Recently, in response to the mass spread of the Novel Coronavirus (“COVID-19”), the Korean government raised its alert level to “red”. Although the national government, local governments, businesses and schools, etc., are currently using their utmost effort to prevent the spread of the virus, the CO-VID 19 is continuing to spread at an alarming rate. In the midst of controversies such as enforcement of usage of annual paid leave due to a decline in revenue, and unpaid leave, etc., in the following article we will discuss potential HR management issues which may arise in relation to CO-VID 19.
- Whether it is possible for an employer to enforce usage of annual paid leave
If an employee is self-quarantined by the health authorities due to reasons such as close contact with an infected person, etc., there is no controversy over enforcing such employee’s usage of annual paid leave, as an employer must guarantee paid leave if such employer is receiving financial subsidies for paid leave from the State pursuant to Article 41-2 of the Infectious Disease Control and Prevention Act (“IDCPA”). However, the issue is whether the employer can force employees to use their annual paid leave if the employer preemptively temporarily suspends business due to the spread of the virus and/or a decline in revenue, etc. Article 60(5) of the Labor Standards Act (“LSA”) stipulates that “employers must grant annual paid leave at the time an employee applies for such leave.” This means that the use of annual paid leave is, in principle, up to the discretion of the employee and cannot be enforced by the employer.
However, the proviso of Article 60(5) of the LSA stipulates “that in the event that granting the employee paid leave at the time when such employee wants to take the paid leave, greatly impedes the business operation, the employer may change the time of the paid leave,” and thus, the employers “right to change the time of employees’ paid leave,” (“Right to Reschedule”). Therefore, it is necessary to determine whether the employer can exercise the Right to Reschedule and thus, change the date(s) employees use annual paid leave. In order for an employer to exercise the Right to Reschedule, the employee must first apply for annual paid leave. In other words, unless the employee first applies for use of annual paid leave, the employer cannot unilaterally predetermine the date the employee will us annual leave by preemptively exercising the Right to Reschedule. If an employee applies for paid annual leave and it is expected that there will be major disruption in business operations such as the use of annual leave by a majority of employees, then the employer may exercise the Right to Reschedule.
- Whether unpaid leave can be enforced provided there is employee consent
In principle, employers, as HR authority holders, are permitted to exercise considerable discretion in exercising their HR authority (Supreme Court Decision 2014da46969 Decided October 29, 2015). However, Article 23 of the LSA stipulates that “an employer shall not, without justifiable cause, dismiss, lay off, suspend, transfer, reduce wages, or take other punitive measures against an employee.” Therefore, an employer cannot force employees to take “unpaid leave” without justifiable cause, however, unpaid leave may be enforced, provided that employees give consent. If an employer temporarily closes down its business due to a decline in revenue, etc., based on the employer’s independent judgement without employee consent, the employer must pay its employees at least 70% of their average wages as leave allowance (Please refer to the Ministry of Employment and Labor’s (“MOEL”) Workplace Response Guidelines for Protection against and Prevention of CO-VID 19 6th Edition). Prior to implementing unpaid leave, etc., it is also necessary to determine whether measures exist to utilize paid leave, sick leave and telecommuting from home, etc., in accordance with the employer’s employment rules and collective agreements, depending on the workplace conditions.
- Utilization of paid “Family Care Leave”
Article 22-2(2) of the Equal Employment Opportunity and Work-Family Balance Assistance Act (“Equal Opportunity Act”) stipulates that “If an employee applies for leave to urgently care for his/her family, on grounds of their disease, accident, or senility or to rear his/her children, the employer shall grant such leave,” and is systematically allowing employees to use up to 10 days of Family Care Leave per year. The Equal Opportunity Act does not stipulate that Family Care Leave needs to be paid by the employer, and therefore, in principle, employers are not obligated to provide paid Family Care Leave to employees.
However, on February 28th, the MOEL, as part of its “Employment Security Support Measures in response to CO-VID 19” through a press release, announced that it would financially subsidize paid Family Care Leave for a limited period of time (up to 50,000 KRW per day, for up to 5 days). Therefore, for applicants who meet the support requirements (if the daycare center, school which is attended by the child of an applicant who is under 8 years old or below 2nd grade elementary school, has delayed the start of the school term, etc., due to CO-VID 19) may apply for up to 5 days (up to 10 days for single parent families) of paid Family Care Leave by applying for a portion of the subsidy. Prior to enforcing unpaid leave due to a decline in revenue, etc., it is a good idea for employers to actively guide employees who satisfy the requirements for the grant, to make proper utilization of the relevant program.
- Employment Retention Support Subsidy of “up to 1.98 million KRW per person” to businesses affected by CO-VID 19.
Pursuant to Article 21 of the Employment Insurance Act and proviso of Article 21(1) of the Enforcement Decree of the same Act, if a company’s revenue and production, etc., decline to below a certain level, and if an “employer which finds it inevitable to adjust employment” retains employment through temporary suspension of business and leave of absence without reducing the number of employees, the requirements for the government’s support program “employment retention support program” has been temporarily relaxed, and the payment level has been raised.
In other words, according to the “Notice of special support period for employment retention measures” and the “MOEL’s “FAQ on enforcement of the special support period for employment retention measures,” up to three quarters of the total labor costs (upper limit of 66,000 KRW per day, decreases depending on the size of the company) paid to employees shall be subsidized to employers who have implemented employment retention measures such as temporary suspension of business or leave of absence and paid suspension and leave allowances to employees from February 1, 2020 to July 31, 2020. As a result, employers who have reported employment retention measures and have implemented paid leave and vacation during the above period may be subsidized a portion of their labor costs from the State.
- Utilization of support programs by workplaces which support implementation of the Flexible Workplace System (Telecommuting, etc.).
The MOEL recently revised the “Regulations on the Application and Payment of Employment Creation Incentives and Employment Security Incentives” to improve the promptness of the subsidy process in relation to the prevention and spread of CO-VID 19. In order to facilitate the use of flexible workplace for SME’s, the MOEL announced that it would simplify the labor cost subsidy application process for employers for a limited time.
The flex-time, selective working hours, telecommuting, and remote working systems, etc., all fall under flexible workplace systems. In order to receive support grants, employers must submit their amended employment rules which implement the flexible workplace system, employment agreements that specify changes in work locations, etc., business plans, and documents that can confirm the actual working hours of flexible workplace employees. Employers can apply for the flexible workplace system support grant on the Employment Insurance website or the nearest employment center.
- CO-VID 19 and Disciplinary Action
- Whether infection of CO-VID 19,etc., constitutes a “cause for disciplinary action”
The issue is whether infection or non-compliance of recommended measures, etc., can be recognized as justifiable cause for disciplinary action in the context of the spread of CO-VID 19. Due to the characteristics of infectious diseases, which make it difficult to determine the time of infection, simply because an employee is infected with the CO-VID 19 does not automatically mean that fault can be attributed to the employee, and therefore, it will be difficult to be recognized as justifiable cause of disciplinary action. In addition, if an employer recommends employees to refrain from traveling to CO-VID 19 danger zones (countries seriously affected), etc., and even if an employee visits a danger zone and is infected with the virus, since this is within the privacy life area of employees, it will be difficult to discipline the infected employee for not adhering to the employer’s recommendations to refrain from traveling as a cause for disciplinary action.
However, if the employer distributes a code of conduct to employees which states that employees who inevitably travel to danger zones must report to the company and the company thereafter makes a decision on whether the employee may come into work or not, etc., and the workplace eventually closes down, etc., due to the spread of the virus within the workplace, due to the employee not reporting to the employer regarding the employee’s visitation of a danger zone and coming into work ,etc., employers may discipline employees for non-compliance with the code of conduct. On the other hand, even if an employee is found to have been infected with the virus due to taking absence without leave during telecommuting, or self-quarantined due to coming into contact with an infected person, the employee may be disciplined in accordance with the employer’s regulations on causes for disciplinary action such as employment agreements, employment rules and collective agreements, etc.
- Whether “dismissal for managerial reasons” is possible due to a decline in revenue attributable to CO-VID 19
In order for an employer to dismiss an employee for managerial reasons, all of the requirements under Article 24 of the LSA must be satisfied such as: urgent managerial necessity, efforts to avoid dismissal have been made, selection of dismissal candidates based on reasonable and fair standards, and sincere consultation and discussion with the employee representative. Among others, whether the decline in revenue due to CO-VID 19 can be recognized as an urgent managerial necessity is of issue. The Supreme Court has stated, “the impending urgent managerial necessity is not necessarily limited to avoiding bankruptcy, but also includes where the reduction of personnel is objectively recognized as being reasonable in order to cope with future crises in advance (Supreme Court Decision 2013da3629 Decided February 23, 2012). With regards to the necessity of reduction of personnel the Supreme Court’s position is “uncertainty about the future is inevitable, therefore, if the estimate of the company’s expected sales volume is based on reasonable and objective assumptions, such estimate should be recognized as being fair even if the estimate was made somewhat conservatively (Supreme Court Decision 2014da20875 Decided November 13, 2014).
While it is difficult to uniformly determine the extent of decline in revenue which meets the urgent managerial necessity requirement, although it is difficult to view that declines in short-term revenue and profits due to CO-VID 19 meet the requirement for “urgent managerial necessity,” if an employer that has been struggling with continuous revenue declines or net losses, etc., is seriously affected by CO-VID 19, and there is a reasonable expectation that such affect will continue to impact revenue, etc., even after CO-VID 19 has calmed down, the urgent managerial necessity requirement is likely to be satisfied.
- Whether infection of CO-VID 19,etc., constitutes a “cause for disciplinary action”
We would like to thank Kwon-Hoe Kim partner at Yoon & Yang for contributing with this article. Yoon & Yang has a team of employment law specialists readily available to assist you with these and other workplace issues. For South Korea related info, please contact firstname.lastname@example.org or visit www.yoonyang.com.
For more information please contact Joseph Granato, Communications Manager at L&E Global at email@example.com.