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Overview of the Supreme Court’s Recent Decision on Receiving a Relief Order from the Labor Relations Commission We would like to inform you of a recent decision by the Supreme Court on the status of receiving a relief order from the labor relations commission. In a case where an employee who worked as a hairdresser for a military barber shop but was later dismissed due to a decision to close the barber shop and thus filed a wrongful termination petition with the competent labor relations commission, the Supreme Court ruled on July 14, 2022 that, if the employment relationship had already been terminated by the closure of the barber shop when the employee filed his wrongful termination petition, the employee cannot be deemed to have the benefit of receiving a wrongful termination remedy order from the labor relations commission (Supreme Court Decision No. 2020Du54852 rendered on July 14, 2022; the “First Decision”). On the same day, the Supreme Court ruled in another case that an employee who filed a wrongful suspension petition with the competent labor relations commission at the time his employment had already been terminated as he reached the company’s retirement age cannot be deemed to have the benefit of receiving a remedy order from the labor relations commission (Supreme Court Decision No. 2021Du46285 rendered on July 14, 2022; the “Second Decision”; the First Decision and the Second Decision collectively referred to as the “Decisions”). Under the Decisions, the Supreme Court held that if an employee has already lost his/her employee status because he/she reached the company’s retirement age or for other reasons, such as the expiration of the employment term or a business closure, at the time of filing a petition for relief (e.g., wrongful termination, disciplinary action, etc.) with the competent labor relations commission, the employee shall be deemed to have lost the benefit of receiving a relief order from the labor relations commission. Meanwhile, the Supreme Court also clearly distinguished the Decisions from its previous Supreme Court En Banc Decision No. 2019Du52386 rendered on February 20, 2020. That is, this Supreme Court previous decision (before the full bench of Supreme Court justices) provided that an employee who filed a lawsuit against the labor relations commission for its dismissal of his petition for a wrongful termination remedy, shall have the benefit of a lawsuit for a relief order to receive the amount equivalent to his wages during the period of dismissal, if necessary, even when the employee became unable to be reinstated to his original position because he reached his retirement age or his employment contract expired “while” the effectiveness of the dismissal was disputed through litigation. Therefore, the legal principle of the above decision may not apply to cases where the employment relationship had already been terminated “before” the employee filed a petition for a wrongful termination remedy, etc., as in the Decisions. The Decisions also clarified the meaning of last year’s enacted Article 30(4) of the Labor Standards Act (“LSA”), which provides that “Even in a case where it is impossible for an employee to be reinstated to his/her original position because the term of his/her employment expires, or he/she reaches the company’s retirement age, and for other reasons, the labor relations commission shall render a relief order or dismiss the case, and in such a case, if the labor relations commission determines that the employee’s dismissal is unfair, it may order the employer to pay the amount equivalent to the wages that the employee could have received during the period of dismissal.” The purpose of this provision is to acknowledge that the employee, who becomes unable to be reinstated to his/her original position due to expiration of his/her term of employment or his/her retirement age “during” the proceedings for relief as to unfair dismissal, etc., should still have the benefit of receiving a relief order - payment equivalent to his/her wages. Therefore, Article 30(4) of the LSA should not be interpreted to mean that the benefit of the relief shall be acknowledged even where the employment relationship has already been terminated “before” the petition for relief was filed, as was the case in the Decisions. In light of the above, the Supreme Court treats the existence of the benefit to seek a relief order from the labor relations commission differently depending on when the employment relationship was terminated — whether it was “before” or “after” the petition for relief was filed with the labor relations commission. [Korean version]
2022.09.02

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Announcement of Legislative Proposal to Amend the Enforcement Decree of the Installation and Utilization of Sports Facilities Act Regarding Requirements and Procedures for the Designation of Public Golf Courses On August 26, 2022, the Ministry of Culture, Sports and Tourism (the "MCST") announced a legislative proposal for partial amendment (the "Amendment") to the Enforcement Decree of the Installation and Utilization of Sports Facilities Act (the "Sports Facilities Act") by its Notification No. 2022-0261. Under the amended Sports Facilities Act (Act No. 18860, partially amended on May 3, 2022), which takes effect on November 4, 2022, the existing distinction between "membership-based golf courses and public golf courses" will be changed to "membership-based golf courses and non-membership-based golf courses." A non-membership-based golf course that meets the requirements for user fees, etc. may be designated as a public golf course and be eligible for government support. The Amendment sets forth the requirements and procedures for the designation of public golf courses, and the details are as follows (other detailed standards and procedures will be determined and notified by the Minister of MCST). 1. Requirements for Designation as a Public Golf Course The Minister of MCST (the "Minister") may designate or re-designate a golf course that meets the following requirements as a public golf course with effective term of three (3) years (Article 7-2 of the Amendment): A golf course that is registered as a non-membership-based golf course; A golf course that charges green fees lower than the average green fees charged by membership-based golf courses to non-members (based on the results of a market survey conducted by the Minister in the immediately preceding year) less a certain amount publicly notified by the Minister (based on the difference in the tax amount imposed on membership-based golf courses and public golf courses); A golf course that applies the standard terms and conditions for the use of the golf course; and A golf course that complies with the plans for green fees submitted when applying for designation or re-designation (limited to re-designation). As you can see, the main requirement to receive the public golf course designation (or re-designation) is low green fees. To our understanding, the above requirement reflects the government's intention to reduce green fees and make golf a more approachable sport to the public. 2. Procedures for Designation of Public Golf Courses A sports facility business entity registered as a non-membership-based golf course business may file an application for designation/re-designation of a public golf course to the Minister, along with a plan for golf course usage fees and the terms and conditions of use. The Minister shall identify whether the applicant meets the requirements and notify the applicant within 30 days of the result. 3. Change of Relevant Terms In addition, the term "public golf course" in the Enforcement Decree of the existing Sports Facilities Act will be changed to a "non-membership-based golf course" in the Amendment. In line with the above, the proposed partial amendment to the Enforcement Rule of the Sports Facilities Act (MCST Notification No. 2022-0262) was also announced. Accordingly, relevant laws, including tax laws, will be additionally amended to adjust the scope of application for tax benefits to golf courses (such as exemption from individual income tax and heavy property tax as well as reduction of acquisition tax). Thus, further Amendment details will come, including the direction of adjustment to the relevant tax laws. Companies can submit their opinions on the proposed amendment plans, including the proposed partial amendment to the Enforcement Decree of the Sports Facilities Act, by September 26, 2022. [Korean version]
2022.08.30

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Proposed Amendment to Enable Extraterritorial Application of the Subcontracting Act to Foreign Companies On August 12, 2022, a draft bill (the "Amendment Bill") for partial amendment to the Fair Subcontracting Transactions Act (the "Subcontracting Act") was proposed by a group of National Assembly members, including Jungho Kim of the opposition Democratic Party, who is the bill's representative sponsor and is also a member of the National Assembly's Trade, Industry, Energy, SMEs and Startups Committee. One key change included in the Amendment Bill is the provision that enables extraterritorial application of the Subcontracting Act, which was previously absent. New provision on extraterritorial application In practice, the Subcontracting Act, along with the Fair Franchise Transactions Act and the Fair Distributor Transactions Act, all of which are special laws for regulating abuse of superior bargaining position in their relevant, specific fields, have been so far only enforced on transactions between Korean companies, and did not include explicit provisions on their extraterritorial application. Adding to the confusion, there have also been no court precedents on this issue to date, although the Korea Fair Trade Commission ("KFTC") in closing a case without further probe notably concluded that the Subcontracting Act cannot be applied extraterritorially to a foreign company in a past case, where a local subcontractor claimed that the final contractor, an overseas headquarters of a global company, violated the Subcontracting Act in delegating the manufacture of certain raw materials for sportswear products to the subcontractor. According to the Amendment Bill, the new provision on extraterritorial application has been proposed so that "the Subcontracting Act can also be applied to a conduct carried out overseas when such conduct affects the domestic market." It further notes that "while there are cases where transnational or foreign companies subcontract work to Korean companies and give them direct orders relating to the subcontract work through local agents, the KFTC has in the past expressed a position that the Subcontracting Act cannot be applied to such transnational or foreign companies due to lack of legal grounds in the current Subcontracting Act." Anticipated issues and need for monitoring Going forward, the National Assembly will gather additional opinions on and review the Amendment Bill (e.g., regarding whether the Subcontracting Act can be directly applied to foreign companies, and if so, what would be the specific scope of application), and if passed into law, it will be necessary to identify how the KFTC will enforce the extraterritorial application of the Subcontracting Act in practice. Currently, extraterritorial application of the Monopoly Regulation and Fair Trade Law ("FTL") is widely recognized under the so-called "effects test" theory, whereby Article 3 of FTL expressly stipulates that the FTL also applies to "a conduct carried out overseas, when such conduct has an effect in the domestic market," and the Supreme Court, in issuing its decision on a case concerning unfair concerted conduct by 26 air cargo transportation companies, concluded that the FTL applies to foreign conduct "when the foreign conduct in question had a direct, significant and reasonably foreseeable effect on the domestic market" (Decision No. 2021Du5466 issued on May 6, 2014). However, considering how other jurisdictions in general do not have regulations similar to the Subcontracting Act, it is unclear whether its extraterritorial application will be interpreted based on the same criteria used for the FTL. For instance, further details are expected to be made available in the coming days on (i) whether a foreign conduct will be recognized to have had an effect on the domestic market only when a foreign company engages in a direct transaction with a Korean SME from overseas, (ii) whether the "effects test" theory can apply to cases where products made as a result of transactions between a foreign conglomerate and SME are imported into Korea, and (iii) what specific circumstances will make it possible to extraterritorially apply the Subcontracting Act when a foreign company engages in a transaction with a Korean SME indirectly through a Korean conglomerate. If the Amendment Bill passes into law, it is expected to have a direct and significant impact on the business models and transaction relationships of foreign companies that are directly or indirectly conducting business with Korean SMEs. Going forward, therefore, it would be necessary to continuously monitor and respond to the National Assembly's discussion process on this new legislative movement. [Korean version]
2022.08.24

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KFTC’s Annual Report to the President Emphasizes Due Process, Free Market Competition and Protection of Small and Medium-sized Enterprises and Consumers On August 16, 2022, Mr. Soo-Hyun Yoon, the Vice Chair of the Korea Fair Trade Commission (the “KFTC”) presented the KFTC’s annual enforcement plan (the “Annual Report”) to the President, detailing the KFTC’s enforcement priorities in furtherance of the Yoon administration’s economic policy agenda. The Annual Report identified the following as the KFTC’s key tasks for the coming year: (i) due process in competition law enforcement, (ii) promotion of free market competition, (iii) eradication of impediments to market competition, (iv) stronger foundation for fair transactions involving small and medium-sized enterprises (“SMEs”) and (v) establishment of consumer-oriented transaction practices. With the KFTC announcing “due process in competition law enforcement” as the first item in the Annual Report, we expect the KFTC to take bold measures to ensure procedural fairness in law enforcement, in line with President Yoon’s emphasis on procedural transparency, predictability and fairness. The Annual Report also highlights the KFTC’s plans for regulatory reform, promoting fair market environment for SMEs and strengthening consumer protection in digital economy. Please refer to the newsletter (link) for a more detailed summary of the KFTC’s Annual Report. [Korean version]
2022.08.18

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MOTIE and Relevant Ministries Announce Strategy to Become a Semiconductor Powerhouse On July 21, 2022, the Minister of Trade, Industry and Energy (the “MOTIE”), Mr. Chang-Yang Lee, announced a strategy to become a semiconductor powerhouse (the “Strategy”), and signed an MOU to create an industry-academia collaborative ecosystem in the semiconductor industry. Based on the industry's recommendations and current challenges, the MOTIE prepared the Strategy via close consultations with relevant ministries. The focus of the Strategy is on investment support, talent training, securing leading technology for system semiconductors, and building a solid ecosystem for materials, parts, and equipment. Most of the above were included in the semiconductor industry policy plan presented by President Yoon Seok-yeol in his presidential election pledge, and the Yoon administration's strategy to support the semiconductor industry is gradually taking visible effect. In particular, the Strategy is significant in that it that it was formulated through interagency discussions on de-regulation, with the most crucial part in the Strategy being the measures to promote investments of semiconductor companies through de-regulation. Key details of the Strategy can be summarized as follows. Relax Various Regulations on Semiconductor Industry Including Labor and Safety Given the unique nature of the semiconductor industry where short-term and intensive R&D is crucial, the Yoon administration plans to legalize “special extended work” for semiconductor R&D activities. “Special extended work” system refers to a system where an employer may temporarily extend work hours over the maximum working hours prescribed by law (which is currently 52 hours per week) in “special circumstances” upon both the consent of employees and the approval from the Minister of Employment and Labor (Article 53, Paragraphs 4 and 5 of the Labor Standards Act (the “LSA”)). The scope of “special circumstances” and the specific procedures to obtain an approval of special extended work are set forth in the guidelines of the Ministry of Employment and Labor (the “Guidelines”) as delegated by the Enforcement Rules of the LSA. To implement this plan, however, it is necessary to amend the approval process for special extended work in the Guidelines, and relevant ministries (including the Ministry of Employment and Labor (the “MOEL”) and the MOTIE) are currently in discussion. Meanwhile, the above special extended work system will apply not only to semiconductor manufacturers, but also to suppliers of semiconductor manufacturing equipment, materials and parts should they also engage in semiconductor R&D. The Yoon administration also plans to relax chemical safety regulations that impose excessive burden on semiconductor businesses. Chemical Substances Control Act (the “CSCA”) Regarding the CSCA, the government plans to publish an amended notification on the standards for installation and management of hazardous substance handling facilities (the “Standards”) by the end of this year to ease regulations on semiconductor facilities. Under this amendment: If a company is equipped with a device that prevents the spread of outflow or leakage, the company would be exempt from the requirement to comply with certain facility standards such as installation of emergency shutdown equipment, etc. If a company is certified with the standards of the SEMI (Semiconductor Equipment and Materials International), the company would be deemed to have complied with applicable facility standards, and the scope and period of inspection under the Standards would be reduced. Regarding installation inspection of hazardous substance handling facilities, while the main facility inspection system1 used to apply only to the manufacture of electronic integrated circuits (for memory, non-memory and others), it would now apply to the entire semiconductor manufacturing industry, including diodes and transistors under this amendment. High-pressure Gas Safety Control Act (the “HGSCA”) The HGSCA, another safety regulation, does not currently provide any particular regulation that would allow the use of new pipe material (Superduplex) in next-generation EUV equipment. Therefore, the Strategy intends to amend the HGSCA such that relevant high-tech semiconductor equipment can be quickly installed in Korea. To this end, the Gas Technical Standards Committee plans to amend the Korea Gas Safety Code after reviewing the safety of the new pipe material, including whether it has been certified by other foreign authorities. In addition, the Strategy aims to continuously seek additional improvements in consideration of the level of regulation overseas. Strengthen Effective Incentives to Attract Corporate Investments The Yoon administration plans to (i) provide state-funded supports for the construction of essential infrastructure such as power and water in the Pyeongtaek and Yongin Semiconductor Complexes, where large-scale new construction and expansion are underway, and (ii) increase the floor area ratio of the Semiconductor Complexes by up to 1.4 times (from 350% to 490%). In addition, tax incentives for semiconductor facilities and R&D investments will be expanded, and the Restriction of Special Taxation Act will be amended to increase the scope of tax incentives for equipment investment of large companies to 8-12%, a 2%p increase from the previous rate, and also widen the range of tax support-eligible companies by including test equipment, IP design, and verification technology, etc. in the National Strategic Technologies. Based on the foregoing, it is evident that the key to the government’s strategy to become a semiconductor powerhouse is to provide full support for corporate investments. Meanwhile, the Act on Special Measures Act for Reinforcement and Protection of National High-Tech Strategic Industry Competitiveness, or the so-called “Special Act on Semiconductors” (“National High-Tech Strategic Industry Act”), went into effect on August 4, 2022. According to procedures set forth therein, an area occupied by (or intended to be occupied by) a business entity engaging in the R&D or commercialization of national high-tech strategic technologies, may be designated as a specialized complex, and the business entity that occupies or intends to occupy a specialized complex will receive significant investment support in terms of simplified permit processes, reduced infrastructure construction costs, and de-regulation. Following the ongoing survey on national high-tech strategic industrial technology, the Yoon administration plans to designate national high-tech strategic industrial technologies. It is notable that, if a company’s technology is designated as a national high-tech strategic technology, the company would be subject to additional regulations such as the requirement to obtain export approval and overseas M&A approval in accordance with the Act on Prevention of Divulgence and Protection of Industrial Technology, and to take protective measures for such strategic technology. The Strategy also includes plans to strengthen state support in various areas, including system semiconductors, fabless, and materials, parts and equipment, in addition to semiconductor memory. As such, it is expected to create new business opportunities for the semiconductor industry, including M&A. Expand Talent Pool in Semiconductor Industry Samsung Electronics, SK Hynix, Dongjin Semichem, and the Korea Semiconductor Industry Association signed an MOU with the MOTIE in connection with the following four major infrastructures for semiconductor industry-academic cooperation: (i) establishment of a semiconductor academy; (ii) operation of a Korean-style SRC (Semiconductor Research Corporation in the US, which is a public-private semiconductor research consortium that supports R&D and talent training through funding of government and companies); (iii) operation of a Korean-style IMEC (the world’s largest semiconductor research institute in Belgium); and (iv) establishment of industry-academic research departments at university level. The Yoon administration aims to train more than 150,000 semiconductor professionals by 2031 via expansion of industry-academic cooperation. Implications Since the inauguration of the new administration, the interest in the semiconductor industry has been on the rise, and the Yoon administration’s policy direction for the semiconductor industry has become clearer to some extent through the Strategy jointly announced by relevant ministries. There is an evident need to closely monitor the new administration’s investment attraction strategy and de-regulation trends. In particular, given the Yoon administration’s stance to ease regulations on the semiconductor industry, this seems to be an appropriate time to propose the government to abolish or improve unnecessary regulations that may hinder corporate investment or R&D in the semiconductor industry. In addition, while the new de-regulation policies mainly concern regulations of the MOEL and the Ministry of Environment, we expect that the Yoon administration will expand its de-regulation policies to address challenges of companies in various fields, including system semiconductors, fabless, small and medium-sized enterprises, etc., where new business opportunities may arise. In addition to Korea, the United States and the EU are also discussing new bills to support the semiconductor industry, which will provide funding in tens of trillions of KRW, and other major countries such as Japan and China have announced their support measures to establish a semiconductor supply chain. In the midst of intensifying competition for semiconductor hegemony, the Korean semiconductor industry seems to be facing a crisis, and while Korea is heavily dependent on exports to China, it has recorded a deficit in its trade with China for the past three consecutive months. Under these circumstances, how the Korean government will strive to overcome this challenge is at the center of everyone’s attention. 1 Under this system, only one representative facility is subject to inspection before the commencement of its operation, whereas the other facilities are inspected after the commencement of their operation. [Korean version]
2022.08.18

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