Korea Workers' Compensation and Welfare Service Launches Full-Scale Credit Sanctions Against Employers with Unpaid Wages

The Korea Workers' Compensation and Welfare Service is intensifying its pressure on employers responsible for unpaid wages by introducing the national tax delinquency disposition procedure to the process of recovering substitute payments. In subcontracting structures, the scope of joint liability will be expanded to include both direct and higher-tier contractors, and full-scale credit sanctions will be implemented against employers with long-term arrears.

On May 17, the Korea Workers' Compensation and Welfare Service announced that, pursuant to the enactment of the revised Wage Claims Guarantee Act, it has completely shifted its substitute payment recovery procedure from the previous civil enforcement method to the national tax delinquency disposition method.

The substitute payment system allows the government to pay workers their unpaid wages on behalf of an employer in cases where the employer is bankrupt, undergoing rehabilitation, or has been deemed incapable of payment by the Minister of Employment and Labor. The government then seeks reimbursement from the employer at a later date.

Previously, the Service had to undergo civil procedures such as provisional seizures, lawsuits, and auctions to recover substitute payments. This process required securing an enforceable title, such as a court judgment, resulting in an average recovery period of 290 days.

However, going forward, by applying the national tax delinquency disposition procedure, the Service will be able to directly enforce collections through the delinquency disposition approval process, without needing a separate civil judgment. As a result, the Service expects the average recovery period to be shortened by approximately 132 days to around 158 days.

The scope of liability in subcontracting structures will also be expanded. The revised law clarifies the provision for joint liability of both direct and higher-tier contractors who are responsible for unpaid wages under the Labor Standards Act. As a result, the liability of higher-tier contractors for wage arrears at subcontractors will be further strengthened.

The Service is also strengthening sanctions against employers with long-term arrears. Starting this year, it will implement a credit sanction system in which the names of employers who have failed to repay substitute payments of 20 million won or more for over a year will be reported to credit information agencies. The aim is to induce repayment by employers in arrears by imposing disadvantages in financial transactions.

Paik Jonggil, President of the Korea Workers' Compensation and Welfare Service, stated, "Wage arrears are a serious crime that threatens workers' livelihoods," and emphasized, "There must be a societal understanding that substitute payments made by the government on behalf of employers must be repaid without exception."

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