As announced in the press release dated December 16, 2021, the Ministry of Employment and Labor (the “MOEL”) recently revised its administrative interpretation of Article 60 (1) of the Labor Standards Act (the “LSA”) concerning 15 days of paid annual leave granted to an employee who has recorded at least 80% attendance in a given year.

MOEL’s Administrative Interpretation
 

• [Before Change] Where an employee has been employed for one year, with the attendance rate of at least 80%, and leaves the company immediately thereafter (i.e., have been employed for 365 days), although the employee may not be able to use annual leave, he/she may claim allowance for 15 days of unused annual leave.

• [After Change] Even though an employee has been employed for one year with the attendance rate of at least 80%, the employee may claim allowance for unused annual leave upon resignation only when he/she is still employed on the following day of the completion of the one year of employment.

Although the change in the MOEL’s position with respect to paid annual leave seems to be in line with the Supreme Court’s decision No. 2021Da227100 rendered on October 14, 2021, it is meaningful in that the MOEL has also expressed its stance on the following issues, which were not expressly covered by the aforesaid Court’s decision:

• Even a regular employee may not claim allowance for 15 days’ annual leave accrued for one year of service with the attendance rate of at least 80% if he/she resigns immediately upon completion of one year of service; instead, the employee may request such compensation in full only if he/she resigns after the employment continues the next day.

• For paid annual leave accrued at the rate of one day for each completed month of continuous service with respect to an employee who has worked less than one year, the employee may claim allowance for accrued unused annual leave for services performed in the preceding month only if he/she leaves the company after his/her employment continues on the following day of the completion of such one month’s service.

• If a regular employee resigns upon completion of one full year of service in his/her last year of employment (e.g. resigns after completing two full years of service, etc.), the employee may not claim monetary compensation for paid annual leave accrued for such one full year’s service, even if he/she has recorded at least 80% attendance.

Employers may encounter the following concerns when applying the revised interpretation of the MOEL:

• Applicability to workplaces where annual leave is calculated based on the company’s fiscal year: In principle, paid annual leave should be calculated on the basis of each employee’s work commencement date, but for businesses where annual leave has been calculated uniformly based on a fiscal year for administrative convenience, it would be reasonable to recalculate annual leave days granted to a resigning employee based on the attendance rate during his/her continued service period as calculated from the actual date of commencement of work.

• Amendment of the Rules of Employment: If provisions concerning annual leave under the Rules of Employment (ROE) merely refer to, or confirm, the applicable provisions under the LSA, the revised administrative interpretation may apply without amending the ROE.  However, if such provisions under the ROE might be interpreted differently, it may be necessary to review whether any such amendment may constitute a disadvantageous change in the ROE.

• When to apply the revised administrative interpretation: As the MOEL’s change of its administrative interpretation is a change in the MOEL’s opinion or its internal case handling standards—and not any change of law—it is expected that the revised administrative interpretation may apply to any cases before, as well as after, December 16, 2021 (when the relevant press release was announced).

• Return of compensation received for unused annual leave: Regarding any allowances for unused annual leave already paid according to the MOEL’s former administrative interpretation, unless there are special circumstances, the company would be able to request the return of the payment upon consultation with the employee concerned or file a civil claim for return of unjust enrichment.

[Korean version]