Hokyun “Brad” Lim
P brad@decentlaw.ioBrad combines hands-on experience from COSMAX NBT, Korea Credit Information, and his own startup background to deliver practical advice in corporate and employment law.
- Corporate · Startups
- Labor · Employment Disputes
- Corporate & Biz
- Real Estate Disputes · Construction
- VC · Financial Advisory
- Cross-border · Dispute Resolution
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BlogsWhy You Should Never Ignore Interest and Criminal Liability for Unpaid Severance Pay
If you are delaying severance payments because “the company is facing financial difficulties” or “we are still discussing payment with the former employee,” you need to review your legal obligations immediately. Once 14 days have passed after an employee's resignation, both statutory interest and potential criminal liability may begin to accrue. When Must Severance Pay Be Paid? Under Article 9 of the Korean Employee Retirement Benefit Security Act, severance pay must be paid within 14 days from the employee's date of retirement. In exceptional circumstances, the payment deadline may be extended by agreement between the employer and the employee. However, even where the payment deadline has been extended by agreement, legal liability may still arise. Moreover, an agreement extending the payment date does not automatically resolve issues relating to delay interest, which requires separate legal consideration. Interest on Unpaid Severance Pay Can Be Significant If severance pay remains unpaid beyond the 14-day statutory period, delay interest accrues from the following day at an annual rate of 20% under Article 37 of the Korean Labor Standards Act and Article 17 of its Enforcement Decree. This rate is approximately four times higher than the general statutory civil interest rate of 5% per annum. Example KRW 30,000,000 (Severance Pay Principal) ↓ + KRW 6,000,000 (Delay Interest After One Year) Even if the parties agree to extend the payment deadline, delay interest is not automatically waived, and the longer the dispute continues, the greater the financial burden becomes. An extension agreement alone does not eliminate delay interest unless there is a separate legal basis supporting such waiver. Can Employers Actually Be Criminally Prosecuted? Yes. Failure to pay severance pay may constitute a criminal offense punishable by up to three years' imprisonment or a fine of up to KRW 30 million under Article 44 of the Employee Retirement Benefit Security Act. This is not merely an administrative violation—it may result in a criminal record. When a complaint is filed, a labor inspector from the Ministry of Employment and Labor will investigate the facts. If the employer is found to have intentionally avoided payment or lacked any genuine intention to pay, the case may be referred to prosecutors for criminal proceedings. Particularly where multiple employees at the same workplace have not received severance payments, authorities may view the conduct as intentional, increasing the likelihood of prosecution. What Should You Do Now? 1. Pay Immediately If Possible Even a partial payment may help demonstrate good faith and may be viewed favorably when assessing intent. 2. If Full Payment Is Not Possible, Execute a Written Installment Agreement Verbal agreements are difficult to prove in the event of a dispute. A properly documented written agreement can help reduce future conflicts and clarify the payment schedule. 3. Seek Legal Advice Early if a Complaint Has Been Filed or an Investigation Has Begun Statements made during a labor investigation can directly affect subsequent criminal proceedings. Establishing an appropriate legal strategy from the outset is critical. Time Is Not on the Employer's Side The longer severance pay remains unpaid, the more unfavorable the situation becomes for the employer. Interest continues to accumulate, and disputes tend to escalate. Obtaining accurate legal advice at an early stage can ultimately reduce both financial exposure and legal risk. At Decent Law Firm, we assist employers with labor investigations, criminal complaints relating to unpaid severance pay, and dispute resolution strategies. Before the situation worsens, consider obtaining legal advice as early as possible.
2026-06-11 -
Blogs
Collective Bargaining With Principal Contractors: A Successful Strategy Learned From Department Store and Duty-Free Shop Salesperson Cases
Why This Case Matters Now Sales employees working for brands operating inside department stores and duty-free shops have long been caught between two different “employers.” The tenant company that signed the employment contract paid the wages, but the department store or duty-free operator controlled the actual working conditions — including working hours, days off, customer service methods, and even restroom usage. Even when workers demanded collective bargaining, they were often blocked by the response: “We are not the party to the employment contract.” Labor Relations Commissions also frequently sided with the companies. That barrier began to collapse with a single judgment issued by the Seoul Administrative Court on October 30, 2025. Then, with the revised Labor Union Act taking effect on March 10, 2026, the principle was formally incorporated into the law. Key Legal Principles Recognized by the Court ① The Standard of Substantial Control — Expanding the Concept of “Employer” Beyond Contractual Relationships The court held that the concept of an “employer” should not be interpreted narrowly as merely the direct party to the employment contract. Instead, it should be broadly interpreted to include entities that substantially and concretely control or determine working conditions. This reflects the modern reality in which technological development and evolving labor structures have created various nontraditional employment arrangements where labor is provided without direct contractual relationships. ② Scope of Bargaining Subjects — Even Management-Related Issues May Become Negotiable Matters The court recognized that issues such as: Guaranteeing collective rest rights Protecting customer service workers Use and expansion of workplace facilities constitute matters directly related to improving working conditions and therefore qualify as legitimate subjects of collective bargaining. However, the court also clarified that whether the companies were ultimately required to accept those demands was a separate issue. In other words, the court clearly distinguished between: The existence of a duty to engage in collective bargaining, and An obligation to accept the union’s demands ③ Relationship With the Revised Labor Union Act — Applicability Even Before the Amendment Following the March 2026 amendment to the Enforcement Decree of the Labor Union Act, procedures for handling correction applications relating to bargaining demands against principal contractors were formally established. However, the court held that even without the legislative amendment, the existing interpretation of the Labor Union Act alone was sufficient to recognize employer status for principal contractors exercising substantial control over working conditions. In other words, even before the revised law took effect, lower court decisions had already recognized that a principal contractor could bear collective bargaining obligations where substantial and concrete control over working conditions existed. How to Prepare for Collective Bargaining With a Principal Contractor What Labor Unions Should Review Identifying substantial control by the principal contractor Designing appropriate bargaining agendas Sending and preserving official bargaining requests Utilizing Labor Relations Commission procedures Establishing solidarity and collective action strategies What Employers Should Carefully Consider Compliance with bargaining notice obligations Risks associated with claiming “we are not the employer” Discussions regarding the scope of bargaining subjects If This Is Your First Principal Contractor Bargaining Case Now is one of the most favorable times to demand collective bargaining, as court precedents and Labor Relations Commission decisions continue to accumulate and the revised Labor Union Act has officially taken effect. However, even a single procedural mistake may result in losing the opportunity to exercise bargaining rights. Decent Law Firm provides comprehensive legal support throughout the entire collective bargaining process involving principal contractors, including: Review of employer status issues Design of bargaining agendas Assistance with bargaining demand procedures Representation before Labor Relations Commissions and administrative courts If you are preparing to demand collective bargaining from a principal contractor, or if your bargaining request has already been rejected, now is the time to seek legal guidance and establish the proper response strategy.
2026-05-21 -
Blogs
M&A Legal Due Diligence Costs and Scope in Korea: A Practical Guide
The cost of M&A legal due diligence is not simply a lawyer’s fee. It depends on the size of the transaction, the complexity of the target company, and the scope of the review itself. For foreign companies and investors entering the Korean market, understanding how legal due diligence works is critical because the findings can directly affect pricing, indemnity structures, and even whether the transaction proceeds at all. What Is Legal Due Diligence in an M&A Transaction? Legal due diligence (LDD) is the process of identifying and reviewing the legal risks of a target company before completing an acquisition or investment. In Korea, legal due diligence is typically conducted after the signing of an LOI (Letter of Intent) and before the execution of the SPA (Share Purchase Agreement). Key review areas usually include: Material contracts and commercial arrangements Litigation and disputes Employment and labor issues Regulatory compliance Intellectual property rights Corporate governance and shareholder structure Licenses and permits Subsidiaries and overseas entities The purpose is not simply to “find problems,” but to assess legal exposure that may transfer to the buyer after closing. The results of due diligence often directly influence: Purchase price adjustments Representations & warranties (R&W) Indemnification clauses Escrow arrangements Closing conditions Deal restructuring decisions What Determines M&A Legal Due Diligence Costs? There is no fixed pricing standard for legal due diligence in Korea. Costs are generally determined by several combined factors. 1. Transaction Size Larger transactions typically involve: Broader review scope Higher legal exposure Increased reporting requirements More intensive negotiation support Cross-border transactions and strategic acquisitions usually require deeper review compared to early-stage investments. 2. Complexity of the Target Company Costs increase when the target company has: Multiple subsidiaries Overseas entities Large numbers of commercial contracts Regulated business operations Complex shareholder arrangements Convertible securities, SAFE, or stock option structures Industries such as fintech, crypto, healthcare, SaaS, and platform businesses often require additional regulatory analysis. 3. Scope of Due Diligence The scope of review is one of the biggest cost variables. • Full Scope Due Diligence A full-scope review examines the overall legal condition of the company in detail. This is commonly used in: Strategic acquisitions Large-scale M&A deals Transactions involving operational integration (PMI) While more expensive and time-consuming, it can significantly reduce post-closing legal risks. • Red Flag Due Diligence A red-flag review focuses only on major legal risks that could materially affect the transaction. This approach is often used by: Financial investors Venture capital firms Early-stage investors Buyers operating under tight timelines It is generally faster and less expensive, but risks outside the agreed review scope may remain unidentified. How Are Legal Due Diligence Fees Structured? In practice, Korean law firms usually structure due diligence fees in one of three ways. Hourly Billing Fees are calculated based on: Time spent Hourly rates of lawyers involved This model is commonly used when the review scope may change during the transaction. Fixed Fee A fixed fee is agreed upon based on: Defined review scope Estimated timeline Expected workload This structure offers budget predictability but may require additional fees if the scope expands later. Hybrid Structure Many mid-to-large transactions use a hybrid model: Base scope under a fixed fee Additional work billed hourly This approach balances flexibility with cost predictability. Data Room Preparation Also Affects Costs The quality of document organization can significantly impact due diligence efficiency. Well-structured VDRs (Virtual Data Rooms) reduce: Review time Additional document requests Follow-up interviews Reporting delays Poorly organized materials often increase both costs and transaction risks. Importantly, legal advisors can only assess documents actually provided to them. Missing or incomplete disclosures may limit the scope of legal responsibility and the reliability of the review itself. Why Due Diligence Findings Matter Legal due diligence findings can materially change the transaction structure. Purchase Price Adjustments Material legal risks may justify: Lower valuations Deferred payments Escrow retention Representation & Warranty Negotiations Discovered risks are often reflected in: Disclosure schedules Liability caps Survival periods Basket thresholds Specific indemnities Deal Restructuring or Termination Serious legal issues may lead to: Changes in acquisition structure Asset deals instead of share deals Conditional closing arrangements Transaction termination Proper Scope Design Is Critical One of the most common problems in M&A transactions is starting due diligence without clearly defining the review scope. When the scope is unclear: Costs become unpredictable Timelines expand Review items continue increasing Negotiations become inefficient A properly structured process usually follows this order: Define review scope Discuss fees and timeline Execute engagement agreement Open VDR and begin review Deliver due diligence report Reflect findings in SPA negotiations Legal due diligence should not be evaluated solely based on price. The more important question is whether the legal team can accurately identify transaction-critical risks and translate them into practical deal protections. Decent Law Firm advises domestic and international clients on M&A transactions, startup investments, cross-border acquisitions, and regulatory risk analysis in Korea. If you are considering an acquisition or investment in Korea and would like to discuss an appropriate due diligence scope and fee structure, our corporate advisory team would be happy to assist.
2026-05-11
