A lawmaker from the Democratic Party of Korea on the 7th introduced a bill to amend the Labor Standards Act to allow corporations to pay performance bonuses in local currency, sparking controversy. The Samsung Electronics union issued a statement on the 10th, calling it "a dangerous attempt that shakes the foundation of wage (cash) payment." Critics say it conflicts with the "cash payment principle" set out in the Labor Standards Act.
A policy to pay part of wages in local currency was implemented by city local government ordinance in 2016 when President Lee Jae-myung was mayor of Seongnam. Afterward, the Ministry of Government Legislation said, "A local government ordinance cannot create an exception to the cash payment principle."
◇ "There are concerns that workers at small and midsize companies with weak unions may not receive cash"
Democratic Party lawmaker Park Min-gyu on the 7th introduced an amendment to the Labor Standards Act. The plan is to add language to Article 43 (1) of the Labor Standards Act stating that "if there is a provision in a collective agreement or if workers consent, a portion of wages may be paid in local love gift certificates." Park said the aim is to contribute to balanced regional development by revitalizing local economies.
Article 43 (1) of the Labor Standards Act, which is the subject of the amendment submitted to the National Assembly, declares the principle that "wages must be paid in currency directly to the worker in full." However, it provides an exception that "if there are special provisions in laws or collective agreements, payment may be made in something other than currency." The amendment seeks to specify in law that local love gift certificates are included among "things other than currency."
On this, Yoo Seong-min, a Certified Public Labor Attorney at the law firm Uirim, said it "effectively nullifies the principle of payment in currency (cash payment) under the Labor Standards Act." Yoo particularly pointed to the clause stating that "if a worker gives explicit consent, local love gift certificates may be paid" as problematic. Yoo said, "Large companies like Samsung have unions that can bargain on equal footing with management, but most small and midsize companies do not," adding, "There is room for corporations to abuse this."
◇ When Lee was Seongnam mayor, local currency was paid… Ministry of Government Legislation: "Do not create exceptions by local government ordinance"
The "cash payment principle" is specified in the Labor Standards Act to prevent corporations from giving workers goods, such as company products, instead of money. Previously, Seoul Milk drew controversy in 2015 for selling milk to employees and deducting the price from their paychecks. At the time, the company said, "As milk consumption declined and the company's management became difficult, employees voluntarily proposed it," and it was not investigated for a legal violation.
The judiciary is also strictly applying the "cash payment principle." In 2019, the Supreme Court ruled that corporate welfare points are not wages, citing the cash payment principle under the Labor Standards Act. The court reasoned that "assessing welfare points as wages may shake the foundation of the principle of payment in currency and, going forward, normatively broaden the possibility of allowing employers to pay wages in something other than currency."
Meanwhile, in 2016, when President Lee Jae-myung was mayor of Seongnam, part of the wages for fixed-term city workers was paid in local currency. At the time, a Seongnam city local government ordinance stipulated that "for wages increased above the minimum wage amount, payment may be made in something other than currency."
This policy was abolished in Oct. 2018, when Lee left the Seongnam mayor's office to become Gyeonggi governor. In 2019, the Ministry of Government Legislation also issued an authoritative interpretation that "a local government ordinance, which has effect limited to the jurisdiction of a local government, cannot serve as the basis for recognizing an exception to the principle of payment in currency."
A legal professional said, "Since the Ministry of Government Legislation's authoritative interpretation says a local government ordinance cannot allow local currency to be paid instead of wages, it appears that a Democratic Party lawmaker introduced an amendment to enshrine this in law."