News

Key Changes to Employment and Labor Laws in 2016

Several new labor laws and regulations recently took effect, or are scheduled to take effect in 2016.

1.  30-day Termination Notice Requirement for Employees Who Have Been Employed for Less Than 6 Months – Recent Constitutional Court Decision

On December 23, 2015, the Constitutional Court issued a decision on the constitutionality of Article 35, Paragraph 3 of the Labor Standards Act ("LSA"). The Constitutional Court ruled that Article 35, Paragraph 3 of the LSA was unconstitutional, because it would infringe upon the relevant employee's rights, and violates the principle of equality.

• This provision of the LSA stipulates that the 30-day advance notice requirement (or payment in lieu thereof) for employee termination does not apply to a monthly-paid employee, who has been employed for less than 6 months. 
• ŸŸŸA law declared unconstitutional loses its effect immediately, as of the date of the Constitutional Court's decision. Therefore, as of December 23, 2015, Article 26 of the LSA, which requires a 30-day termination notice, will apply to monthly-paid employees who have been employed for less than 6 months.

2.  New Laws and Regulations

(1) Earliest Mandatory Retirement Age Set at 60¹

• On May 22, 2013, the National Assembly put in place a limitation on employer's ability to set a mandatory retirement age.² Under the amendment, the earliest retirement age that a company may set is age 60.
• Beginning January 1, 2016:
  • The new mandatory retirement age limitation will apply to businesses employing 300 or more permanent employees, public institutions,³ and local public corporations and agencies.⁴
  • For businesses employing fewer than 300 permanent employees, the new mandatory age limitation will apply beginning January 1, 2017.

(2) Expansion of Permissible Grounds for Interim Severance Payment

•  Interim severance payments are only allowed for specific reasons set forth in the Employee Retirement Benefit Securities Act ("ERBSA").
  • Concerns have been raised regarding the recent introduction of the wage peak system, because employees who are subject to the wage peak system would not have been allowed to withdraw interim severance payment when their wages hit their respective peaks.
  • This would result in reduced total severance payments for these employees, as compared to what the employees would have been entitled to but for the adoption of the wage peak system.
• The relevant provision of the Presidential Decree of the ERBSA was amended as of December 15, 2015, and took effect immediately.
  • The amended Presidential Decree allows the interim withdrawal of a severance payment where:
    1. An employer adopts a wage peak system under which an employee's wage may start to decrease at a certain age, service year or when wages hit a certain amount in exchange for extending the employee's retirement age; or
    2. An employer and an employee agree to adjust the prescribed working hours by one hour per day or five hours or more per week, and the employee continues to work under the adjusted working hours for more than three months.

3.  Workplace Nursery Requirement Strengthened⁵

• Business places with 300 or more female workers, or 500 or more total workers, are required to provide nursery facilities for employees.
  • The Infant Care Act requires such an employer to establish and operate nursery facilities, or to provide support for the care of workers' children by executing service agreements with local nursery facilities.
• Currently, no particular penalty is imposed under the Act for failure to establish a workplace nursery, except the Ministry of Health and Welfare’s disclosure of the list of workplaces which have not complied with the requirement.
• Starting January 1, 2016, however, employers in violation of the above requirements may be ordered to comply and/or be subject to administrative fines of up to KRW 100 million twice a year.

4.  Amendment of Existing Law

(1) The Fair Hiring Procedure Act

• The Fair Hiring Procedure Act ("FHPA") was promulgated on January 21, 2014. Most recently, on January 1, 2016, the FHPA took effect for business with 100 to 299 permanent employees.
• Article 11:
  • Under the FHPA, where a job applicant who has submitted documents required for hiring to a business with 30 or more permanent employees demands that the documents be returned, the business must return those documents to the job applicant.
  • In addition, a business with 30 or more permanent employees must keep the documents submitted by job applicants for a certain period of time,⁶ ) in preparation for possible requests for return of the documents.
• A business that violates these requirements may be subject to a corrective order from the Minister of Employment and Labor and/or a monetary penalty not exceeding KRW 3 million (Article 17 (2)).
• The FHPA took effect on January 1, 2015 for businesses with 300 or more permanent employees and public organizations.
• On January 1, 2017, the FHPA will take effect for businesses with 30 to 99 permanent employees.

(2) Reduced Working Hours for Pregnant Employees⁷

• A female employee, who is within the first 12 weeks of her pregnancy, or who has completed 36 weeks of her pregnancy, may request a reduction of her working hours by upto 2 hours per day. Her employer must accept this request.⁸
• Further, the employer cannot reduce the female employee's salary during this reduced work schedule period.⁹
• Since March 25, 2015, the above provisions have applied to businesses with 300 or more permanent employees.
• Beginning September 25, 2016, these requirements will to businesses with fewer than 300 permanent employees.

(3) National Health Insurance Premium Will Increase by 0.9% ¹⁰

• The National Health Insurance Premium rate has increased from 6.07% in 2015 to 6.12% in 2016.

(4) Minimum Wage will Increase by 8.1% ¹¹

• The minimum wage has increased from KRW 5,580 per hour in 2015 to KRW 6,030 per hour in 2016.

_____________________________

1. Article 19 of the Act on Age Discrimination Prohibition in Employment and Promotion of Employment of the Aged.
2. By amending the Act on Prohibition of Age Discrimination in Employment and Promotion of Employment of the Aged.
3. As defined by Article 4 of the Act on Management of Public Institutions.
4. Established under the Local Public Corporation Act.
5. Articles 44-2 and 44-3 of the Infant Care Act.
6. Has not yet been specified by statute.
7. Article 74 (7) of the Labor Standards Act.
8. Article 74(7) of the LSA.
9. Article 74(8) of the LSA.
10. Article 44 of the Presidential Decree of the National Health Insurance Act.
11. Article 10(1) of the Minimum Wage Act.