[Saving SMEs through Labor Flexibility] ③ Criminal Penalties Even with Labor-Management Agreement?No Other Country Does This

Criminal Penalties for Exceeding Weekly Limit by Just One Hour
Major Countries Leave Overtime to Labor-Management Agreements
Special Extended Workplaces Account for Just 1% of All Businesses

Editor's NoteLabor regulations such as the 52-hour workweek, introduced with the aim of creating advanced working conditions, continue to weigh heavily on both companies and workers across various industrial sites. The issue is becoming increasingly prominent, especially as small and medium-sized enterprises (SMEs) face serious challenges in management and workforce supply due to a prolonged economic downturn. Amidst this, the Lee Jaemyung administration is accelerating the introduction of a '4.5-day workweek without wage reduction,' further intensifying anxiety among SMEs, which are both the backbone and the most vulnerable link of the economy and industry. There is a growing call to urgently reconsider the rigid and uniform regulations that disproportionately burden smaller and less-resourced companies, and to foster a work culture based on flexibility and autonomy. Asia Economy explores solutions based on the realities faced by SMEs.

[Saving SMEs through Labor Flexibility] ① Even 'Centennial Businesses' Can't Survive Labor Regulations

[Saving SMEs through Labor Flexibility] ② Rigid Labor Regulations Actually Undermine 'Work-Life Balance'

[Saving SMEs through Labor Flexibility] ③ Criminal Penalties Even with Labor-Management Agreement?No Other Country Does This

[Saving SMEs through Labor Flexibility] ④ The 4.5-Day Workweek May Only Widen the Gap Between Large and Small Businesses

[Saving SMEs through Labor Flexibility] ⑤ "SME Jobs, the Backbone of Industry, Must Be Protected Through Flexibility and Autonomy"

Lim Youngseong (pseudonym), CEO of an automotive parts surface treatment company in Busan, says he feels like tearing his hair out every time he thinks about the 52-hour workweek. The rigid regulation of working hours has dealt a direct blow to his sales. Surface treatment is the final process before delivering automotive parts, and any delay in deadlines can disrupt the entire vehicle production line. Flexibility in operations is crucial in this field, with frequent requests to complete jobs within a single day. However, since the implementation of the 52-hour workweek, there has been a cap on the amount of work that can be handled. Even though employees wanted to work longer hours, Lim would have faced criminal penalties if he allowed it. As a result, he had to endure losses exceeding 500 million KRW.

The current regulation that caps weekly working hours at 52 is stipulated in Article 53, Paragraph 1 of the Labor Standards Act. There have been ongoing criticisms that this provision restricts freedom of contract and occupational freedom. As in the case of Lim's company, the regulation is applied uniformly without exceptions, resulting in reduced wages for employees and business losses.

However, last year, the Constitutional Court dismissed a constitutional complaint challenging the regulation as unconstitutional, acknowledging the potential for infringement of basic rights but ruling unanimously to reject the case. The court cited the greater need to address the longstanding problem of excessive working hours. The court also made it clear that, given the realities in Korea, simply leaving the issue to voluntary agreements between employers and workers would not easily resolve the problem of long working hours.

Nevertheless, the rigidity of the law, which subjects business owners to criminal penalties even for exceeding the limit by a single hour in a week, remains a contentious issue. According to Article 110 of the Labor Standards Act, violators may face up to two years in prison or a fine of up to 20 million KRW. Nam Sedong, CEO of AI startup VoyagerX, commented, "If a company head forces employees to work beyond 52 hours, then perhaps punishment is justified. However, how do you explain a situation where an employee voluntarily works overtime, does not wish to press charges, yet the CEO is still held criminally liable?even if a co-founding executive who holds shares works more than 52 hours?"

The industry explains that such cases are rare in major countries overseas. In the United States, there are no daily limits on statutory working hours, and overtime is essentially unrestricted. As long as a company pays employees at least 1.5 times the regular wage for hours worked beyond 40 per week, labor and management can agree to work as needed.

Japan also sets the statutory workweek at 40 hours but allows, through labor-management agreements, up to 100 hours of overtime per month and a maximum of 720 hours per year. In France, the statutory workweek is 35 hours, but overtime is permitted within an annual cap set by collective agreements, effectively granting autonomy to companies and workers.

In Germany, the statutory daily working limit is 8 hours, but this can be extended by 2 hours to a maximum of 10 hours per day. Sunday work is prohibited, so up to 60 hours per week is allowed. Exceptions are possible through collective agreements or workplace agreements based on collective agreements, allowing for even more overtime.

There are exceptions in Korea as well, such as the 'Special Extended Work System.' In special circumstances, with employee consent and approval from the Minister of Employment and Labor, overtime can be extended up to 64 hours per week. However, the application requirements are so strict that actual approvals are rare. According to the Ministry of Employment and Labor, the number of businesses approved for special extended work was 2,116 in 2021, 2,938 in 2022, 2,093 in 2023, and 1,908 in 2024, decreasing each year. Approved businesses account for less than 1% of all workplaces.

Given these circumstances, it is common for workplaces to resort to loopholes to work more hours than officially allowed. Lee Myungro, head of the Workforce Policy Division at the Korea Federation of SMEs, said, "A significant number of SME employees are working more than 52 hours per week, but they are doing so unofficially without recording their working hours. The bigger problem is that, even when overtime is necessary, companies are omitting work records to avoid legal penalties."