Will You Take the Money or Sue? A Country Where Bad Employers Can Avoid Punishment [Wage Arrears Tracker] ②

Judicial Prosecution Rate for Wage Arrears at Only 20%
Sentencing Guidelines for Wage Arrears Weaker Than for Theft
Effectiveness of Habitual Wage Arrears Prevention Act in October Under Debate

Editor's NoteThe total amount of unpaid wages in South Korea surpassed 2 trillion won for the first time last year, and as of April this year, it is approaching 800 billion won, on track to reach a record high. Even considering the economic downturn, it is difficult to understand why South Korea’s unpaid wage amount is more than 20 times that of Japan, despite Japan having twice the labor force. We investigated the reasons why South Korea has become a country where wage arrears are both common and easy to commit.

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One of the main reasons for the repeated occurrence of intentional wage arrears is the current punishment structure, in which only 20% of reported employers are subject to judicial prosecution. Criminal punishment for employers is subject to the principle of non-prosecution upon objection (meaning that if the victim does not wish to punish the perpetrator, criminal punishment is not possible). In addition, the victimized worker must prove the employer’s intentionality in withholding wages, making it difficult to file a complaint or accusation. The sentencing guidelines for wage arrears crimes are also lower than the maximum sentence under the Labor Standards Act, which is three years in prison, with the actual guideline set at two years and six months.

Judicial Prosecution Rate for Wage Arrears at 20%... "Reported, But Do Not Wish to Punish"

According to data on wage arrears from the Ministry of Employment and Labor on June 22, out of 194,915 reported cases of wage arrears last year, only 39,513 cases led to judicial prosecution, resulting in a prosecution rate of just 20.27%. The judicial prosecution rate for wage arrears cases has steadily declined from 29.83% in 2020 to just above 20%. This means that even if an employer is reported for wage arrears, 8 out of 10 do not face judicial prosecution.

Typically, when wage arrears occur, the worker submits a petition for wage arrears online to the regional labor office that has jurisdiction over their company. Once the complaint is received, the relevant labor office assigns a labor inspector immediately, who investigates the facts within 25 days. If the arrears are confirmed, the inspector orders the employer to pay the unpaid wages. Depending on the case, the labor inspector can extend the investigation period up to a maximum of 75 days.

Afterward, the labor inspector may ask the victimized worker whether they wish to pursue punishment against the employer. However, it is rare for workers to request punishment. From the worker’s perspective, if they accept guidance and mediation from the labor inspector, they can receive their overdue wages more quickly. Last year, the proportion of wage arrears cases resolved through guidance by labor inspectors was 77.28%, nearly 10 percentage points higher than the 68.26% recorded in 2020. If the process moves toward prosecuting the employer, the worker must undergo a lengthy process of investigation and litigation, which can require significant time and effort before receiving their unpaid wages.

Ha Eunsung, a labor attorney, explained, "If a worker expresses their intention to punish, they must prove the employer’s intent and undergo a prosecution investigation, making it even harder to receive overdue wages. From the employer’s perspective, even if they are reported for wage arrears, they can simply endure for a while and then pay the wages belatedly to avoid punishment."

Sentencing Guidelines for Wage Arrears Weaker Than for Theft... Ministry of Labor Also Requests Tougher Penalties

Under the current Labor Standards Act, wage arrears are punishable by up to three years in prison or a fine of up to 30 million won. However, the actual sentencing guidelines vary depending on the amount of unpaid wages, and are more lenient than for habitual theft.

According to the Sentencing Commission’s "Sentencing Guidelines for Violations of the Labor Standards Act," if the amount of unpaid wages is less than 50 million won, even with aggravated punishment for habitual wage arrears, the sentence ranges from six months to one year in prison. For amounts between 50 million and 100 million won, the guideline is eight months to one year and six months, and for amounts exceeding 100 million won, the guideline is one year and two months to two years and six months.

Given that the aggravated sentencing guideline for habitual theft offenders is three to six years in prison, intentional wage arrears are subject to relatively light punishment. In March, the Ministry of Employment and Labor requested the Sentencing Commission to strengthen the sentencing guidelines, noting that the current guidelines do not reach the maximum sentence of three years under the Labor Standards Act, resulting in a high recidivism rate. The ministry also requested that the number of victimized workers and the duration of arrears be specified as aggravating factors, and that suspended sentences not be granted for large-scale wage arrears above a certain threshold.

Yang Seungyeop, associate research fellow at the Korea Labor Institute, pointed out, "The judiciary has tended to apply lenient sentencing guidelines or grant suspended sentences, believing that incarcerating employers would make it even harder to resolve wage arrears. However, as wage arrears continue to increase, strong and exemplary punishment is needed to deter and prevent recurrence."

"Habitual Wage Arrears Prevention Act" to Take Effect in October... Effectiveness Uncertain

From October 23, the "Habitual Wage Arrears Prevention Act" will be implemented for one year, imposing credit sanctions, restrictions on government support, and disadvantages in public bidding on employers who habitually withhold three months or more of wages per worker or withhold more than 30 million won in wages on five or more occasions. These employers will be listed in a habitual offenders registry, the principle of non-prosecution upon objection will not apply, and they will be subject to travel bans. In addition, victimized workers can claim damages from the employer up to three times the amount of their loss due to wage arrears, and both former and current employees can claim 20% delayed interest on unpaid wages.

However, experts unanimously agree that even with the implementation of the "Habitual Wage Arrears Prevention Act," it will be difficult to eradicate wage arrears. This is because, to claim damages, the victimized worker must personally file a complaint or accusation and prove that the employer intentionally withheld wages.

Labor attorney Ha explained, "For example, if a worker who was denied overtime pay wants to sue the employer, even if they collect evidence such as security records from CAPS or Google location tracking data, they must still prove exactly how much they worked during those hours and what instructions the employer gave. Even if the principle of non-prosecution upon objection does not apply, it is extremely difficult to prove the employer’s intentionality in wage arrears, so victimized workers are likely to become exhausted in the process of gathering evidence, and labor inspectors also tend to encourage settlements with employers."