Korean Job Discussion Forums

[gerald.in.korea]

Article 20 (Prohibition of Predetermination of Nonobservance)
No employer shall enter into a contract by which a penalty or indemnity for possible damages incurred from breach of a labor contract is predetermined.

According to the “Supreme Court ruling of October 23, 2008, 2006da37274 [Cancellation Fees],”

In cases where an employee has agreed to pay a fixed amount of money in the event that he/she breaks an agreement to work for a certain period of time, if the employee has to pay this penalty immediately upon resigning ahead of the mandatory service period regardless of whether the company will suffer actual damages due to the early resignation, this is a clear violation of Article 20 of the Labor Standards Act.

In addition, in cases where the employee has to return his/her wages that would have paid to the employee simply because the employee resigns prior to the previously agreed end-of-service date, such provision of the employment contract violates the purpose of the above Article and will not be deemed valid."

Principle:

In cases where an employee promises to pay a fixed amount of money in the event that he/she breaks an agreement to work for a certain period of time, if the employee has to pay this penalty immediately upon resigning ahead of the mandatory service period regardless of whether the company will suffer damages due to the early resignation, this is a clear violation of Article 20 of the Labor Standards Act. In addition, in cases where the employee has to return his/her wages that would have been paid to the employee simply because the employee resigns prior to the previously agreed end-of-service date, such provision of the employment contract violates the purpose of the above Article and will not be deemed valid.

The clauses which force the employee to pay for Airfare or recruiting fees if they quit are illegal but many contracts have such clauses. The employers know that in the event that they are charged with Unpaid Wages with the Labor Administration Bureau (the Labor Board) that they will loose and will have to pay the amount they deducted illegally.

It begs the question as to why would an employer then do it and the simple reason is because for every time they are forced to pay there are 5 times where the employee is not aware that they have to pay so the employees nativity regarding the Korean Labor Standards Act is to their benefit.