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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.