Diverted Contract Payments for Personal Use... Ministry of Labor: "First Employer Arrested for Wage Arrears This Year"

Pohang Branch of the Ministry of Employment and Labor
Steel Manufacturer Owner Arrested

The head of a steel manufacturing company who withheld wages and severance pay amounting to hundreds of millions of won has been arrested, and a full-scale investigation is now underway.

According to the Ministry of Employment and Labor on January 29, the Pohang branch of the ministry announced that it had arrested business owner A on the previous day for failing to pay approximately 320 million won in wages to 16 retired workers.

Mr. A, who operates a steel manufacturing business in Pohang, is accused of failing to pay unused annual leave allowances and severance pay to multiple workers within 14 days of their retirement-the deadline stipulated by the Labor Standards Act and the Act on the Guarantee of Workers’ Retirement Benefits-even after their departure. The unpaid amount includes more than 120 million won in severance pay owed to four elderly workers in their late 50s to 60s who had worked for over 10 years.

The investigation found that even after the wage arrears were confirmed, Mr. A repeatedly ignored requests to appear and went into hiding for an extended period, cutting off all contact. It was also determined that he had been moving between lodging facilities without a fixed residence.

Furthermore, Mr. A was found to have dispersed approximately 110 million won received as contract payments from the prime contractor into six personal bank accounts in his own name, subsequently using the funds for personal expenses such as insurance premiums and credit card payments. Based on this, labor authorities believe that Mr. A had no intention of settling the unpaid wages.

This arrest marks the first such case by the Ministry of Employment and Labor this year, reaffirming its zero-tolerance policy toward wage and severance pay arrears. The ministry has consistently gone beyond mere administrative guidance, actively employing compulsory measures such as arrest, search and seizure, and detention against business owners who intentionally and habitually withhold wages. This approach will be further strengthened throughout the year.

Pohang branch chief Park Haenam stated, "Wages and severance pay are the minimum safety net supporting workers' livelihoods and retirement. Deliberately withholding them and evading investigation is a clear crime, and we will make it clear again this year that wage arrears will inevitably be punished."