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Labor Issues Arising in the Context of Insolvency

Part Name
Articles
Title
Labor Issues Arising in the Context of Insolvency
Author(s)
Seok-Pyo Hong
Publication Year
30-Nov-2019
Citation
Vol. 9 Issue. 2 Page. 32-58, 2019
Publisher
한국법제연구원
Keyword
Debtor Rehabilitation and Bankruptcy Act (the “DRBA”); Labor Standards Act; rehabilitation proceedings; bankruptcy proceedings; common benefit claims; estate claims; priority claims; insolvency; wages; severance packages; retirement bonus.2
Type
Articles
URI
http://www.klri.re.kr:9090/handle/2017.oak/9808
Abstract
This article identifies the labor-related issues that may surface in the event of an
insolvency in the wake of the recent increase in insolvencies attributable to
economic downturn. Under Korean legal framework, two statutes serve as a
primary source of safeguard against employees’ unpaid wages during
insolvencies: (i) the Debtor Rehabilitation and Bankruptcy Act (the “DRBA”)
under which an employee’s unpaid wage claim against the employer is given
priority over other types of claims and (ii) the Labor Standards Act (the “LSA”)
under which an employee’s wage claim (i.e., for the last three months of
employment), severance claim (i.e., accrued for the last three years of
employment) and other claims (e.g., accident compensation) arising out of the
employment relationship are given priority over other secured claims, taxes,
utility charges, and other claims with respect to the company’s total assets.
Notwithstanding the statutory protection, labor issues are present during
insolvency proceedings as evidenced by the following three major cases. In
Tongyang, Inc. case, the court wrestled with the scope of an “employee” within
the meaning of the LSA in the context of a rehabilitation proceeding. In
Ssangyong Motor case, the court held that a large-scale layoff during the
rehabilitation proceeding was justified. In Hankook Ilbo case, the court
approved the employee-creditor’s application for the commencement of the
rehabilitation procedure against the employer.
Table Of Contents
I. Introduction
II. Outline of Korean Court Insolvency Procedure
III. Insolvency Proceedings and Protection of Claim for Wages
IV. Relationship under Employment Agreements in Insolvency Proceedings
V. Participation of Employees in Insolvency Proceedings
VI. Conclusion
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