Unfair/Wrongful Dismissal of Foreign Executives under Term Contract with Korean Chaebols

Expat executives in Korea are typically hired by Korean conglomerates based on two or three year contracts. These employment contracts often have three to six-month at-will termination clauses. In many cases, these contracts are in violation of the Korean Labor Standards Act. Many foreign executives, recently, have been pushed out of these Korean conglomerates with nothing more than a few months salary and a bitter taste in their mouth. These actions are giving Korea a bad image amongst potential foreign employees and foreign employees are too often letting the conglomerates get away with these actions because of ignorance of Korean law. I was told by an employee-side executive recruiter that he always advises clients to choose China over Korea, since he believes that, in Korea, you have a far greater chance of not completing your contract. We are normally on the business-side of litigation for foreign companies, but the increase in these actions

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Hiring/Terminating an Employee/Contractor in Korea: Employment Law in Korea

One of the largest areas of Korean law that we consult on is labor & employment law.  Because of, inter alia, the lack of the conception in Korea of an “at-will” worker – many non-Korean employers get their feet into hot water when structuring agent, consultant, employment and even distribution agreements with Korean individuals.  Some of these arrangements – lead to us needing to defend employers in court.  An expense – that would have, typically, not been necessary. The reality is that the most important aspect of ensuring that you will not have a large employment liability is to: Adequately vet the anticipated hire.  This does not, simply, mean having a call and meeting the person. A Korean “old hat” is, normally, necessary in flagging issues that, often, do not seem to be issues by those not, deeply, familiar with Korean employees and Korean realities; Don’t trust “salary tables.”  In

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Seniority-based Promotions being Replaced by Merit-based Promotions in Korea

Slowly, but surely, South Korean organizations are moving away from seniority to merit-based promotions.  Standard Chartered Bank weathered a long employee strike as it pushed its Korean personnel policies into closer compliance with its international, merit-centric standards.  While the article below mentions a promotion by Korean Air of a female may not have been given to a owner family member (as is most often the case for Korean female executives), it may be helpful to keep in mind that Korean Air has a long tradition of sending its rising stars abroad for foreign MBAs, such as at the University of Southern California.  In fact, a daughter of the chairman got her MBA just like dear old Dad from USC and today she is a vice president of Korean Air.  When something like that happens, change is likely to occur. So for whatever may have been the original motivations, Korean companies

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Ordinary Wages and the Principle of Good Faith in Korea: How long should the principle be applied to Korean CBAs?

We wrote a post on this blog a few years back entitled: Ordinary Wages Under Korean Law Clarified by Supreme Court: Regular, Uniform & Flat Defined.  Our post noted, in part, that: ” . . .the Supreme Court, in a case that I will call the Regular Interval Bonus Case, has delivered  a couple of more clear examples, than in the past, of cases that will be considered Ordinary Wages.   In the case, the employer was providing a “regular bonus” every two months. The Court in the Regular Interval Bonus Case opined, in part, that: Any collective bargaining agreement (labor-management agreement or like agreement) that deems a certain type of payment as not an Ordinary Wage is void and, thus, unenforceable.  An exception is available for certain specific companies that have implemented this practice in particular limited situations based on the vague principle of “good faith and trust.”  I will

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Korean Labour Relations by Tom Coyner

Korean democracy is a new and relatively recent development. Many Koreans feel it is natural to protest as part of their newfound freedom. Marches and rallies are part of daily life, albeit less intense than one might think from the news coverage. Only a small percentage of these demonstrations ever get out of hand. The press tends to focus on what makes up perhaps a mere 1% of the story. Only on relatively rare occasions do some Koreans act unruly and out of control. If the reality was as represented in the media, as one resident foreign CEO challenged, why is Korea doing so well compared to many other countries? His answer: the fact is 99% of the real story is about a highly educated, very hard working labor force that is fiercely loyal and committed to company goals Still, the prudent manager needs to pay close attention to employee

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“Ordinary Wages” Under Korean Labor Law Clarified by the Supreme Court: “Regular, Uniform & Flat” Definition

The definition of “ordinary wage” has been clarified by the Korean Supreme Court in two decisions handed down on December 18, 2013.  The cases will have a significant impact on Korean Labor & Employment Law and will, likely, lead to additional litigation. The calculation for an Ordinary Wage is utilized to calculate statutory entitlements, thus, has an impact on the aggregate amount of contributions necessary to be paid to an employee.  The issue is one of the most significant issues, this year, for domestic and foreign employers. For example, under 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.  For many companies, this calculation could increase costs to a point that will make profitable companies head, immediately, to the red. The basic test has been that an Ordinary

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Korea’s Data Privacy and Data Protection Law

Korea’s Personal Information Protection Act has replaced, in whole, the Public Agency Data Protection Act of Korea and, in part, the Act on Promotion of Information and Communications Network Utilization and Information on September of 2011. The new privacy law is one of the strictest laws in the world.   Please seek advice prior to engaging in any business where data of customer will be collected. Over the next couple of weeks please check back to this blog.  We will be updating the reader on: Basics of the new Korea data protection law; The Data Protection Commission; The Personal Information Dispute Mediation Committees; The Korea Communications Commission; The Korea Internet & Security Agency; also We will provide sample privacy and data collection statements. _______Sean Hayes may be contacted at: [email protected] Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the only non-Korean to have worked

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Severance Payments in Korea: Death to Korea’s Competitiveness by Tom Coyner

Getting what you want and doing as you wish offers immediate gratification, but these short-term rewards may lay the foundation for long-term disaster. There are two areas that come to mind regarding Korean business practices. Recently, a Financial Times article on revised Korean compensation calculations was widely circulated among long-term Western expats here. It generated much discussion as this whole issue could have a major impact on the labor costs of doing business in Korea. I remember when I was hired by the Chase Manhattan Bank in Seoul during the 1970s, I was offered an annual salary divided by 14 payments to allow for 12 monthly payments plus two one-month payments scheduled for June and December. I uniquely asked for and got the same annual compensation divided by 12 and paid out monthly sums the so-called semi-annual bonuses. So, in a sense, these scheduled bonuses that normally are consistently paid

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Status of Interns Under the Korean Labor Standards Act: Employees Entitled to Severance/Minimum Wage?

Interns in Korea may be considered Employees under the Korean Labor Standards Act, thus, entitling the interns to minimum wage, severance and the numerous other protections and benefits under the Act.   The matter is having an impact on franchises, entertainment companies, and other SMEs. The, incredibly vague, Employment & Labor Ministry Guideline 826 (April 7, 2009) notes, in part, that: If a person is considered an employee under the Labor Standards Act shall be determined by considering the subordinate relations with the employer collectively – with regard to the details of job, supervision by the employer, disciplinary actions, capability to ignore work orders and the type of wages paid, etc.  In cases when students provide work to an employer to gain academic credit with no promise to hire via a academic-industrial cooperation agreement, even though the agreement contains working hours, a stipend, social insurances, etc. the students are, generally,

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Samsung Investigated for Union Busting by Korean Ministry of Employment and Labor

A large part of Samsung’s success has been its “good” relationship with the Korean government and its “no union” policy.  Samsung has been criticized for decades for receiving preferential treatment from the Korean government, because of relationships with government officials/politicians and perception that without Samsung the country is doomed. Many in Korea have, also, criticized Samsung for its environmental practices, labor practices, abuse of suppliers and gauging of local consumers.  Much of the criticisms have, at least, some merit. The government may be changing its practices with regard to Samsung.  An opposition party has revealed a document produced by Samsung management that allegedly instructs management to encourage employees to disorganize trade unions if unions are established.  The document has led the Korean Metal Workers’ Union, Lawyers for a Democratic Society and the People’s Solidarity for Participatory Democracy to file a criminal complaint with the Seoul Central District Prosecutors’ Office against

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Korean Invention Promotion Act: Employee Inventions in Korea

 The Korean Investment Promotion Act (“IPA”) was amended in June of 2013.  The amendments will come into force at the end of January of 2014.  Major Amendments to Korean IPA 1.  Employers will no longer obtain, automatically, a non-exclusive royalty-free license to all inventions by employees.  Employers will, now, have to implement company policies and/or include in employment contracts provisions to grant rights to inventions to employers.  The amendment will not apply to employers deemed by the Act on Small to Medium Enterprises to be SMEs. 2.  Employers will have an easier time establishing that “reasonable” compensation was paid in exchange for an assignment of inventions under the invention compensation policies of the employer.  The amendment, however, maintains the, present, uncertainty by still maintaining abstract guidelines, partially, based on future unknown profits that are, only, realized often years after assignment of the invention. 3.  Employers are required to establish an

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More Damage from Militant Unions & Rising Labor Costs in Korea: GM to Reduce Production in Korea

GM has been a success story for Korea FDI, however, the success story may have been more of a fairytale. GM produces around 1/5 of its automobiles in Korea.  According to local media sources, management at the company is posed to lower production in Korea because of rising labor costs in Korea that are caused by bonuses being included in “regular wages,” thus, increasing severance obligations, a union that threatens to go on strike nearly every year (last year all full-time employees received based on a threat of strike a bonus of around USD 9,000) and increasing wages year-on-year. GM has, already, decided to not produce the new Chevy Cruise in Korea.   The current model will, still, be produced in Korea.  It has been noted by NBC that the development center for the Chevy Cruise has been moved from Korea to a technical center near Detroit.  A small SUV produced

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Hyundai Motors on the Fast Track to a 45,000 Employee Strike

It has been reported, in the local Korean papers, today that negotiations between the Hyundai Motors Union and Hyundai Management have ended without a deal.  The union reported that they would not budge on the basics of their proposal.  The union has been demanding the increase of the retirement age to 61 (Korean law mandates a minimum retirement age of 60 by 2016), a pay raise, shorter working hours and an increase in some basic benefits. Hopefully, the union and management realize that these situations make Korea look like a not so business-friendly destination.  Another strike would have a very harmful impact on the image of Korea in the minds of companies that are considering destinations for investment. Korea is increasingly struggling to obtain FDI with labor being one of the major red flags for investors.   ______Sean Hayes may be contacted at: [email protected] Sean Hayes is co-chair of the

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Korea’s Minimum Wage Increases to KRW 5,210

The minimum wage in Korea has increased by over 7%.  The new minimum wage is now set at KRW 5,210 which equates to KRW 41, 680 per day or KRW 1.08 million per month.  Korea’s Ministry of Employment and Labor statistics indicate that 2.56 million workers are paid, only, the minimum wage.  Unions were pushing for a 21.6% rise in the minimum wage, while business lobbies were calling for a wage freeze.   The largest number of individuals being paid the minimum wage are in service and light manufacturing._______Sean Hayes may be contacted at: [email protected] Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the only 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. (c) Sean Hayes – SJ IPG. All Rights reserved.  Do

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Korean Unions Turning Violent Again: Solution is Jail

Labor competition from Korea’s Asian neighbors is leading to Korea becoming a less than favorable place for international and Korean manufacturers.  The Korean unions make the situation more dire. China, Vietnam, Indonesia, Malaysia and other Asian countries are, in many cases, able to produce products that are of an equal quality to Korean products when the operations are managed by skilled management.  Korea, however, in many cases has a technological advantage that allows it to still dominate in certain industries, but the gap is quickly closing. This reality is worrying to many of us residing in Korea.  Increasingly, even Korean companies are choosing to forego investment in Korea for more cost effective and business-friendly destinations. The issue is personified in the recent clash at a Hyundai Motors plant.  A group calling itself the Hope Bus caused the injury of more than 100 people according to reports by local Korean media. 

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Korea’s Data Privacy and Data Protection Law

Korea’s Personal Information Protection Act has replaced, in whole, the Public Agency Data Protection Act of Korea and, in part, the Act on Promotion of Information and Communications Network Utilization and Information on September of 2011. The new privacy law is one of the strictest laws in the world.   Please seek advice prior to engaging in any business where data of customer will be collected.   Over the next couple of weeks please check back to this blog.  We will be updating the reader on: Basics of the new Korea data protection law; The Data Protection Commission; The Personal Information Dispute Mediation Committees; The Korea Communications Commission; The Korea Internet & Security Agency; also We will provide sample privacy and data collection statements. _______Sean Hayes may be contacted at: [email protected] Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the only non-Korean to have

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Inside Korea’s Two-Tiered Economy by Tom Coyner

In preparation for a BBC television interview (which failed to happen due to Skype Internet difficulties), I looked into the indicators and foundations of current South Korean sentiment. What I discovered was much less sanguine than official Bank of Korea statistics that the news agencies and embassies frequently quote. In addition to the below excellent report from which I can personally recognize a number of young Koreans who fit the article’s descriptions, please consider findings from Gallop Korea’s recent report. During the second half of each November, Gallop Korea polls some 1500 South Koreans above the age of 19. This past November’s results were largely similar to those of November 2011, polling sentiments about the coming calendar year. Here are some of the highlights: “How do you feel the ROK economy in 2013?” (percentage of replies) Worse: 40% (previous year’s poll had a ‘worse’ rating of 43%) Better: 12% (no

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Employee Titles in Korea: Yes Titles Still Matter in Korea

The following are the most commonly utilized titles in Korea.   회장 (Hwae Jang): Chairman대표이사 (Dae Pyo Isa): Representative Director사장 (Sa Jang): President부사장 (Bu Sa Jang): Vice President전무이사 (Jun Mu Isa): Executive Managing Director상무이사 (Sang Mu Isa): Managing Director이사 (Isa): Director부장 (Bu Jang): General (Senior) Manager차장 (Cha Jang): Manager과장 (Gwa Jang): Section Chief (Manager)대리 (Dae Ri): Assistant Manager사원 (Sa Won): Employee/Clerk (Entry-Level)______Sean Hayes may be contacted at: [email protected] Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the only non-Korean to have worked as an attorney 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. (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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Private Detectives, Tattoo Artistists and Chiropractors in Korea Will Become Legal Professions?

It is illegal to be a private investigator, tattoo artist or chiropractor in Korea.  Of course, Korea has private investigators, tattoo artists and chiropractors.  Thus, those practicing these occupations in Korea face criminal prosecutions and fines. Additionally, the clients of those practicing these occupations are not safeguarded by the typical administrative agency regulations that serve to protect these individuals.  Some issues have occurred with regard to private investigators.  Some have utilized tactics that many consider less than ethical.  These criticisms may be lessened with the regulation of the profession.  I believe in the near future that tattoo artists and private investigators will become legal occupations, but I believe you will see a vigorous fight from massage therapists (anma- blind practitioners), pharmacists and doctors towards legislation of the chiropractic profession.   Some lawyers are against the private investigator profession, but in my own straw pole I found no Korean attorney that

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Hiring Employees in Korea: The Basics by an HR Guru and Advisor to IPG Legal

“Hiring is your most important task,” said the late Steve Jobs. Considering a wrong hiring decision can be extremely expensive to repair, let’s look at some recruiting options. Ideally, a succession plan will have an internal candidate ready for promotion: advancing a rising star’s career and providing continuity with minimum controversy and a positive message to the workforce that capable people who do well will be recognized and rewarded. Often, however, hiring from outside is required. If the company has a competent HR recruiting function, direct ads and in-house screening may be effective for lower and some midlevel positions. For more important midlevel management or specialist positions, outside assistance may be needed. There are many recruiting companies. By going to any networking event, it is hard not to collect business cards from such firms. Most recruitment firms offer contingency searches. Usually the process begins with interviewing the hiring managers and

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