The government and the ruling Democratic Party of Korea have decided to significantly overhaul economic criminal penalty provisions that have constrained corporate activities. Instead of abolishing criminal penalties applied to corporate unfair practices, they will impose administrative fines of up to 10 times the profits gained from illegal activities to enhance the effectiveness of economic sanctions. The direction is right in that it has reduced legal uncertainty for businesses and employers. In particular, converting simple administrative violations and livelihood-related violations by small business owners from criminal penalties to administrative fines will help restore public livelihoods. With this measure, a total of 441 economic penalty provisions have been revised, including those scheduled for September this year.
Business leaders have long complained that they feel like they are "walking on prison walls," constantly exposed to the risk of criminal prosecution. Due to excessive legislation by politicians riding on anti-business sentiment, a distorted situation has continued where as many as 8,404 legal violations in economic laws alone are subject to criminal punishment. While late, this measure should serve as an opportunity to break away from penalty absolutism and revitalize business activities.
However, more scientific and objective investigation and judgment must be a prerequisite for abuse of market-dominant position and anti-competitive practices subject to heavy administrative fines. Excessive economic sanctions that could "bankrupt a company if caught" must not create "unjustly accused powerful parties" and lead to further economic damage. It is particularly regrettable that breach of trust (baeim) was not included in this round of reforms. The government must faithfully reflect voices from the field in the forthcoming alternative legislation for breach of trust to dispel corporate concerns about legal gaps and strengthened civil liability.
The punishment system for labor disputes and industrial accidents also needs to be re-examined. The Lee Jae-myung administration declared a "war on industrial accidents" and introduced strong penalty provisions including expanded worker work-stoppage rights, administrative fines of up to 5% of operating profit, and cancellation of registration for construction companies with repeated industrial accidents. However, the number of industrial accident fatalities has actually increased through the third quarter of this year. The industrial accident policy focused solely on punishment and regulation is showing its limits. The effectiveness of the Serious Accidents Punishment Act, which has failed to reduce industrial accidents, also needs to be reviewed. Currently, 25 employment and labor laws contain 357 penalty provisions, 65% of which directly target employers. If criminal liability is imposed for labor disputes, industrial accidents, and other force majeure incidents or structural factors, it will only increase business anxiety and dampen corporate activities.
