Korea Update: Significant new criminal liability for CEOs: the Severe Accidents Penalties Act

On January 8, 2021, the Korean National Assembly passed the controversial Severe Accidents Penalties

Act (the “Act”).

Most significantly, the Act establishes new health-and-safety obligations for businesses and their

executives, including CEOs, and imposes serious penalties on those businesses and the responsible

executives where failure to fulfill those obligations results in death, or in serious injuries or illnesses that

satisfy certain thresholds.

The Act will take effect one year after promulgation. However, employers with fewer than 50 employees

(or construction businesses involving projects that cost less than KRW5 billion) will enjoy an enforcement

grace period until three years after promulgation.

1. Highlights

1. New penalties for severe workplace or public accidents

The Act imposes stringent penalties for two categories of “accidents”: (i) severe workplace accidents,

and (ii) severe public accidents. Employers with fewer than five employees are exempt from the

requirements and penalties related to severe workplace accidents. Severe public accidents involving

“public-use facilities” (see explanations below) are subject to a 5 or 10-employee workforce threshold,

depending on industry, and a facility-size exemption. Other kinds of severe public accidents are not

subject to any exemptions.

“Severe workplace accidents” are incidents where any of the following result from failure to fulfill one’s

workplace health-and-safety obligations under the Act, with respect to any covered workers:

(i) death;

(ii) injuries suffered by two or more people from the same incident, that require medical treatment

for six months or longer; or

(iii) work-related illness (which will be further clarified by regulation) in three or more people

resulting from the same cause within one year.

“Severe public accidents” are incidents where any of the following result from failure to fulfill one’s

public health-and-safety obligations under the Act, with respect to any individual:

(i) death;

(ii) injuries to ten or more people from the same incident, that require medical treatment for two

months or longer; or

(iii) illness in ten or more people that requires treatment for three months or longer, and results from

the same cause.

2. Responsible executive

The Act imposes its new health-and-safety obligations on “responsible executives.” For a private

employer, “responsible executive” is defined to mean (i) the representative of the business who is

responsible for its overall management (e.g., the representative director of a Korean corporation); or

(ii) a comparable individual responsible for health-and-safety matters for a business.

Unlike most of the existing health-and-safety legal regime, the Act imposes the full breadth of its

obligations and penalties directly on a company’s CEO or comparable executive.

3. New health & safety obligations

A “responsible executive” will be subject to four categories of new health-and-safety obligations. These

new obligations, which will be further clarified by regulation, are:

(i) implement and operate a health-and-safety system by utilizing sufficient resources (including

people and finances);

(ii) if an accident occurs, take measures to establish and implement adequate contingency plans to

prevent reoccurrence;

(iii) comply with any corrective order related to health-and-safety from a governmental authority;

and

(iv) implement measures that are necessary to comply with all other health-and-safety laws.

These new obligations apply to both (i) protecting workplace safety by preventing industrial accidents

and illnesses; and (ii) protecting public safety by preventing harm caused by (a) a defect or deficiency

in the design, production, or maintenance of products or materials that one sells, manufactures, or

distributes; or (b) a defect or deficiency in the design, installation, or maintenance of “public-use

facilities” (e.g., saunas and restaurants) or “public-use transportation” (e.g., trains, planes, subways)

that one controls, operates, or manages. Public-use facilities and public-use transportations are

specifically defined by reference to other laws and do not include all types of facilities or modes of

transportation.

The scope of individuals to whom these obligations are owed is also very broad.

These workplace health-and-safety obligations are owed to a broader scope of workers than obligations

under the existing Occupational Safety and Health Act (“OSHA”), Korea’s basic workplace health-and-safety law.

Under OSHA (as recently amended), an employer is responsible for prescribed health-and-safety measures with respect to its own employees, as well as any employees of a third-party contractor who are providing services

(i)   at the employer’s own workplace, or

(ii)   at any other “dangerous”

workplace (as defined by regulation) if the employer:

(a) provides or designates the workplace, and

(b) controls or manages that workplace.

Whereas a company’s health-and-safety obligations under the Act will apply to any worker—including

any third party’s employees, and regardless of the form of contract—who provides services to the

company through the use of any facilities, equipment, or workplace that the company substantially

controls, operates, or manages. This may include a workplace that is not provided or designated by the

company, but which is controlled or managed by the company.

And these health-and-safety obligations are also owed to all members of the public who could be

harmed by one’s goods or services.

4. Penalties

If a severe workplace or public accident occurs that results in death

(i) the responsible executive shall be punished by either imprisonment for at least one year (up to

a maximum of 30 or 50 years, depending on circumstances) or by a fine of up to KRW1 billion,

or both; and

(ii) the employer may also itself be fined up to KRW5 billion.

In the event of a severe workplace or public accident that results in injuries or illness

(i) the responsible executive may be punished by either imprisonment for up to seven years or by

a fine of up to KRW100 million; and

(ii) the employer itself may also be subject to a fine of up to KRW1 billion.

II. Implications

1. Who is the “responsible executive”? Can it be delegated from the CEO?

The statutory text seems to allow for the possibility that health-and-safety-related obligations can be

assigned to a responsible executive other than a CEO, relieving the CEO of responsibility.

However, once the Act begins to be enforced, there is likely to be significant controversy over

(i) the circumstances and conditions under which the CEO can be released from responsibility; and

(ii) who qualifies as a comparable individual.

2. How much safety is enough?

The new health-and-safety obligations under the Act are very broad. Further detail is to be prescribed

by regulation, but there is no predicting how much guidance the regulations may provide. It may be

very difficult to be confident that one has fulfilled one’s obligations, especially before any accident has

occurred.

It will be prudent to minimize one’s legal risk by conducting a health-and-safety compliance review and

working to improve or establish robust controls and systems to ensure health-and-safety compliance in

advance of the Act’s effective date and on a continuous basis.

3. Responsibility for worker safety is expanding.

Although the scope of one’s health-and-safety obligations may remain unclear, it seems certain that the

new law will expand the scope of a business’s responsibility for health-and-safety measures, because:

(i) it imposes penalties if a serious workplace or public accident occurs due to one’s failure to

comply with any other legal health-and-safety requirement; and

(ii) it applies this obligation to a broader scope of workers than are covered by OSHA’s protections.

Businesses will have to ensure that they are attentive to health-and-safety issues affecting any covered workers.

By Yulchon, Korea, a Transatlantic Law International Affiliated Firm. 

For further information or for any assistance please contact korea@transatlanticlaw.com 

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