January 27, 2022 is the date when the Serious Accidents Punishment Act (the “SAPA”) will go into effect for companies with 50 or more employees. Under the SAPA, if a serious accident occurs on or after January 27, 2022 and further if the safety and health management system of the company concerned is either not established or not fully effective to secure safety and health, then criminal punishment will be imposed on the responsible management personnel of the company, as defined by the SAPA (“RMP”), who is the final decision-maker with the authority and responsibility over the company’s safety and health matters (including sign-off authority over budget and personnel).
In this regard, fulfillment of the SAPA duties to secure safety and health has become a top priority task for companies subject to the SAPA. With the SAPA enforcement date approximately one month from now, many companies are checking the status of their compliance, with focus on whether (i) establishment of safety and health management system and (ii) preparation of relevant internal company regulations, among other things, are being addressed in order to fulfill the RMP’s duties under the SAPA to secure safety and health.
During the early stages of the enforcement of the SAPA, it is anticipated that the Ministry of Employment and Labor and the Prosecutors’ Office will engage in robust enforcement of the SAPA. To properly manage risk exposure under the SAPA, we are of the view that companies should (i) make their best efforts to prevent accidents and maintain safe workplace and (ii) be prepared to show that – in case a serious accident were to occur – they have established and operated a safety and health management system which can prevent accidents in accordance with the goals of the SAPA.
In this newsletter, we set forth below a checklist of key items for companies to consider as they prepare their SAPA compliance programs.
Overview of SAPA Duties
To begin with, the SAPA duties are placed on the RMP. The RMP must take the following measures to secure safety and health:
Establishing and implementing a safety and health management system, including personnel and budget necessary to prevent accidents;
(In the event of an accident) establishing and implementing measures to prevent the recurrence of the accident;
Implementing improvement or corrective orders issued by a central administrative agency or a local government under the relevant statutes; and
Taking managerial measures necessary to perform obligations under safety and health laws and regulations.
Building Safety and Health Management Systems
The outcome of the SAPA enforcement by the governmental authorities after January 27, 2022 will provide more clarity on the scope and substance of the SAPA duties mentioned above. That being said, at this juncture, it would be prudent for each company to design, establish and implement safety and health management systems that are tailored to the company’s specific facts and circumstances, including the company’s business activities, organizational structure, size and type of industry, among other things, combined with interpretation of the SAPA and its subordinate regulations to determine what would be required of the company.
KEY ACTION ITEMS
1) Clearly designate the RMP
It is important to clearly designate who the RMP is for SAPA compliance. This may be especially relevant for multinational companies doing business in Korea, many of whom maintain a matrix organization (with involvement in EHS matters by the headquarters or regional offices) for the following reasons:
With a clear designation of the RMP, the governmental investigation of a SAPA case will likely be more streamlined and will likely avoid reaching out to the headquarters or the regional office.
The SAPA duties are imposed on the RMP. Accordingly, having a clear designation of the RMP will assist with allocation of role and responsibility and – more importantly –accountability within the company and help contribute to the fulfillment of the SAPA duties by the RMP.
2) Set and Implement Goals and Policies
The first step towards establishing a compliant safety and health management system is to set and implement specific goals and management policies that can be achieved for continuous improvement of safety and health. Since it is important for the employees to be aligned with such goals and policies, the companies need to collect the opinions of the employees when setting goals and policies and share the details thereof with the employees.
3) Identify Risk Factors and Take Response Measures
If a company fails to (i) identify hazards and risk factors and take necessary remediation measures, (ii) put necessary resources to work (e.g., budget, people, equipment) to secure safety and health or (iii) set up plans to prevent recurrence of accident if such accident occurs, then a causal linkage could be established between a serious accident – if such accident happens – and a violation of the SAPA.
Accordingly, it would be prudent for the companies to consider taking the following measures:
Analyze potential hazards and risk factors in the workplace and take appropriate measures (such as removing, replacing, and controlling such hazards and risk factors);
Take measures to establish safety and health management system, such as providing support in terms of necessary budget, personnel, and facilities, etc.;
Conduct periodic check as to whether safety and health measures are being performed in accordance with the prescribed procedures;
Take remediation measures if any deficiencies are found, and
(In case of any accident) identify the root causes thereof and establish measures to prevent recurrence.
4) Commit Organizational Resources
Companies meeting certain employee headcount thresholds under the SAPA need to (i) set up a dedicated organization separate from the existing safety and health organization to manage compliance with the SAPA duties and (ii) ensure that they effectively fulfil their obligations under safety and health laws and regulations, which have been identified through the analysis of hazards and risk factors, including the Occupational Safety and Health Act.
It is also important to establish an appropriate safety and health management system under the Occupational Safety and Health Act in consideration of the SAPA and to support the persons in (general) charge of safety and health management, supervisors, safety officers, health officers, etc. so that they can faithfully perform their duties with sufficient authority and responsibility under such system.
5) Safety and Health of Third Party Workers
The SAPA duties encompass not only a company’s employees, but can also the safety and health of the employees of a third party if such third party provides services to the company under outsourcing, subcontracting or delegation arrangements. Accordingly, companies should pay close attention when designing their safety and health management systems so that they account for the safety and health of third party workers, including safety and health inspections, obtaining views regarding safety and health matters from such third party workers, and carrying out remediation measures where deficiencies are identified.