Korean Labor Law Update – Q3 2024

Korea passes major legislation enhancing family-related leave and penalties for wage theft.

On September 26, 2024, the National Assembly passed amendments to the Gender Equal Employment and Work-Family Balance Act and the Labor Standards Act. These amendments include enhanced maternity, paternity, and childcare leave. They also include provisions more strongly targeting and punishing employers that habitually fail to pay wages. Most provisions will go into effect from February 23, 2025, while the wage-related provisions will take effect from October 23, 2025. Certain provisions will take effect at different times as indicated below. A summary of the key changes is as follows.

Family-related provisions

Childcare leave is increased from one year to one and a half years for (1) single parents; (2) parents of a child with a severe disability; or (3) where each parent takes more than 3 months of childcare leave.

Childcare leave can also be split into 4 separate periods instead of the previous 3.

• Paternity leave is increased from 10 days to 20 days.
• The period eligible for government wage subsidies is also increased from 5 days to the full 20 days, for employees of “priority support companies” (those with 100 or fewer employees).
• Paternity leave can be used up to 120 days after the birth (increased from the previous 90 days). And it can be split into 4 periods.

Reduced working hours for childcare can be used for children up to 12 years old instead of the previous 8.

Any unused childcare leave can be doubled in duration if the time is used as reduced working hours for childcare.

• The minimum period for reduced hours for childcare is 1 month, instead of the previous 3 months.
• Employees who already used up one year of combined childcare leave and reduced hours for childcare, prior to October 1, 2019, will also be allowed to use the enhanced reduced working hours for childcare. They were previously deemed to have exhausted their combined entitlement and were not allowed to benefit from later enhancements.
• Effective immediately (October 22, 2024), a period of reduced working hours for childcare will be fully included in calculating years of service for legal purposes, without prorating.

Reduced working hours during pregnancy can be used until 12 weeks and after 32 weeks, rather than the current 12 weeks and 36 weeks.

And effective immediately (October 22, 2024), a period of reduced working hours during pregnancy will be fully included in calculating years of service for legal purposes, without prorating.

Maternity leave for premature babies is increased to 100 days from 90.

Infertility treatment leave is increased to 6 days from the current 3. The paid period is also increased from 1 day to 2 days.

Wage-related provisions

Credit Sanctions

Every year the Ministry of Employment and Labor (“MOEL”) will designate employers who habitually fail to pay wages, and provide the relevant data to the Korea Credit Information Services (KCIS). So financial institutions will be able to utilize the information of delinquent employers in screening financial transactions such as loan applications, extensions, and interest rate calculations. “Habitually” delinquent employers are those that were more than 3 months’ in arrears on wage payment (excluding severance pay), or that had 5 or more instances of being in arrears totaling KRW30 million, in the previous year.

Restrictions on government support

Business owners that habitually fail to pay wages will be restricted from applying for subsidies or grants provided by the national and local governments, or public organizations.

Disadvantage in public sector bidding

Habitually delinquent employers will be restricted or penalized with respect to participating in government or public construction projects.

Delinquency interest

Statutory delinquency interest (20%) on unpaid wages, which currently applies only to employees after termination, will also apply to incumbent employees with unpaid wages.

Stronger criminal punishment and travel restrictions for delinquent employers

Employers that have been convicted twice or more within the prior 3 years for non-payment of wages, and which have had wage arrears of KRW30 million or more within the prior year, can be prosecuted for non-payment of wages even against the wishes of the employee. The general rule has been that prosecution for unpaid wages is not possible if the employee settles and opposes prosecution.

The Ministry of Employment and Labor may also request the Ministry of Justice to prohibit the responsible executive of such an employer from fleeing abroad without settling the unpaid wages.

Punitive damages for habitual non-payment of wages

Employees who suffer losses due to habitual non-payment of wages may file a claim for punitive damages (up to treble actual damages) in court.

“Habitual” non-payment, for this purpose, refers to (1) clearly intentional non-payment; (2) non-payment for more than 3 months in a year; or (3) non-payment exceeding 3 months of the employee’s “ordinary wage,” which is the base rate for overtime pay.

Cases

Landmark Supreme Court decision holds that employees who are not subject to Korean law cannot be counted towards workforce-size thresholds that trigger legal rights and obligations.

Supreme Court Decision No. 2023Du46074 (October 25, 2024)

A foreign company which had hired only one employee in Korea dismissed the employee. The employee asserted that there was no just cause for dismissal as required under the Labor Standards Act (the “LSA”). Under Article 11 of the LSA, certain of its provisions do not apply to a “business or workplace” with fewer than 5 employees (a “Small Employer”). Among the provisions that are inapplicable to Small Employers is the requirement to have just cause for dismissal.

The intermediate appellate court had decided that the employees of the overseas HQ should be included in determining whether the employer was a Small Employer. However, the Supreme Court has now held, “It is reasonable to assume that a business or workplace under Article 11 of LSA refers only to a business or workplace located in Korea. Unless there are special circumstances, only foreign labor-related laws and regulations are applied to employees of foreign companies located abroad. So, when deciding if there is a business or workplace with 5 or more employees under Article 11 of LSA, it is not acceptable to include the number of employees employed in foreign countries where the LSA is not applicable.”

Before this decision, there had been lower court and labor tribunal decisions aggregating the employees of a foreign parent or HQ together with employees of a local Korean subsidiary or branch, in order to determine if the employer was a Small Employer. This decision clearly establishes that such employees in foreign countries are not counted, and the LSA is not applicable to foreign companies that do not have 5 or more employees in Korea. The consequence of this is that many significant Korean employment-law rules will not apply to such employers, including the requirement to have just cause for dismissal, the requirement to pay for overtime work, the 52-hour general limit on weekly working hours, rules for minimum paid annual leave, and consent requirements for changing employment rules.

An important note to remember is that aggregation among entities within Korea remains possible under existing precedents. So multiple entities within Korea that are not really independent of each other may still be found to constitute a single business or workplace for purposes of workforce-size thresholds. This principle has been confirmed by another recent Supreme Court decision on October 25, 2024 (Supreme Court Decision No. 2023Du57876).

Supreme Court holds that, where administrative leave is reasonably imposed at the outset but continues for too long, courts should only partially invalidate it from the point at which it becomes unreasonably prolonged.

Supreme Court Decision No. 2024Da250873 (September 12, 2024)

During an investigation, an employee was placed on administrative leave with partial pay, indefinitely, to prevent interference with the investigation. However, even after the investigation was over, the employee was not allowed to return to work for over two years. Consequently, both the trial and appellate courts simply found that the administrative leave was unlawful.

The Supreme Court upheld the lower courts’ finding that the duration of the administrative leave was unreasonable. However, the Court held that it was inappropriate to simply invalidate the administrative leave without distinguishing the period when it was lawful from the period when it became unlawful. The Court instead remanded with instructions to the lower court to determine the point at which the administrative-leave period became unreasonable.

The Court stated, “Even if a provisional personnel order, such as an indefinite-period administrative leave order, is justified at the time it is issued, the duration must be reasonable when considering the purpose and function of the administrative leave, the reasonableness of maintaining it, and the disadvantages to the employee in terms of his/her status and finances . . . . Thus, administrative leave that is maintained beyond the point where it becomes unreasonably prolonged should be deemed partially invalid from that point.”

This decision helpfully clarifies that courts should not merely invalidate administrative leave as a whole when it was imposed for legitimate reasons but continues beyond the point where it is reasonably justified.

Daegu District Court awards damages for employer’s nonconsensual forensic examination of an employee’s office PC.

Daegu District Court Decision No. 2023Na320254 (August 21, 2024)

An employee who refused the employer’s request to resign, became unable to work due to an occupational injury. During that time, the employer, without the employee’s consent, used a digital-forensics service to access the employee’s office PC, retrieving internet search histories, web-browsing records, and application logs. The Daegu District Court ruled that this action was a tort, and awarded KRW3,000,000 (approx. USD 2,200) in damages to the employee.

The District Court stated, “Information stored on an employee’s office PC, such as an individual’s internet search history, website visit records, and application logs, pertains to the secrets of one’s personal life. Unauthorized monitoring of such information infringes upon privacy rights, personal freedom, and the right to self-determination regarding information. Unless there is a justifiable reason, this constitutes an illegal tort. Therefore, the defendant, as the employer, engaged in illegal examination of the plaintiff’s office computer data in the plaintiff’s absence, and is liable to compensate the plaintiff for the mental distress caused.”

Searching an employee’s office email or PC without consent is not always illegal. For example, the Supreme Court has explained that a non-consensual search by an employer is not illegal where there is a strong basis to suspect criminal activity by the employee, the search was reasonably limited to seeking information related to the suspected activity, and the search confirmed such activity. There is also lower-court precedent finding a non-consensual search justified when there was a reasonable basis to suspect misconduct, and the search was required to confirm the facts and secure relevant evidence. However, in this latest case, the court found there was no particular basis to suspect any crime or misconduct, and the search was simply an unjustified attempt to find dirt to use in forcing out the employee.

It is not uncommon for employees to lodge complaints with the relevant authorities alleging violation of privacy by their employer. It is relatively rarer for employees to bring private civil suits seeking damages. This case is an example demonstrating that some courts may be willing to award damages for such violations of employees’ privacy, even though the amount of damages may be small.

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

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