Definition of “Ordinary Wage” in Korea: Korean Employment & Labor Law Basics

The courts of the Republic of Korea, for years, has struggled to find a consistent interpretation of an “Ordinary Wage.”  The definition of Ordinary Wage, under Korean Law, was clarified by the Korean Supreme Court in two decisions handed down on December 18, 2013.  The calculation of Ordinary Wages is important, since it is utilized to calculate statutory entitlements, and thus has an impact on the aggregate amount of contributions necessary to be paid to employees. For example, according to Article 56 of the Korean Labor Standards Act, an employer must pay 50% of the Ordinary Wage plus the Ordinary Wage for overtime, night and weekend work performed by the employee. Because of the potential for a large unknown future liability, this issue became the most significant issue, in the last few years, among domestic and foreign employers in labor and employment law in Korea. The basic Korean test is

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Civil Liability of Companies for Actions of Employees Off the Company Property and After Work Hours

Korea imposes, in some cases, liability on companies for actions of employees of companies even when the employee conducts an intentional wrongful act outside the workplace, after the work hours and beyond the duties imposed by the employer.  The employer is not relieved of civil liability by a mere limiting the scope of duties of employees, warnings to employees or having comprehensive sexual harassment education programs. A, typical, sexual harassment situation, related to this issue, occurs after a company office party.  The manager takes his team out to dinner and drinks.  After the dinner and drinks, the inebriated co-worker is asked by the manager to a local motel.  The inebriated co-worker alleges, in the morning, that she was incapable of consenting to the sexual advances or that she was pressured either implicitly or explicitly by the manger to have sexual relations with the manager.  The courts even when a employer

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Rights of “Non-Registered” Shareholders in Korea

Questions arise, often, in Korean companies if a non-registered shareholder (not placed in the Korean corporate registry), that can prove that the shareholder is the beneficial “owner” of shares of the company, may exercise rights of a owner of the company.  The Supreme Court has recently made a running on this issue. Supreme Court 2015Da248342 Decided March 23, 2017 The Supreme Court, in this case, ruled that: “In light of the legal nature of a company whereby its ownership structure constantly changes depending on the issuance and transfer of shares, the purpose of the shareholder registry system under the Commercial Act lies in making it easier for a company to externally distinguish its legal relationship with numerous shareholders based on a cursory and uniform standard, thereby improving efficiency in handling matters related to the exercise of shareholder rights and ensuring legal certainty. Only a person owning a company’s shares and

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Company Car Expense Deductions in Korea: Korean Tax Law Updates

Companies, in Korea, sometimes provide senior employees of the company a company car.  A tax issue arises concerning the deduction of car expenses and the refunding of VAT.  In practice “company cars” are, often, used for the company as well as private use.  Thus, Korea has excluded deduction of expenses and exclusion of VAT for some automobiles. Corporate Tax Law formalities require Korean companies and Foreign Capital-Invested Companies, in Korea, to have detailed operation records or sufficient evidence to claim deductions and exclusions.  The rules have tightened over the past few years and a proactive and detail-oriented accountant is necessary. For example, if the legal defined size of the company car is less than nine passengers: No VAT refunds are legally allowable (we have fund that some accountants in Korea are not even aware of this reality); Maintenance expenses are not deductible expenses; and Other expenses, including fuel are not

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Arbitration against Korean Government Agencies in Korea: Korean Arbitration Law Basics.

The Korean National Assembly amended the Act on Contract to Which the State is a Party, partially, on December 1, 2017.  The amendment was intended to encourage the Korean Government to arbitrate more disputes with parties that have contracted with the Korean Government.  To date, few cases have been resolved via Arbitration when disputes occur between the Korean Government and parties to a contract with the Korean Government.  The reason stems, mainly, from realities within many Korean-based law firms, within in house legal teams at government agencies and the lack of knowldge of the benefits of arbitration for the Korean court system, Korean government agencies and those doing business with the Korean government.  For a general article on Arbitration in Korea, please see: Arbitration in Korea.  ACT ON CONTRACTS TO WHICH THE STATE IS A PARTY Article 28-2 (Settlement of Dispute Resolution) (1) The head of each central office or

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Tax Liability of Controlling Shareholders in a Korean Company: Tax Law Updates

Under Article 39 of Korea’s Framework Act on National Taxes, unpaid taxes owed to the Korean government are enforceable against certain “ologopolistic” shareholders of respective debtor company’s shareholder.  This secondary liability of shareholders is codified within the Framework Act on National Taxation.  Article 39 of the Framework Act on National Taxes, specifically, notes that: “Where the property of a corporation is not enough to pay national taxes, additional dues and disposition fees for arrears imposed upon or to be paid by the corporation, any person who falls under any of the following as of the date on which the national tax liability is established shall have the secondary tax liability for the amount of such money shortage: Provided, That in case of an oligopolistic stockholder under subparagraph 2, his/her secondary tax liability shall be limited to the amount calculated by multiplying the amount obtained by dividing the amount of such

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Privity of Contract in Franchise Agreements in Korea: Korean Franchise Law Updates

Normally, in Korea, a contract/agreement cannot confer rights nor impose obligations upon a person who is no a party to the contract/agreement.  One interesting case, in franchise law, applied this principle to the benefit of the franchisor and the detriment to a supplier.  A Supplier delivered food through a Distributor to a Franchisee based on a franchisee requirement iterated in a franchise agreement with a franchisor.  The case brings to light, also, the potential liability of franchisors for acts of Korean franchisees.  The dispute occurred, of course, since the Supplier was not paid for an outstanding order, since the Franchisee was insolvent.  The Franchisor (deep pocket) was not insolvent and, thus, the only available option for collection was via the Franchisor.  One caveat is that the Franchisor was paid a commission by the Supplier/Distributor for sales to the Franchisee and as noted above, the Franchisee was mandated to use this specific Supplier.  Thus, the

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Does a Korean court have the power to issue a preliminary attachment on Korean assets stemming from a foreign court claim?

A situation often arises when a plaintiff is suing a Korean debtor in a foreign court and the non-Korean plaintiff wishes to attach the Korean-based assets of the Korean defendant in Korea.  Typically, the plaintiff found no assets of the defendant abroad and fears the disposal of the assets in Korea.  Thus, typically, the plaintiff wishes to file to a Korean court a request for a provisional attachment of the assets of the prospective defendant.  While, provisional attachments of assets of Korean defendants in lawsuits pending in Korea courts is common – this situation is not common and few courts, or Korean law firms, have handled these type matters. Thus, the question is, in short, does a Korean court have the power to issue provisional/preliminary attachment of Korean-based assets based on a claim stemming from a pending or future foreign lawsuit against the owner of these Korean-based assets?   Yes.  Korean courts may

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Expiration Versus Termination of a Distribution Agreement in Korea: Korean Distributor Basics

While Korean Law does not specifically detail the differences in treatment in law between the non-renewal (expiration) of a distribution agreement versus the termination, in reality, Korean courts are less likely to rule in favor of distributors in cases where a distribution agreement is not renewed.  Thus, typically, it is advisable to have a distribution agreement based on a specified term of years.  However, even with the expiration of the Korean Distribution Agreement, termination risks exist. In some cases, Korean courts have noted that termination and even non-renewal is a violation of Korean Law since the non-renewal or termination of the Korean distributor was not based on “good faith.”  In many cases, Korean courts have required a showing of “good cause” to terminate or even to not renew a relationship.  Contractual formalities and structural realities often assist in allowing a non-performing distributor from prevailing in court.  Thus, a nuanced and

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Future of Bitcoin in Korea according to FTC: Korean Cryptocurrency Updates

The head of the Korean Fair Trade Commission has noted to local vernaculars that he does not agree with Justice Minister Park Sang-ki’s comment that “cryptocurrency investment is gambling.”  He further noted that: “cryptocurrency recently emerged as an issue in Korea and other laws do not have the exact legal clauses that relate to closing exchanges.”  Thus, indicating, in part, that the Korean government doesn’t have the specific power to close the Korean cryptocurrency exchanges.  Of course, the FTC Chairman’s opinion does not have any legal binding effect, however, his opinions are widely respected by academics and legal practitioners. Many legal practitioners I have spoke to, in Korea, believe that the government shall not have the power, because of the number of traders in Alt Currencies to ban trading in Alt currencies.  This reality may lead to a settling of this issue via the imposing of capital gains tax on

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“Fair Use” Korean Copyright law

Dear Professor Hayes : I am in the process of completing a book on the modern history of the Republic of Korea. A good deal of my work cites news reports, published journals, and first hand reports mentioned in other books, Web sites and personal blogs. My book chronicles the modern developments from the eyes of foreigners who reside or resided in Korea. My publisher wants to confirm that Korea has a “fair use” doctrine, therefore, allowing me to cite the works of others.  Author in Rhode Island Dear Author: In general, the copyright holders, in Korea, may solely economically exploit a copyrighted work for the life of the author of the work plus 50 years. Korean Copyright Law provides that copyright infringers may be held liable in civil court and even punished in criminal court. In recent years, the Korean prosecution has been vigorous in prosecuting copyright infringers and

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Is Bitcoin Banned for Foreigners in Korea? Korean Bitcoin Law Updates

This Law Firm has wrote a few articles on Bitcoin Law in Korea.  This Alt Currency/Bitcoin Law articles may be found at: Court Challenges to Governments Ban on Cryptocurrency in Korea and Will the Korean Government Ban Bitcoin? Other article can be found via searching the Blog.  A Forbes article notes, with one significant caveat, that: “All foreigners, including residents, nonresidents and “kyopo” ethnic Koreans with foreign citizenship, will be banned from trading cryptocurrencies in Korea, the FSC’s foreign media department said by email. Minors are banned after Prime Minister Lee Nak-yeon earlier claim the cryptocurrency craze could lead the youth toward crime.” However, the article, additionally notes that: “However, Kang noted a loophole. In the new system, foreigners and minors can’t possibly make investments as it operates on a bank’s real-name account, but they could potentially use corporate accounts to make additional investments. ‘There’s no limit to that for now. We haven’t

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Non-Compete Restrictive Covenant in Employment Contracts in Korea

Korean courts have invalidated numerous, non-compete agreements, reduced the amount of time of the non-compete period and/or have reduced liquidated damage amounts for violation of non-compete agreements.  Courts typically balance the freedom to work (an ability to work outside the specific field) with the significance of the interest in the employer to enforce the covenant not to compete.  The primary factors courts utilize in determining whether to enforce a non-compete agreement are: if compensation was paid in exchange for the covenant not to compete; if the interest being sought protection over includes valuable trade secrets and other valuable intellectual property; if the position of the employee was such that the employee would be able damage the future of the employer; if the employee was terminated for justifiable reasons; if the industry practice is to enforce covenants not to compete; and if the employee is harmed by the covenant not to

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Legality of an Employer Lockout in Korea: Korean Labor & Employment Law Basics

Korea, in the eyes of many domestic and foreign companies, has been lax in the enforcement of the rights of employers to run a business.  One noted cases that lead to a decision by the Supreme Court of Korea comes to mind.  Because of a labor strike at a major automobile parts manufacturer and the physical blocking of the use of replacement workers and employer machinery by the employees, the employer implemented a partial unpaid lockout of certain employees (employees were employed by a unit of the employer), thus disallowing certain workers to enter the workplace in order to prevent further disruption of the manufacturing process.  The employees physically blocked production and thus did not allow certain orders to be fulfilled by the employer, thus affecting the employer’s business. The case is a great case to demonstrate Korea’s Lockout Law. Following the lockout, the locked-out employees, on several occasions, expressed

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IPG’s Korean Employment & Labour Law Chapter in Global Legal Insights 2018

IPG is proud to announce the contribution of the Korean chapter to GLI’s 2018 Edition of Employment & Labour Law.  The publication contains chapters from 29 different countries.  The publication may be found at: Employment & Labor Law, Sixth Edition. Key Issues addressed are, among others,: -General Labour Market Conditions in Korea -Employment Policies under the Moon Administration -Litigation Trends in Korea -Definition of “Ordinary Wage” in Korea -Korean Supreme Court’s Regular Interval Bonus Case -Director as an Employee for Korean Employment Security Purposes -Korean Employee Lockouts -Layoffs and Dismissals Based on Fault of the Employees in Korea -Korean Restrictive Covenants Law -Trade Secrets Protection in Korea -Severance Payments in Korea -Childcare Leave in Korea -Maternity Leave in Korea -Paternity Leave in Korea -Annual Leave in Korea Please see the other articles below and via the Employment Law Tag. [ABTM id=1137] (c) Sean Hayes – SJ IPG. All Rights reserved.

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Part-time Worker Annual Paid Leave Obligations under the Korean Labor Standards Act

Employers, in Korea, are in most cases required to grant annual paid leave to full-time and even part-time workers working in Korea-based companies.  Exceptions to this Korean annual paid leave law exist for Korean workers that work, on average, less than 15 hours per week for these Korean-based companies. Article 18 of the Korean Labor Standards Act notes that: “(1) The terms and conditions of employment of part-time workers shall be determined on the basis of relative ration computed in comparison to those work hours of full-time workers engaged in the same kind of work at the pertinent workplace.” However, annual paid vacation leave and other articles/obligations under the Korean Labor Standards Act do not apply to “workers whose contractual work hours per week on an average of four weeks (in cases where their working periods are less then four weeks, then, based on such period of work) are less

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Korean Cryptocurrency Case Filed to the Korean Constitutional Court: Korean Bitcoin Updates

The author of this blog, formerly worked for the Constitutional Court of Korea and he is excited to see this matter being litigated in Korean courts.  The issue, as I have always noted, is simply if government are willing to protect the freedom of individuals to trade and speculate in asset classes of the choosing of the investor.  While, I am far from sold on Bitcoin (and other Alt Currencies) as a long-term asset class plays – of course any free democracy shall allow its citizens to invest in asset classes the government doesn’t favor.  The key to this issue, seemingly, is just if Alt Currencies shall be considered mere asset classes. As the reader likely knows, various branches of the Korean government have noted that the Korean government shall either ban Bitcoin exchanges in Korea, prohibit banks from linking accounts to exchanges or otherwise prohibit the use of Alt

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Korean National Tax Service Tax Law News Release to Foreign Corporate Taxpayers: Korean Tax Law Updates

The following Korean Tax Law News is a publicly released Korean tax notification that is intended for foreigner companies in Korea.  The notification was not translated or drafted by this law firm.  For any questions on this notification please Contact Us. Korean Tax Law News 【January 2018】 ☞ The following Korean tax information is translated from Korean for foreign-invested companies, and is not legally binding. ※ Year-end tax settlement by foreign workers in Korea □ With the increase in foreigners residing in Korea, the number of foreign workers in Korea has increased every year as well. ○ For the convenience of foreign workers‘ year-end tax settlement in Korea, here are a few tips on year-end tax settlement for foreign workers this year. □ If a foreigner has wage and salary income generated in Korea, he/she should perform year-end tax settlement just like domestic workers, regardless of his/her sojourn period and

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Korean Tax Law Amendment Press Release by Korean Government

The following is a Press Release by the Korean Government on recent Korean Tax Law enforcement decrees.  We shall update the reader when more is known.  The following press release was not proofread or translated by this firm.  The Press Release was published by the Ministry of Strategy & Finance in the English language and copied, in its entirety, below. Decree Focuses on Boosting Investment and Broadening Tax Base The government announced a revision to a total of 17 tax enforcement decrees, including ones to help create jobs, improve income and broaden the tax base.  Major revisions to the 2017 tax enforcement decrees are as follows. – Expand the angel investment tax incentives (30 to 100 percent income tax deduction):  Include crowdfunding investment in companies run for less than 7 years, or investment in companies run for less than 3 years if they are qualified by credit rating agencies –

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Doing Business in Korea: The Korea labor market under the Moon administration

The election of progressive President Jae-in Moon, after the impeachment and imprisonment of the conservative former President, led to, among other progressive proposals, pledges from the President Moon Administration of sweeping changes to Korea’s Labor & Employment Law.  The following appears in a publication supported by the Korean Government.  The complete publication may be found at: Discovering Business in Korea.  The following changes are the major changes proposed by the Moon Administration. The changes may have a significant affect on companies doing business in Korea and may lead to an increase in taxes as a percentage of GDP. 810,000 new jobs via expanding Korea’s public sector President Moon vowed to create over 340,000 new government social service jobs and over 140,000 new government jobs in public safety and security, while converting 300,000 non-regular workers to permanent workers.  A non-regular worker, in Korea, is a worker without employment security. Thus, the conversion of

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