The owner of a Paik's Coffee, a low-cost franchise cafe in Cheongju, North Chungcheong Province, who sparked controversy by suing a part-time worker for embezzlement over three drinks worth 12,800 won, was found to have split the business into separate operations to avoid labor laws. About 3 million won in unpaid wages owed to 49 part-time workers was also uncovered.
The Ministry of Employment and Labor (MOEL) announced Wednesday the results of a roughly two-month special inspection of 33 franchise cafe and restaurant operations in Cheongju, North Chungcheong Province. The controversy grew in March after it emerged that a part-time worker at the cafe had been sued for embezzlement in the course of duties by the owner, identified as A, over having consumed three drinks worth 12,800 won. A later withdrew the lawsuit, and Theborn Korea said in a statement, "We are proceeding with a business suspension based on the franchise contract, and we will consider strong secondary measures depending on the results of the labor ministry's inspection."
The ministry launched its inspection of the store on March 31, and as reports of similar harm in the Cheongju area followed, it expanded the scope of the inspection to about 30 similar businesses. The inspection confirmed that A had registered the business separately and operated two locations, including a coffee shop and a dessert store, as separate entities. Under the current Labor Standards Act, some provisions, such as the payment of premium pay for overtime, night, and holiday work, do not apply to businesses with fewer than five employees. A did not pay premium pay on the grounds that it was a business with fewer than five employees, and the ministry uncovered about 3 million won in unpaid wages owed to 49 workers, including this, and issued a corrective order.
A was also found to have violated the Labor Standards Act's provision prohibiting predetermined penalties by including in employment contracts terms that calculated the amount of sales damage in the event of contract non-performance and imposed liability for damages, and that paid only 90 percent of wages if a worker resigned before three months. The ministry booked A on criminal charges.
As related reports poured in following the incident, the ministry expanded its target to franchise cafes and restaurants in the Cheongju area and conducted additional inspections. As a result, numerous cases emerged of inadequate basic labor management, such as the drafting and preservation of employment contracts and pay statements, or failure to observe break times. The ministry imposed fines and corrective orders for failure to prepare documents, and corrective orders for unpaid wages and failure to observe break times.
Labor Minister Kim Young-hoon stressed, "Franchise cafes and restaurants are places where many young workers entering society for the first time work, yet there are still many places with poor labor management." He added, "We will respond strictly through inspections and other means to illegal acts that infringe on the legitimate rights and interests of young workers."
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