Requirements and Legality of Management Layoffs in South Korea

1. Introduction

With the global prevalence of COVID-19, management layoffs have become increasingly common in underperforming industries in South Korea, and even foreign companies facing poor performance resort to management layoffs. However, the criteria for management layoffs in Korea are stringent, with minimal precedents where the Labor Commission and the courts have deemed such layoffs legal.

Therefore, to carry out management layoffs in Korea, it is crucial to meet all the requirements for such layoffs. The process should be carefully executed by considering various factors that the courts have recognized as justifiable grounds for legal management layoffs. Failure to meet these criteria may result in the reinstatement of the laid-off employees and potential liabilities for unpaid wages during the layoff period.

2. Requirements for Management Layoffs

Article 24 of the Labor Standards Act establishes (1) urgent managerial necessity, (2) efforts to avoid layoffs, (3) reasonable and fair criteria for layoffs, and (4) consultation with the labor representative at least 50 days prior as legal requirements for management layoffs.

a. Urgent Managerial Necessity

In determining urgent managerial necessity, recent Supreme Court decisions consider factors such as (1) the industry’s overall financial crisis leading to insolvency, (2) recognition of a business crisis through an audit firm’s management diagnosis report, (3) the scale of total and short-term borrowings, and (4) acknowledgment of the necessity for layoffs by the affected employees.

The Seoul Labor Commission, in a case related to COVID-19 layoffs in the airline industry (Case No. 2021부해744), also considered factors like the need for workforce reduction, employee salaries, and the company’s initiation of a recovery procedure.

Therefore, assessing managerial necessity requires a comprehensive review of (1) industry conditions, (2) employee salaries, (3) financial statement analysis, (4) employee acknowledgment of managerial necessity, and (5) assessments by relevant authorities such as accounting firms or recovery courts.

b. Efforts to Avoid Layoffs

Efforts to avoid layoffs vary based on the reasons for layoffs, the scale of the business, and the number of employees affected. While setting universal criteria is challenging, demonstrating sincere efforts to explore alternatives and the inevitability of layoffs enhances the likelihood of meeting this requirement. Strategies such as (1) prohibiting new hires, (2) implementing voluntary resignations, and (3) unpaid leave should be explored before resorting to layoffs. If layoffs are deemed unavoidable even after these efforts, providing evidence of minimal layoffs will strengthen the case.

c. Reasonable and Fair Criteria for Layoffs

The selection of employees for layoffs must be reasonable. Supreme Court precedents emphasize considering both the protective aspects for employees (e.g., age, family dependents, and other income sources) and the company’s profit-oriented factors (e.g., employee performance and qualifications). Foreign companies, especially, should avoid discriminatory criteria based on nationality or gender, as these may be viewed as insufficient grounds for layoffs.

d. Consultation with the Labor Representative 50 Days in Advance

In cases where a labor union represents the majority of workers, consultations must involve the union. In the absence of a union, the company must engage with a designated labor representative at least 50 days before layoffs. Discussions should cover the reasons for layoffs, the company’s financial situation, efforts to avoid layoffs, the number and scope of layoffs, selection criteria, layoff procedures, and protective measures for affected employees.

3. Conclusion

As mentioned earlier, obtaining recognition for management layoffs in Korea is challenging, and conducting layoffs without careful consideration of legal requirements may lead to reinstatement and payment of backdated wages. Therefore, management layoffs should be approached cautiously, emphasizing the potential consequences of not proceeding with layoffs on the company’s viability.

Analyzing various cases and seeking legal counsel from a reputable firm experienced in handling similar situations is essential. Ahnse Law Firm has successfully handled multiple cases, including management layoffs for foreign companies. For any inquiries regarding this matter, please feel free to contact us.

The difficulty of exonerating yourself of a crime

Sexual crimes are usually quite difficult to prove innocence unless only the accuser and the accused know the exact truth and there is no CCTV, etc. In addition, the accuser’s allegations can lead to criminal proceedings such as search, arrest, and detention from the beginning, making it difficult for the average person to properly prepare and defend themselves.

Let’s take a look at two recent cases that we actually handled at Ansae Law Firm to see how you should handle yourself if you are accused of a sexual offense.

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Applicable law

Article 297 of the Criminal Code (Rape)

Whoever rapes a person by assault or threat shall be punished by abandonment for a term of not less than three years.

Article 298 of the Criminal Code (Indecent Assault)

A person who commits indecent assault on a person by assault or threat shall be punished by imprisonment for up to 10 years or a fine of up to 15 million won.

Article 14 of the Special Act on the Punishment of Sexual Violence Crimes (Filming with Cameras, etc.)

A person who uses a camera or other mechanical device with similar functions to photograph a person’s body that may cause sexual desire or shame against the will of the person being photographed shall be punished by imprisonment for up to seven years or a fine of up to 50 million won.

Sexual offense cases

In the first case, according to the victim’s allegations, suspect C was accused of rape at Hotel A in Jung-gu, Seoul, where he forcibly inserted his penis into the victim’s genitals and raped her after suppressing her rebellion. While raping the victim, he filmed the rape with the suspect’s cell phone, and after the rape was over, he filmed the victim sitting on the bed in a naked state again, thus violating the Act on the Punishment of Sexual Offenses (Filming with Cameras, etc.).

 As soon as we were assigned to this case, we reviewed all relevant materials in order to secure evidence that could prove the defendant’s innocence. First of all, we reviewed all KakaoTalk conversations, phone calls, and contents of phone calls between the suspect and the victim before and after they met on the day of the incident, and selected evidence that could help prove their innocence.

In addition, to prove that the suspect and the victim voluntarily entered Hotel 00 by mutual consent, we filed an evidence preservation request under Article 184 of the Criminal Procedure Act for the CCTVs of the restaurants and bars they visited before going to Hotel 00 and the convenience store in front of Hotel 00.

Evidence preservation requests are not commonly made in criminal cases, but in this case, it was essential to secure evidence to prove innocence, and CCTV recordings are often automatically deleted after 30 days, so it was necessary to secure evidence as soon as possible.

Fortunately, the evidence secured by the defense and the persuasion of the suspect convinced the victim to tell the truth and the suspect was cleared at the prosecution stage.

(If you would like to learn more about evidence preservation claims, please refer to our previous blog post https://blog.naver.com/ahnseoffice/222936027281).

In the second case, Defendant K, who worked as a medical doctor, was accused of touching the victim’s buttocks while she was lying on her side in the name of positioning her during a medical procedure, and forcibly molesting her by rubbing her waist and calves.

The defense focused on the fact that Defendant K’s touching was not forcible molestation, but rather unavoidable touching in the course of medical practice. We emphasized that the place where the incident occurred was an open space, and since Korean medical materials were not sufficient, we secured medical education materials in the United States to emphasize that Defendant K’s physical contact was sufficiently in the course of medical practice.

We also reviewed a number of lower court cases and were able to obtain a number of acquittals in cases similar to the above, which we submitted as evidence and argued for Mr. K’s acquittal, which was accepted by the court.

Conclusion

Sexual crimes are very difficult to secure evidence, and there is no general procedure for securing evidence, so you need to look at each case and think about what evidence is most appropriate in that case and prepare a strategy for each case.

In particular, for the average person involved in a sex crime, it is difficult to understand the criminal procedure and even more difficult to understand how to secure evidence. Therefore, if you are in this position, it is important to appoint an experienced lawyer from the beginning of the police investigation.

At Anse Law Firm, we have 20 years of experience in obtaining acquittals and exonerations for sex crimes such as rape, indecent assault, and camera recording, and we will continue to work hard to ensure that no one is wrongfully convicted.

Successful Criminal Cases for Foreigners

Introduction

Hello, this is Anse Law Firm. We have several foreign lawyers who specialize in foreign criminal cases.

In foreign criminal cases, foreigners who are suspects or accused are often unable to respond appropriately to various criminal proceedings due to communication problems. They also complain of psychological anxiety after being arrested, detained, or having their cell phones confiscated in a foreign country.

Due to these communication and response difficulties in foreign criminal cases, the skill of a lawyer is very important, especially in handling the case. In this article, we will introduce the actual criminal cases of foreigners that we have handled at Ansae, and provide effective responses in foreign criminal cases.

Alien Criminal Case Wins

In this case, an Australian suspect, C, was charged with rape at Hotel A in Jung-gu, Seoul, where he forcibly inserted his penis into the victim’s genitals and raped her after suppressing her resistance. While raping the victim, he filmed the rape with the suspect’s cell phone, and after the rape was over, he filmed the victim sitting on the bed in a naked state again, violating the Act on the Punishment of Sexual Offenses (filming with a camera, etc.).

In general, it is not easy to secure objective evidence to prove that sexual intercourse was mutually consensual in a sexual crime case. Therefore, the conversation history of KakaoTalk, texts, and phone calls between the victim and the suspect before and after the incident become important materials. In this case, the KakaoTalk and phone call history of the incident played a crucial role in proving the innocence of the accused.

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In a criminal case, if the evidence is in English, you must attach a translation of the evidence.

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The power of law firms that customize for foreigners

The problem was that all of the KakaoTalk and phone calls were in English, and the volume was enormous, as the client had been talking to KakaoTalk every day since the incident. While it is common for other firms to rely on external translators in such cases, our firm believed that each and every conversation could be crucial in proving innocence, so our foreign lawyers and Korean lawyers collaborated to manually translate and review them to collect evidence.

In addition, we kept in close contact with Mr. C and requested petitions from his Australian friends to support his claim of innocence. The petitions from his Australian friends were also translated by our lawyers and submitted to the prosecution as evidence.

With this evidence and the persuasion of the suspect, the victim told the truth and the suspect was cleared at the prosecution stage.

Conclusion

Unlike ordinary criminal cases, foreign criminal cases have many additional factors that need to be reviewed, such as the SOFA. In addition, many court records are written in a foreign language, and other procedures such as translation and apostille must be considered in addition to the law.

In our 20 years of experience, we have handled many foreign criminal cases through the collaboration of foreign and Korean lawyers. We promise to provide specialized and customized defense in foreign criminal cases based on our past successes.

Korea: Foreign Direct Investment and Corporation Tax

Korea: Foreign Direct Investment and CorporationTax

FDI

South Korea attracts foreign business and investment in a number ofways. There are Free Economic Zones. The government provides variousincentives. Even some local governments provide incentives. These can includesubsidies for labour and tax breaks.

Foreign investment into Korea is underpinned by the Foreign Investment Promotion Act (the “Act”) which was enacted to attract more inward foreign investment into Korea.

In order to qualify under the Act, a foreign investor must make aninvestment equivalent to KRW100 million. At the time of writing, this isapproximately USD81,000. Certain “in kind” contributions may qualify as well.

The main benefits under the Act are that all remittances to the home country are guaranteed and that the company will receive equal treatment with Korean companies. The issuance of work visas is also less problematic with this route.

Taxation

The Korean government has for a long time recognised the importanceof foreign investment.

Corporation Tax

The basic rates of Corporation Tax are as follows:-

11%                           onthe first KRW200 million of the tax base

22%                           upto KRW200 billion

24.2%                       overKRW200 billion

Withholding Tax and VAT

Withholding tax for a non-resident is payable at the rate of 22%unless the rate is reduced by a Tax Treaty with the third party country.

The rate of VAT is currently 10%.

Some Features of The Personal Information Protection Act

The Personal Information Protection Act was enacted in Korea, March 2011 and went into effect at March 2012. The legislation of the Personal Information  Protection Act streamlined various Acts related personal information like Act on the protection of Personal Information maintained by Public Institutions, Act on Promotion of Information and Communications Network Utilization and Information Protection, etc. and Use the Protection of Credit Information Act.

The purpose of this Act is to prescribe matters concerning the management of personal information in order to protect the rights and interests of all citizens and further realize the dignity and value of each individual by protecting personal privacy, etc. from collection, leakage, misuse and abuse of individual information.

There are some features we didn’t have before enactment The Personal Information Protection Act.

1. This Act is applicable to not only a public institution but also corporate body, organization, individual, etc. who manages personal information directly or via another person to administer personal information files as part of his/her duties.

2. A personal information manager may collect personal information and use it for the intended purpose of collection only in some cases like 1) where he/she has obtained the consent of subject of information, 2) where there exist special provision in any Act, and so on.

3. A personal information manager shall establish personal management policies containing purpose, period, matters concerning providing a third person with personal information, the rights and duties of a subjects of information.  And when a personal  information manager establishes or amends the personal information management policies, he/she shall disclose them in accordance with methods prescribed so that a subject of information can readily use them.

4. A committee for mediation of disputes on personal information is established to mediate disputes over personal information. The Dispute Mediation Committee didn’t cover public institution things before, but now it will manage both of the civil and public disputes.

5. A Personal Information Protection Committee (referred to as ‘Protection Committee) is established under the direct jurisdiction of the President to deliberate and resolve on matters concerning the protection of personal information.

6. There are penalties on a person who provides a third person with personal information without obtaining the consent of a subject , who uses personal information or provides a third person with personal information beyond the scope, and who uses in another way in violation of this Act.  A person who fails under any of the cases shall be punished by imprisonment for not more than five years or by a fine not exceeding 50 million won.

And a person who serious hinders, interrupts or paralyzes a public institution in performing its business by altering or erasing personal information managed by the public institution with the intention of interfering with the management affairs of personal information shall be punished by imprisonment for not more than ten years, or by a fine not exceeding 100 million won.

The Emissions Trading System to start in 2015

Korea will start green house gas emission trading from 2015 as part of its efforts to curb global warming and promote low-carbon, green growth.

In 2009 Korean Government voluntarily declared it would cut greenhouse gas emissions by 30 percents on a business as usual basis by 2020. The Framework Act on Low Carbon, Green Growths enacted in 2014 to attain this goal entrusted legislators to enact a bill on ETS(emission trading system).

There was a debate, however, on the proper timing of introducing ETS between government and industries. Contrary to the government insisting that benefits of ETS offset the costs, the Korea Chamber of Commerce opposed the bill, saying it would put an additional burden on domestic companies.

On May 3rd, 2012 the National Assembly approved the Act on Allocation and Trading of Greenhouse Gas Emissions despite opposition from industries.

According to the bill, companies with more than a certain amount of greenhouse gas emissions are to be allocated emissions rights as of 2015. Any emissions left unused can be sold to other companies that exceed their emissions cap.

The basic allocation during 2015 – 2020 consists of a free allotment of 95% or more. The legislation also enables a 100% free allocation for industries that show a high level of trade dependence or are liable to lose competitiveness due to ETS.

Separate from the cap and trade scheme in this act, the government will implement the greenhouse gas and energy target management system. Under this system, the government sets obligatory emissions and energy consumption reduction target for the nation’s 458 heaviest corporate polluters and imposes fines on violation of the targets.

Some critics said the ‘target management system’ and ‘cap and trade system’ are likely to overlap in regulating the emissions, putting an additional burden on industries. The Act on Allocation and Trading of Greenhouse Gas Emissions exempted companies allocated emission rights from the target management system to avoid this criticism.

Another concern is that the face-off over the main authority to preside affairs related with ETS between the Ministry of Knowledge Economy, which has focused on green growth and the Ministry of Environment, which has emphasized low-carbon regulation remains unsolved. The enforcement decree needed for the specification of presiding office will be announced later this year.

Introduction to the LLC in the Amended Commercial Act

The amended Commercial Code introduced new business entities such as LLC(Limited Liability Company) and LP(Limited Partnership) to satisfy the needs of our business societies placing emphasis on human resources and willing to limit the external liability of the participants.

The LLC(Yuhan Chaegim Hoesa) is a separate legal entity situated halfway between Limited Partnership Company(Habza Hoesa) and Limited Company(Yuhan Hoesa) in that LLC internally guarantees the self-governance of the participants while limiting the external liability of the participants at the same time. Key distinctions of LLC and Limited Company(Yuhan Hoesa) are set forth below.

Attributes	Limited Company (Yuhan Hoesa)	Limited Liability   Company ( Yuhan Chaegim Hoesa)
Number of Share Holders Required	Minimum of 1; maximum of 50	Not prescribed by law
Authorized Capital	Authorized capital is not contemplated	Authorized capital is not contemplated
Minimum Paid-in Capital	No minimum paid-in capital requirement	No minimum paid-in capital requirement
Number of Directors	Minimum of 1; no maximum number prescribed	Not prescribed by law; Instead, minimum of 1 managing member should be appointed among   the participants or nonparticipants
Board of Directors	Required	Not prescribed by law
Statutory Auditor	Appointment of statutory auditor is optional	Appointment of statutory auditor is optional
Issuance of Corporate Debentures	Not permitted	Not permitted
Management of business	Determined by a majority of directors	Determined by approval of all the entire managing members
Transfer of Shares	Free transferability is not guaranteed by Commercial Code and is   subject to approval of a majority of members holding at least 75% of units	So far as the articles of incorporation prescribed otherwise, free   transferability is not guaranteed by Commercial Code and is subject to   approval of all the rest members except the share of a non-managing member   subject to approval of all the managing members

 

Procedures for Establishing LLC

A. Foreign Investment Notification

The foreign investment notification procedures for establishing LLC is entirely the same with those for the stock corporation. Notification of foreign investment on a prescribed letter and a notarized Power of Attorney appointing local counsel to represent the foreign investor should be submitted to the government-designated foreign exchange banks or Korea Investment Service Center of the Korea Trade Investment Promotion Agency.

B. Incorporation Process

The members of LLC should draw up the Articles of Incorporation including information such as the names, registration numbers and addresses of the members, the address of the principal office, and the name and address of the representative managing member. As explained above, the Commercial Code allows the internal part of LLC being operated flexibly by the self-prescribed Articles of Incorporation, contrary to the Yuhan Hoesa.

The initial foreign investment in a LLC must be at least 100 million won, the same with the case of incorporating the Stock Company. The receipt of all payments should be finished until the registration process is completed because a certificate of deposit of subscription funds must be submitted to the Commercial Registry Office. The investment of members of LLC is not limited to money or kind, but credit or labor is not allowed for the investment in LLC under the Commercial Code.

The incorporation process of LLC is completed with the registration of the new company to the Commercial Registry Office located in the place of the principal office. The following is the key information required for the registration of LLC.

(a)    The names, resident registration numbers and addresses of participant(s)

(b)   The address of the principal office

(c)    The name, address, and resident registration number of the managing members (not necessary if the representative managing member is appointed)

(d)   The name, address, and resident registration number of the representative managing member appointed among the managing members 

(e)    The way of notification if it is prescribed in the Articles

Foreign Direct Investment in KOREA

Foreign Direct Investment in KOREA

 

FOREIGN DIRECT INVETMENT (FDI)                         FDI refers to an investment made by a foreign investor (a foreign company or foreign individual) for the purpose of doing business or establishing a continued economic relationship in Korea.  FDI differs from a portfolio investment, whose purpose is to earn margins from stock transactions for short term profits.

A foreign investor may do its business in Korea by establishing a company or a branch office, and a branch office and a subsidiary company are allowed to do income generating business activities.  If a foreign investor considers efficient operation of business or good reputation toward customers, establishing a subsidiary or company is the most popular method for a foreign investor to do business in Korea.

Foreign investors should invest to Korea in accordance with the Foreign Investment Promotion Act (“FIPA”), and they may establish a wholly-owned company or joint venture company.

REQUIREMENTS         In order for FDI to comply with the FIPA, both the amount of the foreign investment and the stock ratio must be satisfied as prescribed in the FIPA.

• Minimum Foreign      Investment Amount: 100 million Korean Won
• Foreign Investment Ratio:      10% or more of the voting stocks or total invested capital

TEYPS OF BUSINESS ENTITIES           The Commercial Act of Korea provides 4 types of business entities, and they are:

1. Jushik-hoesa: Equivalent to a corporation of the United States and most popular form of business entity. Main characteristics are investment by shares, limited liability, and 1 or more shareholders.
2. Yuhan-hoesa: Equivalent to a partnership of United States but it is an incorporated entity. Partners have limited liability, and 1 partner up to 50 partners is allowed to form a company.
3. Hapmyong-hoesa: Equivalent to a general partnership of US, but it is an incorporated entity. Number of partners is 2 or more, and partners have unlimited liability.
4. Hapja-hoesa: Equivalent to a limited partnership of US, but it is an incorporated entity. Number of partners is 2 or more, and 1 type of partners having unlimited liability and limited liability.

Among the business entities, ‘ju-shik-hoe-sa (a stock-company)’is the most common form of entity that foreign investors wish to establish.  Depending on a business which a foreign investor whishes to do in Korea, it may be required to invest more than 100,000,000Won in accordance with the Korean relevant laws.  A foreign investor may recover and remit back the invested amount to its country if it decides not to do business in Korea any more.

ESTABLISHMENT PROCEDURES       Establishment procedures are ① report of foreign investment to a foreign exchange authority, ② incorporation of a company in accordance with the Commercial Act, and ③ registration thereof with a court commercial registry.  Upon completing the establishment procedures, a foreign investor has to obtain a business license certificate (tax ID No.) to start its business by submitting an application therefor to the competent tax office.

Ahnse Law Offices

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