Statutory Severance Obligations in Korea after Acquisition of Company in Korea

Korean employers have attempted, in many cases unsuccessfully, through mergers, to reduce the statutory severance obligations of a company through a company acquiring another company with a workforce with large outstanding severance obligations. The acquired company, in most cases, is strapped with debt and an inefficient workforce. Prior to a merger, please check the statutory severance obligations and other liabilities even if the merger is a mere “asset” merger, since Korea is proactive on obligations it feels are owed to employees. For an article on the calculation of severance in Korea, please see: Calculation of Korean Severance Obligations.

Korean Joint Venture Agreement Terms & Conditions

The acquiring company, inter alia, often alleges that as a separate legal entity, it owes no duties to the employees of the acquired company. The acquiring company, thus, alleges that the employees of the old company are not obligated to receive the accumulated years of severance, thus, reducing vested employee obligations.

The Korean Supreme Court has ruled, on numerous occasions, that if an employee has continued work with the new acquiring company the duties owed to the employees by the acquired company in Korea are owed to the employees by the acquired company, thus, often negating the benefit of the merger.

Some companies have creatively structured deals that have allowed for a reduction in the workforce. We shall be updating the reader on strategies to assist in avoiding assuming the obligations of the acquired company.

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Sean Hayes is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw, and IPG Legal is consistently ranked Top Dispute Resolution Law for our litigation services.

If you would like a consultation with an English-speaking lawyer in Korea, please schedule a call at: Schedule a Call with an Attorney.

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