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Nearly 4 years after they
first began discussions to revise the law, the Korean National Assembly passed
a bill on February 28, 2018 to amend the Labor Standards Act (“LSA”), to reduce the maximum working
hours. The new law will reduce Korea’s maximum working hours (“Maximum Working Hours”) from 68 hours
per week to 52, will make all public holidays mandatory paid days off, will reduce
the number of special industries that are exempt from restrictions on Maximum
Working Hours, and will provide much needed clarification on overtime premiums
for weekend working hours. The law will become effective on July 1, 2018 and
will apply to large companies before being rolled out in stages to smaller
companies.
The main changes affected by the bill are summarized
below. If you have any questions or would like further information on this
topic, please feel free to contact us.
1. Reduced Maximum Working Hours
The new law will cap the Maximum Working Hours per
week at 52 total. Meaning that, the current 68 hour work week, broken down into
40 hours for regular work, 12 hours for overtime work, and 16 hours for holiday
(weekend) work, will no longer be permitted.
2. Mandatory Paid Days Off for Public Holidays
To date, paid days off for public holidays were not a
legal requirement for private employers, although practically, most private
employers offered such paid holidays. Only Labor Day (May 1st) and
the weekly paid holiday (usually, designated as Sunday) were mandatory
requirements. However, this new law will now make public holidays mandatory
paid days off for private employers. The new law will provide some flexibility
for employers. With the agreement of employees, employers may arrange for
employees to take alternative days off in lieu of public holidays.
Some labor unions argue that, even if public holidays
fall on weekdays, weekly overtime working hours cannot exceed 12 hours. However,
this is simply an inaccurate understanding. The Supreme Court defines working
hours as “actual” time used by employees to perform work/duties, as stipulated
in their employment agreement, under the direction and supervision of the
employer. Paid days off should not be counted towards the weekly Maximum Working
Hours. In a similar case, the Ministry of Employment & Labor (“ MOEL”) determined that where
the weekly working hours did not exceed the maximum due to a public holiday
falling on a weekday, overtime was not applicable to work performed up to 8
hours on a Saturday.
3. Reduced Number of Special Industries
The new law will reduce the number of special
industries enumerated under the LSA (“Special
Industries”) in which employers are permitted to have employees work in
excess of the Maximum Working Hours. The current 26 Special Industries will be
cut down to just 5 industries as listed below. Employers who fail to comply
with this new rule will be subject to criminal penalties of imprisonment for up
to two years or a fine of up to KRW 20 million.
4. Holiday Work Performed Up to 8 Hours
Due to the controversial interpretations by the lower
courts and the MOEL, there have long been questions on whether employees who
performed work up to 8 hours per day on weekends would be entitled to only the
holiday premium of 50% of ordinary wages or entitled to both holiday and
overtime premiums amounting to 100%. However, the new law is set to clear this
up. Under the new law, employees will be paid additional 50% of their ordinary
wages for work performed up to 8 hours per day on a holiday.
5. Reduced Maximum Working Hours for Minors
The new law will reduce the Maximum Working Hours for
minors (ages 15 to 18) from 46 hours per week to 40.
6. Effective Date
The new law will become effective in stages based on employer
size, with the first changes taking effect on July 1, 2018 for employers with
300 or more employees.
7. Fixed-Allowance System for Overtime Work
Now that many employers have adopted a fixed-allowance
system (approximately 45.4% according to MOEL surveys) in which a predetermined
amount of overtime pay is built into the employment contracts or rules of
employment, there is concern as to whether the new law will be able to effectively
reduce working hours in Korea. To address such concerns, MOEL plans to announce
a new policy based on Korean Supreme Court precedents to provide more
regulatory guidance on the fixed-allowance system. Employers who currently
implement the fixed-allowance system should pay attention to these changes as
they become available.