Minimum Wage Raised in Korea for 2020: Employment Law Updates

South Korea has chosen to raise the minimum wage by 2.9% for 2020 to KRW 8,590 (c. USD 7.11).  The Minimum Wage Commission of Korea set the wage at a lower than expected increase because of deteriorating economic conditions in Korea. President Moon’s plan to raise the minimum wage to KRW 10,000 per hour shall fall short, because of, among other things, a slower than expected growth rate and regional geopolitical issues facing Korea.  We shall keep the reader updated when more is known. (c) Sean Hayes – SJ IPG. All Rights reserved.  Do not duplicate any content on this blog without the express written permission of the author. [email protected]

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Korea Amends the Act on the Employment, etc. of Foreign Workers in 2019: Employment Law Updates

Amendment to the Act of the Employment, etc. of Foreign Workers in Korea (hereinafter as “Amendment to the Act of the Employment of Foreign Workers” of Korea) was proposed by the Korean Environment and Labor Committee in December 2018. The focus of the Amendment of the Employment of Foreign Workers is on the improvement of the living conditions of foreign workers at dormitories provided by their companies. Major Changes Due to the Amendment and the Struggles on the Way Addition of Criteria for the Dormitories to the Requirements to Obtain Permission for Hiring Foreign Workers in Korea? The original bill contained the regulation in Art 8 (3) Act of the Employment of Foreign Workers that the criteria for dormitories shall be added to the requirements that employers in Korea must meet in order to receive permission to hire foreign workers, if they – in general – provide dormitories to foreign

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Amendment to Korea’s Intellectual Property Registration System: Korea IP Law Updates

South Korean organizations, companies and startups will, likely, in the near future experience a quicker and increasingly more efficient Patent and Intellectual Property Registration System in Korea and internationally based on developments within the IP5. Top IP officials in Korea are gearing up, in order to help South Korean organizations, companies and startups register their Intellectual Property more efficiently.  It seems like the effort is a serious attempt to expedite approvals and lesson application burdens for those doing business in Korea. IP officials from Korea, the United States, China, Japan and the European Union (a.k.a IP5) recently gathered in Incheon and asserted that they shall utilize A.I. technology and other future advances to improve the worldwide Patent Application System. To accomplish this objective, IP5 consented to organize a research team, containing Patent and IT specialists from these four countries and the EU. This team will start working on an A.I.

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Korea Establishes Legal Grounds for the Commercialization of Autonomous Vehicles – A New Act for 2020

Proposed by the Chair of the Land, Infrastructure and Transport Committee on April 4, 2019, the Act on Promotion and Support of the Commercialization of Autonomous Vehicles (hereinafter as “Korean Act on Autonomous Vehicles”) aims to set forward legal grounds and a legal framework for projects of domestic and foreign companies, who focus on the development of autonomous or self-driving vehicles with the goal of the successful commercialization in Korea and abroad. The aforementioned Act shall become effective one year after promulgation. We shall update the reader when more is known. The Role of the Koran Motor Vehicle Management Act The Korean Motor Vehicle Management Act provides only general regulations about autonomous vehicles, thus, the Korean government believed a more robust regulatory framework was necessary. According to Art 2 (1-3) of the Korean Motor Vehicle Management Act an “autonomous driving motor vehicle” is “…a motor vehicle which can self operate

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Terminate/Layoff an Employee in Korea: Terminating an Employee in Korea

The Korean Labor Standards Act mandates that employees under “contract” or “regular employees” may only be terminated for “justifiable reason attributable” to the employee or “urgent managerial necessity” after the completion of the employee’s probationary period. Both Korean employment law standards are, often, difficult for an employer to meet without the professional structuring of HR policies and procedures and a nuanced approach to termination of employees in Korea. We strongly recommend, prior to even considering firing or laying off Korean workers, to put a system of internal controls/systems in place that provides evidence to substantiate Korean employment terminations decisions.  We see too many companies in Korea that lack the systems necessary to substantiate termination.  Modest changes can, often, be refreshing for managers. FYI – Company executives/directors are, normally, not considered company “employees” and thus are not benefited by most of the protections afforded by the Korean Labor Standards Act.  However,

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Korea Focuses on Greater Control over Imported Food – Amendment to the Special Act on Imported Food Safety Control 2019

The Special Act on Imported Food Safety Control was recently amended and shall strengthen the on-site inspections of foreign establishments, which already export food to Korea, as well as those, which apply for registration of the importation of overseas food. The Amendment was proposed in early April 2019 and shall become effective upon promulgation. We expect substantially heightened risk for importers and an increase in the price of many imported goods. Major Provisions of the Korean Amendment to the Special Act on Imported Food Safety Control Food from facilities overseas, which is produced, manufactured, processed, treated, packaged and/or stored, before being imported to Korea, shall be subject to inspections initiated by the Ministry of Food and Drug Safety. In addition, overseas facilities, which intend to import livestock which are slaughtered, manufactured, processed, stored and/or milk is collected, shall also be required to be inspected upon request of the Ministry of

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The Amendment to the Korean Pharmaceutical Affairs Act 2019

The Korean Pharmaceutical Affairs Act (hereinafter as “Pharma-Act”) was proposed by the Chair of the Health and Welfare Committee of Korea on December 27, 2018. The Pharma Act shall adds more cumbersome regulations on the foreign qualifications of pharmacists, increases the limits of penalty surcharges and shall change the system to transfer a Korean pharmacy businesses. This Amendment shall become effective in July 2019. The major amendments are detailed below. Key Highlights of the Korean Amendment to the Pharmaceutical Affairs Act Criteria for the Qualification for the Korean Pharmacist Exam regarding Pharmacists Who Graduated from Foreign Colleges The current Art 3 Pharma-Act, as part of Section 1 – Qualifications and Licenses of Pharmacists states that a person, which wants to become a pharmacist “…shall obtain a license from the Minister of Health and Welfare.” A license shall be granted if an individual has a bachelor’s degree from a national institution

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Distribution Agreements in Korea: Crawl before you Walk

Prior to going into any relationship with a distributor/agent in Korea, please read my post entitled: Finding a Korean Distributor: The Top 10 Things to Know Before Going to Bed with a Distributor in Korea. Please read that post in combination with this post, prior to engaging a distributor in Korea. We see too many Korean distribution agreements that are mere spun U.S. or European agreements.  Please have your Korean distribution agreement and all agreements you have in Korea drafted by an experienced and proactive attorney that has on-the-ground experience in Korea.  We see too many issues that could have been easily resolved by a carefully drafted agreement and a little due diligence. Issues to consider for your Korean Distribution Agreement: Will your distributor in Korea be your agent?  If the Korean distributor is an agent, generally, you will, only, be paying your agent In Korea a commission and you will be

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Korea Increases the List of Serious Crimes in the Act on Regulation and Punishment of Criminal Proceeds Concealment

The Chair of the Legislation and Judiciary Committee in Korea proposed an Amendment to the Korean Act on Regulation and Punishment of Criminal Proceeds Concealment (hereinafter as “Act on Punishment of Criminal Proceeds Concealment”) on April 4, 2019. Some crimes shall be added to the list of “serious crimes” stated in the aforementioned Act. Amendment to the Act on Punishment of Criminal Proceeds Concealment The list of “serious crimes” (also “specific crimes”) as defined in Art. 2 (1) Korean Act on Punishment of Criminal Proceeds Concealment shall be extended with the proposed Amendment. These newly added “serious crimes” shall be subject to a proper punishment under this Act, especially for concealing, disguising and/or exchanging criminal proceeds. In addition, the collection and/or confiscation of such illegally earned proceeds shall be able. The newly added ‘serious crimes’ under this Act shall be for instance: Confinement, human trafficking, kidnapping, abduction, etc., as well

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New Provisions regarding the Korean Act on Reporting and Using Specified Financial Transaction Information

The Amendment to the Act on Reporting and Using Specified Financial Transaction Information of Korea (hereinafter as “Amended Financial Transaction Information Act of Korea”) focuses on strengthening Korean legal provisions related to money laundering as well as implementing a “global standard” proposed by the Financial Action Task Force on Money Laundering. The Amended Financial Transaction Information Act of Korea shall enter into force on July 1, 2019. Major provisions of the Korean Act on Financial Transaction Information The purpose of the Act on Reporting and Using Specified Financial Transaction Information is to “…provide for matters concerning reporting on and use of specified financial transaction information necessary to regulate money laundering and financing of terrorism through financial transactions, such as foreign exchange transactions, thereby contributing to preventing crimes and further establishing a sound and transparent financial system.” (Art 1). The major provisions of the prior Act are: Transactions of expected illegal

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Amendment to Korea’s Occupational Safety and Health Act in 2019

The amended Occupational Safety and Health Act of Korea (hereinafter as “OSHA”) entered into force on January 15, 2019. One major aspect of the revision is that it has raised the risk of liability of representatives of institutions and companies and companies for workplace industries in Korea. The amended Korean OSHA law is expected to increase the risk to company management, increase liability of companies and increase options for employees that are perceived to have been harmed because of the actions or inaction of employers. Korean OSHA Basics Importer or Manufacturer of harmful and/or dangerous chemicals should draft a Material Safety Data Sheet and send it to the Ministry of Employment & Labor for approval. The Material Safety Sheet is publicly published – in most cases. Hazardous work shall not be contracted out by companies to third parties. However the amendment provides some notable exceptions (beyond the scope of this

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Succeeding in Business in Korea

Since 1977, I have observed the rise and fall of many foreign companies in South Korea. I have witnessed the trials and tribulations as a bank employee, a high-tech salesman, a country manager and as a business consultant of foreign and Korean companies doing business in Korea . Bluntly speaking, while some foreign ventures have had some unlucky breaks, those companies that have succeeded in the Korean market have done so for good reasons.  And those who have failed have done so, largely, because of their own inadequacies and often the lack of understanding of the needs of businesses in the Korean market. Those companies who for a period “succeed” do so by largely having some kind of a monopoly in technology, a lock on a particular resource, or an overwhelming marketing advantage that makes Korean copycats look decidedly second class.  But many initially successful companies ultimately fail by not getting adequately

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Safety Measures in Korean School Buses in Korea via the Amended Road Traffic Act of Korea

The Amendment to the Korean Road Traffic Act (hereinafter as “ Korean RTA”) is in force since March 2019 and shall generally increase the safety for children in school buses in Korea. The Amendment was a reaction to an accident that occurred with in school buses, including children, which got physically harmed or even died. An infamous incident involved a young child that left unattended in a bus and died because of, among other things, heat exhaustion. Korean RTA drastically changed, the following brief snippet is, only, the tip of the iceberg. If you are running a business that transports children, we, highly, recommend having your law firm in Korea walk you through this law. Two Highlights of the Amendment to the Korean Road Traffic Act 2019 “A driver of a school bus for children shall operate a device that verifies that the discharge of children from the bus has

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Korean Act on Special Cases Concerning the Establishment and Operation of Internet Banks

In September 2018 the Korean National Assembly passed the Korean Act on Special Cases Concerning the Establishment and Operation of Internet Banks (hereinafter as “Act on Internet-Only Banks”), which is in force since January 2019. The major facial intent of the Act on Internet-Only Banks is to “…encourage innovative enterprises to enter the financial market while laying the legal framework for the convergence of information and communications technologies (ICT) with financial services, and the creation of new economic growth drivers.” One of the main impetus for the Moon Administration related to this Act was to allow individuals and companies that may have a more difficult opportunity to obtain credit to obtain credit. The foregoing is, only, intended as a brief teaser and not anything more than to provide a basic understanding of this Act. Korean Act on Special Cases Concerning the Establishment and Operation of Internet Banks 2018 “Internet Banks”

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Korea Due Diligence for Joint Ventures, Licensing, OEMs and Buying a Korean Company

Intending execute a joint venture agreement with a Korean company? Buying a Korean company? Licensing technology to a Korean company? OEM with a Korean supplier? Selling to a Korean company?Before going to bed with a Korean company – do a little due diligence.  The motivation for this article is an article by my friends over at the China Law Blog. Due diligence in Korea is not much different than due diligence in China.  However, don’t forget what is said below: “get someone who truly knows what he or she is doing” to assist with the due diligence.  We see too many Korean lawyers and Korean business professionals with a lot of ego, but little on-the-ground high-level Korean experience or an inability to think strategically.  The few great due diligence professionals are, typically, not found easily at the ubiquitous Korean Law Firms, because of issues of the over-delegation of tasks to

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Corruption in Korea: What is the Crux of the Problem? by Tom Coyner

Whenever I read a news item regarding Korean corruption, I have mixed feelings. Usually the article is based on the latest finding by a well-meaning NGO that focuses on corrupting influence of big business on government without adequately addressing the root causes or even the breadth of corruption. Korean corruption doesn’t limit itself to envelopes and car trunks of cash being paid by business people to government officers. *The following article is a re-posting of an article by Tom Coyner.  The article first appeared on this law blog in 2012.  The issues remain the same and we thought this was an excellent time to repost this excellent article on an important issue for those doing business in Korea.  So one may ask oneself, “Can Korea end its many forms of corruption?” That is the essential question, and the obvious answer is “no.” I don’t mean that as a cynical observation.

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Building Systems Before JVs in Korea to Build Trust between Partners

A blog referred to me by the China Law Blog has a wonderful post on Developing Trust in China by Building Trustworthy Systems/Processes.  The same advice given in this blog post is relevant to work done in Korea, Southeast Asia, China and even the West.  We believe that the verification of the developing and implementation of these system is, often, necessary before building a joint venture relationship with a Korean company. The value of building systems is not to be underestimated in Korea.  Koreans, in most respects, are wonderful at performing tasks that are well dictated and explained. While in the West, we often appreciate more autonomy and, often, don’t strive when systems are too rigid. In the East, many strive on ordered guidance. My law firm often works with business consultants to assist client in implementing systems that reward following these systems/processes. These “systems” are, often, incorporated by reference

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Contract Drafting in South Korea

The following post considers some of the basics of contract drafting in South Korea. The following post is meant to be, only, a basic explanation of the basics of a good Korean contract based on a few observations. This post is not meant to be an exhaustive explanation of this issue, books have been written on contract drafting and we will not be drafting a book with this post. The main purpose of drafting a contract is to avoid a dispute. This article and a great Korean-experienced lawyer with an understanding of business in Korea and your industry should assist you in avoiding a legal dispute in Korea. Basics Considerations Before Signing a Contract in Korea Contract Clarity.  We see all too often, Korean contracts that lend themselves to unnecessary ambiguity. In some cases, ambiguity may be a benefit to our clients doing business in Korea, but in other cases, ambiguity

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Minority Squeeze-outs in Companies in Korea

The amended Korea Commercial Code of 2012 allows majority shareholders with 95% of the shares of a company in Korea, to purchase the shares of the minority for “fair value.”  Thus, allowing a statutory means under Korean Law to squeeze-out a minority shareholder. Fair value may be determined by the court if the parties are unable to reach an agreement within 30 days of a request by the majority shareholder to purchase the shares of the minority. We advise that you place a mechanism within your shareholder agreement (if possible) noting the manner of determining fair market value. ___ Sean Hayes may be contacted at: [email protected] Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He 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

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“Probationary Periods” in Korean Employment Contracts for Newly-Hired Workers

Korean companies should consider negotiating stipulations to create “probationary periods” at the start of employment to train and assess newly-hired Korean workers. Often companies wish to evaluate workers over a set period of time after concluding a labor contract to assess the worker’s abilities and intelligence, and to allow the worker time to gain familiarity with the work.  This period of employment is called a “probationary period.” The practice is relatively unregulated by the government. The Labor Standards Act of Korea provides, among other things, minimum standards for conditions of employment, prohibits discrimination and the use of force or violence against workers.  But, it provides little guidance on regulating “probationary periods.”  The only guidance the Labor Standards Act provides can be found within Article 35, which states that employers do not need to provide 30 day notice of dismissal to workers under a “probationary period” and within Article 77, which

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