On February 28, 2018, Korea’s National Assembly approved a bill amending the Labor Standards Act (the “LSA”), Korea’s primary employment-law statute. The bill, once signed and promulgated by the President, will prospectively resolve a long-standing controversy over the treatment of weekend working hours, restrict the use of labor-management agreements allowing excess overtime, and make all Korean public holidays mandatory paid days off.
This bill will effect the following primary changes:
The maximum weekly working hours will be 52, consisting of 40 regular hours and 12 overtime hours. A 68-hour work week, consisting of 40 regular hours, 12 overtime hours, and up to 16 day-off (weekend) hours, will no longer be possible for most employers.
Premium pay will continue to work as it does under the current Ministry interpretation that has been challenged in the courts. For work on regular days off—which generally includes one or both days of the weekend—the premium will be only 50% for the first eight hours of each day, even if the employee has already reached the 40-hour weekly regular-hours limit. An additional cumulative 50% overtime premium will only be earned for work beyond eight hours on a regular day off.
The list of industries in which businesses are allowed to reach an agreement with a labor representative allowing more than 12 hours of overtime per week, will be significantly reduced. And workers in any of the remaining five special industries—which cover only certain transportation and healthcare industries—will be required to have a break of at least 11 continuous hours between their work shifts.
Governmental public holidays will now be mandatory paid days off for private employers in addition to Labor Day (May 1), though employers already very frequently offer public holidays voluntarily.
The new rules will become effective in several phases, with the first major change being enforcement of the 52-hours rule for employers with 300 or more employees beginning July 1, 2018. Please note that the change regarding premium pay for weekend work will become effective immediately upon promulgation.
Violation of the working-hours rules and failure to pay full wages (including overtime/day-off premium pay) were already subject to criminal penalties. But with these new changes, employers will have to pay special attention to their current practices. In particular, employers who have been making use of the extra weekend working hours, or who are not already granting all public holidays to their employees, will need to bring their practices into compliance by the effective dates above. And employers in special industries who have been relying on labor-management agreements to assign excess overtime to employees, and who will lose their industry exemption, will have to make other arrangements.
Adapting to the new working-hours rules, in particular, will in many cases require employers to revise their employment agreements, rules of employment, and/or collective bargaining agreements, which will quite likely involve labor-management consultation and may even require workforce consent. We thus strongly recommend that employers begin to carefully consider and prepare for these changes soon.
- Weekend Work
Under current law, the Ministry of Employment and Labor has long held that hours worked on regular days off—which generally include one or both days of the weekend—do not count towards the weekly regular-hours limit of 40. This interpretation essentially allows up to eight hours of work per day of the weekend, which does not count as overtime.
The effect of this is twofold. First, it allows a maximum work week of 68 hours (40 regular hours, 12 overtime hours, and 16 weekend hours), instead of 52 hours (40 regular hours and 12 overtime hours). Second, it reduces the premium pay required for hours worked on days off, after having worked a 40-hour regular week. This reduction in premium pay occurs because the premium required for overtime, nighttime, and day-off work (50% each) is generally cumulative, but eight hours of work per regular day off (e.g. Saturday and Sunday) is, by definition, not overtime.
This interpretation has been controversial, and several relatively recent lowercourt decisions have held it to be contrary to the law. A case currently pending before the Supreme Court is likely to determine the correct interpretation of current law, and resolve whether employees have previously been required to work excessive hours and underpaid for their overtime. However, this new bill will settle the matter prospectively.
The new 52-hour work week will be phased in based on employer size, beginning on July 1, 2018 (employers with 300+ employees, as well as most government-invested or government-controlled employers), then becoming effective on January 1, 2020 (50-299 employees) and July 1, 2021 (5-49 employees). Employers with fewer than five employees are exempt. The premium-pay rule will become effective immediately upon promulgation, effectively ratifying the current practice of many employers. Note that this will not absolve employers of potential liability for claims of past underpaid premium pay, if the Supreme Court rules in favor of the employees in its pending case on this issue.
Employers with fewer than 30 employees will be allowed to have them work an extra eight hours per week until December 31, 2022, by agreement.
- Extra Overtime in Special Industries
This bill will also cut the list of industries in which employers are permitted to have employees work more than 12 hours of overtime in a week, if agreed in writing with a representative of the workforce. Until now, there were 26 industries in which such a written agreement was permitted. However, this will be reduced to just five industries: (i) land transportation; (ii) water transportation; (iii) air transportation; (iv) transportation support activities; and (v) healthcare services. And a continuous break of at least 11 hours between work shifts will be required for workers in these five industries.
The effective date for these changes is September 1, 2018.
- Public Holidays
Until now, public holidays—meaning the days when public-sector workplaces are closed—have not been legally required to be offered by private employers. Labor Day (May 1) has been the only mandatory regular holiday for private employers, apart from the legally required weekly paid day off (usually, but not necessarily, designated as Sunday). Nonetheless, many private companies provide in their employment contracts, company policies, or CBAs that their employees will receive the same public holidays as are published by the government and offered to civil servants. This practice is virtually universal among large employers, but relatively small employers do not always follow it. Once this bill becomes effective, however, that will no longer be lawful.
The new mandatory public-holiday system will become effective on January 1, 2020 for large employers (300+ employees) and most governmentinvested or government-controlled employers, then on January 1, 2021 (30- 299 employees) and January 1, 2022 (5-29 employees). Employers with fewer than five employees are exempt.
- Potential Criminal Penalties
Failure to pay employees their full wages and overtime/day-off pay is a criminal offense subject to imprisonment for up to three years or a fine of up to 20 million Korean Won.
Having employees work overtime in excess of the legal limit is a crime subject to imprisonment for up to two years or a fine of up to 10 million Korean Won. And failure to provide mandatory public holidays will be subject to the same maximum penalties.