfer) can be viewed together on the “List of Decisions Related to Personnel Orders (Demotion and Transfer)” page.
※ Korean version of this case: Korean article
This case is a decision in which the employer prevailed (application dismissed) on the issue of a “personnel order (demotion and transfer).”
Decision Committee: Seoul Regional Labor Relations Commission 2026Buhae941 ○ ○ ○ Application for Remedy for Unfair Dismissal
2026-05-22 · Case result: Dismissed
Key Issue Summary: (a)
1. Legal Implications
Ⅰ. Case Overview
In this case, after a personnel order was issued to the employee involving a transfer and demotion in rank, the employee applied to the Labor Relations Commission for relief, arguing that the measure constituted a de facto disciplinary action and an unfair personnel measure equivalent to unfair dismissal.
The Seoul Regional Labor Relations Commission focused its review on whether the personnel order constituted a disciplinary action and, if it was to be viewed as an exercise of managerial prerogative, whether it was justified. The employee’s application was dismissed.
The key issue in this case is whether “a personnel order involving transfer and demotion in rank constitutes a disciplinary action, and further, whether it satisfies the requirements of business necessity, degree of disadvantage to the employee’s livelihood, and procedural fairness as an exercise of managerial prerogative.”
Ⅱ. Summary of Issues
The issues in this case were, first, whether the measures of transfer and demotion in rank were “disciplinary actions” imposed as sanctions for past misconduct, or general “personnel orders” arising from organizational restructuring.
Second, if they were to be viewed as personnel orders, the question was whether they satisfied the requirements under Article 23(1) of the Labor Standards Act—namely, business necessity, the degree of disadvantage to the employee’s livelihood, and the appropriateness of procedures such as prior consultation—so that they would not constitute an abuse of rights.
Ⅲ. Summary of the Labor Relations Commission’s Reasoning
The panel in this case found that the transfer and demotion in rank implemented by the employer were for the purpose of job reassignment following organizational restructuring; that “demotion” was not included among the types of disciplinary action under the rules of employment; and that the rank in question was not directly linked to the wage/compensation system but functioned more as an internal title/position within the organization, with no actual reduction in pay.
In light of these factors, the panel held that the measures were not disciplinary sanctions for past misconduct, but personnel orders falling within the scope of managerial prerogative. Furthermore, it recognized business necessity in the aim of aligning the transfer and rank system for fairness and establishing organizational order; it found it difficult to conclude that the economic and livelihood disadvantages resulting from the personnel order significantly exceeded the level ordinarily to be borne; and it found no circumstances indicating that the procedures related to the personnel change deviated substantially from the standards required by the Labor Standards Act and case law. On this basis, the panel held that there was no abuse of managerial prerogative.
Ⅳ. Practical Points (From the Employee’s Perspective)
From the employee’s standpoint, it should be noted that a transfer or change in rank is not automatically recognized as “disciplinary action” or “unfair dismissal.” Its legal nature will differ depending on whether it is stipulated as a type of disciplinary measure in the rules of employment or collective agreement, and on the extent of any substantive disadvantage in terms of wages, benefits, and the like.
To challenge a personnel order as unfair, the employee must systematically organize and assert specific circumstances before the Labor Relations Commission—such as a lack of business necessity, disadvantages to livelihood that clearly exceed the ordinarily acceptable range, or a complete absence of prior consultation or explanation procedures—and provide supporting evidence.
Ⅴ. Practical Points (From the Employer/Company’s Perspective)
From the company’s perspective, when implementing transfers or rank adjustments in the course of organizational restructuring, it is important to clearly document, in both written records and factual circumstances, that the purpose is grounded in business necessity, such as rationalizing organizational operations and maintaining hierarchical order.
In addition, the rules of employment should clearly distinguish between types of disciplinary action and types of personnel orders; the structure linking ranks/titles to the compensation system should be organized in advance; and procedures for consultation and explanation should be established to minimize changes in wages and benefits and any disadvantages to the employee’s livelihood before and after the personnel change.
To prevail in this type of case, it is essential to have HR and labor-management capabilities that include a prior understanding of the legal criteria distinguishing personnel orders from disciplinary actions, as well as the requirements for the legitimacy of transfers and reassignments (business necessity, disadvantage to livelihood, and procedural fairness), and to design and organize the underlying facts in advance so that they conform to these legal principles.
2. Matters Decided
A. Case Overview and Progress of Procedures
(a) Whether the personnel order constitutes disciplinary action
The transfer and demotion in rank appear to have been for the purpose of job reassignment through organizational restructuring. “Demotion” is not included among the types of disciplinary action under the rules of employment, and there was no reduction in pay. The “rank” in question is therefore assessed as a functional position indicating an internal title within the organization, rather than a rank linked to the compensation system. Accordingly, the measure constitutes a personnel order falling within managerial prerogative, not a disciplinary disposition.
(b) Whether the personnel order is justified (business necessity, disadvantage to livelihood, faithful consultation and compliance with procedures)
(i) The transfer and demotion in rank, aimed at aligning the internal organizational hierarchy and the rank system within the sales division and establishing organizational order, are supported by business necessity...
3. Summary of the Decision
A. Summary of the Labor Relations Commission’s Reasoning
(a) Whether the personnel order constitutes disciplinary action
The transfer and demotion in rank appear to have been for the purpose of job reassignment through organizational restructuring. “Demotion” is not included among the types of disciplinary action under the rules of employment, and there was no reduction in pay. The “rank” in question is therefore assessed as a functional position indicating an internal title within the organization, rather than a rank linked to the compensation system. Accordingly, the measure constitutes a personnel order falling within managerial prerogative, not a disciplinary disposition.
(b) Whether the personnel order is justified (business necessity, disadvantage to livelihood, faithful consultation and compliance with procedures)
(i) The transfer and demotion in rank, aimed at aligning the internal organizational hierarchy and the rank system within the sales division and establishing organizational order, are supported by business necessity... /
[See More Related Decisions]
- “Unfair Dismissal Decision Concerning ‘Lack of Business Necessity (Non-referral under the Personal Information Protection Act)’”
- “Unfair Dismissal Decision Concerning ‘Failure to Meet Requirements for Redundancy Dismissal (Workout Company)’”
- “Unfair Dismissal Decision Concerning ‘Non-Formation of Hiring Commitment (Absence of Offer Letter)’” – Date of Decision: – Case Result: First-instance Decision Upheld
[Tags]
Unfair dismissal, personnel order (demotion and transfer), performance evaluation/poor performance, others, Labor Law Firm Law&, large labor law firm, Samseong-dong labor law firm, Samseong Station labor law firm, Gangnam labor law firm
※ This article is part of the “Unfair Dismissal Decisions” series by Labor Law Firm Law&.
※ You can view the previous article, “Unfair Dismissal Decision Concerning ‘Lack of Business Necessity (Non-referral under the Personal Information Protection Act)’,” in a new window.
※ A list of decisions related to personnel orders (demotion and transfer) can be viewed together on the “List of Decisions Related to Personnel Orders (Demotion and Transfer)” page.
※ Korean version of this case: Korean article
