Suspending Korean Workers without Pay due to Economic Fallout from the Coronavirus: Korean Employment Law Basics

IPG has numerous client-employers in Korea that are facing serious economic conditions because of the spread of the coronavirus across Korea. In my nearly two decades, in Korea, we have never seen such a dire situation. This situation seems, on its face, even more dire for those in F & B and certain manufacturing sectors than the 1997 Asian Financial Crisis (IMF Crisis). Yes, I was even in Korea during the Asian Financial Crisis.

work suspension

Korea, as of the writing of this post, is approaching 6,000 confirmed cases (35 confirmed deaths) of the novel coronavirus. While arguments exist that this virus is less serious, in the aggregate, than the seasonal flu, the reality is that business in Korea, and throughout much of the world, has been drastically affected by COVID-19.

Some of these companies doing business in Korea have no logical choice but to, among other things, temporarily layoff workers, reduce salaries, suspend business or reduce paid working hours. If not, many of these companies operate on such small margins that a loss of business for even one month can lead to yearly losses and even worse. The situation for many is dire but numerous options exist.

Economic Reduction of Manpower Hours/Economic Dismissals in Korea

Options for employers exist. However, with the next Korean election nearing, an employee-centric Ministry of Employment & Labor and other political realities, the need for a nuanced and proactive approach is necessary. For example, the manner of informing employees and executing on these temporary work suspensions and according Economic Reductions is critical. Those running afoul of Korean Law may be ordered to pay backpay damages, fines and may face a labor audit by the Ministry of Employment & Labor. Criminal sanctions are, also, in some cases possible. Options, however, do exist and with a proactive and nuanced guide – these options are not so difficult to execute on.

We, strongly, advise immediately gathering your employment rules/handbook and employment agreements as well as obtaining a proactive and experienced attorney in Korea to assist in structuring a system that allows for the reduction of payroll costs. Most employment rules, we see, are mere form rules and these rules, rarely, are adequate for the needs of an employer. Further, many of these employment rules do not take into account recent changes in Korean Labor Law.

Attorneys at IPG, over the next couple of days, shall post articles on Korean Labor & Employment Law that may be of interest to the reader. Please check back and please subscribe to the blog.

For a consultation with an attorney please: Contact Us at IPG.

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