"Unclear Effects of Serious Accident Punishment Act, Only Side Effects for Companies"

Source: Federation of Korean Industries

[Asia Economy Reporter Changhwan Lee] Concerns have been raised that the Serious Accident Punishment Act (hereinafter referred to as the Serious Accident Act), currently being promoted by the government and ruling party, may have unclear policy effects in reducing industrial accidents while causing serious side effects such as the relocation of production bases overseas.

On the 6th, the Federation of Korean Industries (FKI) released a report titled "Five Potential Problems Caused by the Serious Accident Act," stating that if the government’s version of the Serious Accident Act currently under discussion in the National Assembly is implemented, numerous unintended policy side effects could occur.

The FKI identified five representative cases.

First, there is the absurd possibility that serious accidents occurring at subcontractors could result in only the primary contractors being punished. The government’s Serious Accident Act draft stipulates that when a business owner or corporation outsources services, contracts, or commissions to a third party, the safety and health obligations are jointly borne by the third party, and if a serious accident occurs at the subcontractor, the primary contractor is also subject to punishment.

At the same time, the law defers application for two years after promulgation for workplaces with 50 to fewer than 300 employees, and for four years for workplaces with fewer than 50 employees. During this grace period, subcontractors, who are the direct parties involved in serious accidents and are relatively smaller in scale, may be exempted, while only the indirect party, the primary contractor, could be punished.

Second, there is the possibility of reduced work opportunities for small and medium-sized enterprises (SMEs). The FKI predicted that with the introduction of the Serious Accident Act, primary contractors might hesitate to expand their businesses or reduce subcontracting due to the cost burden of managing subcontractors’ safety, which could significantly decrease subcontractors’ orders.

According to the government, as of 2019, 42.1% of domestic SMEs are subcontractors, and most of their sales (83.3%) are generated by supplying to commissioning companies. This high dependence on subcontracting raises concerns that SMEs could face serious management difficulties.

Third, there is ambiguity regarding compliance targets. The FKI expressed concern that the government’s draft presents the safety and health obligations that business owners and management officials must observe in a broad and vague manner, which could only increase confusion at the actual sites where the law must be complied with. In particular, many workplaces have multiple owners, operators, and managers, which could lead to unclear responsibilities.

Furthermore, in cases of services, contracts, and commissions, the draft does not clearly define the obligations of primary and subcontractors separately, only stating that they bear the same obligations, making the actual duties and responsibilities they must bear uncertain.

Concerns Over Lack of Specialized Investigations and Potential Acceleration of Corporate Exodus Due to Increased Regulations

Fourth, concerns were raised about police investigations. Under current law, investigations into violations of the Industrial Safety and Health Act are conducted by labor inspectors designated as special judicial police officers to ensure expertise in industrial safety.

However, if the Serious Accident Act is enforced, general police officers will directly investigate violations of safety and health obligations at industrial sites, which could degrade the professionalism of industrial accident investigations and cause inefficiencies, undermining the purpose of the labor inspector system designed to supplement the police’s lack of expertise.

Finally, the FKI raised the possibility that the surge in regulations could accelerate the relocation of corporate production bases overseas. With the passage of the three corporate regulation laws and labor union laws, the enactment of the Serious Accident Act could push the domestic corporate environment to its worst, significantly increasing incentives for domestic production bases to move abroad.

Choo Kwang-ho, Executive Director of the FKI, said, "Even if the Serious Accident Act is not enacted, the current Industrial Safety and Health Act already imposes some of the world’s strongest penalties. Moreover, looking at overseas cases such as the UK, the effect of stricter penalties on reducing industrial accidents is not clear." He added, "When formulating policies, the focus should be on preventing serious accidents rather than imposing harsh penalties on companies."

This content was produced with the assistance of AI translation services.