Article 1 (Purpose)

The purpose of this Act is to improve workers’ quality of life and contribute to the balanced development of the national economy by prescribing matters necessary in establishing labor welfare policies and carrying out welfare projects.

Enforcement Ordinance

Article 2 (Definition)

The terms used in this Act are defined as follows:

1. The term "employee" means a person who provides his or her labor to a business or at a place of business in return for wages, regardless of the type of occupation;

2. The term "employer" means a business owner, a person responsible for the management of a business, or any other person who acts on behalf of a business owner with respect to matters relating to an employee;

3. The term "housing business entity" means a person who builds or purchases houses for the purpose of selling or leasing them to employees;

4. The term "employee stock ownership association" means an organization established in full compliance with the requirements prescribed in this Act in order for employees employed by a joint stock company to acquire and manage shares in the joint stock company;

5. The term “employee shares” means shares in a joint stock company acquired by the employees of the joint stock company through an employee stock ownership association established in the joint stock company.

Article 3 (Basic Principles of Labor Welfare Policies)

(1) Employees’ welfare policies (excluding basic working conditions, such as wages and working hours; the same shall apply hereinafter) shall aim to expand employees’ opportunities to participate in economic and social activities, increase their willingness to work, and improve their quality of life.

(2) When formulating and implementing employees' welfare policies, consideration and assistance shall be given to prevent discrimination against an employee on any ground, such as gender, age, physical conditions, employment status, religion, and social standing.

(3) Assistance prescribed in this Act to promote the welfare of employees shall be given in a manner that ensures the preferential treatment of employees working for micro, small, and medium enterprises, fixed-term employees (referring to fixed-term employees defined under subparagraph 1 of Article 2 of the Act on the Protection, etc. of Fixed-Term and Part-Time Employees), part-time employees (referring to part-time employees defined under Article 2 (1) 9 of the Labor Standards Act), temporary agency workers (referring to temporary agency workers under subparagraph 5 of Article 2 of the Act on the Protection, etc. of Temporary Agency Workers; hereinafter the same shall apply), workers hired by a subcontractor (referring to a subcontractor under subparagraph 5 of Article 2 of the Act on the Collection of Insurance Premiums, etc. for Employment Insurance and Industrial Accident Compensation Insurance), low-income employees, and long-serving employees.

Article 4 (Responsibility of State or Local Governments)

If the State or a local governments establishes and implements labor welfare policies, it shall make efforts to promote workers’ welfare by providing budgetary, fund, tax and financial support according to the basic principles of labor welfare policies prescribed in Article 3.

Article 5 (Responsibility of Employers and labor unions)

(1) An employer (referring to a person who carry out business using workers) shall make efforts to promote the welfare of workers in the workplace concerned and cooperate on labor welfare policies.
(2) labor unions and workers shall make efforts to improve productivity by increasing their will to work and cooperate on labor welfare policies.

Article 6 (Prohibition of Use for Other Purposes)

Any person who receives subsidies or loans for labor welfare, such as stabilizing workers’ housing, securing their livelihoods and creating their wealth, etc., from the State or a local government shall use the money only for the intended projects.

Article 7 (Fund Raising)

(1) The State or a local government shall make active efforts to raise necessary funds for labor welfare projects under this Act.
(2) The funds raised pursuant to paragraph (1) may be contributed or loaned to the Labor Welfare Promotion Fund under Article 87.

Article 8 (Deliberation on Important Matters concerning Labor Welfare Promotion)

The following matters concerning labor welfare under this Act shall be deliberated on by the Employment Policy Council (hereinafter referred to as “the Employment Policy Council”) under Article 10 of the Framework Act on Employment Policy：
1. Basic plan on labor welfare promotion under Article 9 (1)；
2. Matters concerning the raising of funds needed for labor welfare projects；and
3. Other matters concerning labor welfare policy brought forward by the chair of the Employment Policy Council.

Article 9 (Establishment, etc. of Basic Plan)

(1) The Minister of Employment and Labor shall establish a basic plan for labor welfare promotion (hereinafter referred to as “the basic plan”) every five years in consultation with the heads of relevant central administrative agencies.
(2) The basic plan shall include the matters described in any of the following subparagraphs：
1. Matters on workers’ housing stability；
2. Matters on workers’ livlihood stability；
3. Matters on workers’ wealth creation；
4. Matters on employee stock ownership plans；
5. Matters on the employee welfare fund system；
6. Matters on support for selective welfare systems；
7. Matters on the operation of the employee support program；
8. Matters on the establishment and operation of welfare facilities for workers：
9 Matters on the raising of funds needed for workers welfare projects；
10. Evaluation of the previous master plan ;
11. Other matters considered by the Minister of Labor to be necessary for labor welfare promotion.
(3) If the Minister of Employment and Labor has established the basic plan, he/she shall announce it.

Article 10 (Provision of Materials and Use of Electronic Network)

(1) The Minister of Employment and Labor may request the head of such government agencies, such as the Court, the Ministry of the Interior and Safety,, the Ministry of Health and Welfare, the Ministry of Land and Transport, the National Tax Service, etc., and local governments and relevant agencies and organizations to provide the materials and network access under the following subparagraphs, and to allow him/her to use their electronic networks in order to perform labor welfare projects under this Act, such as provision of livelihood stability funds pursuant to Article 19 and support for credit guarantee pursuant to Article 22. In this case, the head of government agencies and local governments, and relevant agencies and organizations shall comply if there are no reasonable grounds not to do so.
1. Certificate of Earned Income (for applicants of global income tax, for business income earners who completed year-end settlement, for other income earners)；
2. Transcripts and abstracts of resident registration；
3. A register of family relations (family relations certificate, marriage certificate, birth certificate)；
4. Certificates of local tax payment by tax item；
5. Transcripts of vehicle and construction machinery original register；
6. Transcripts of building and land register；and
7. Transcripts of corporation register.
(2) Any fees, charges or etc. shall not be imposed for materials provided to the Minister of Employment and Labor and using electronic networks under paragraph (1).
(3) When requesting the provision of materials pursuant to paragraph (1) and the use of relevant electronic networks, the Minister of Employment and Labor shall obtain consent of the related parties in advance.

Enforcement Ordinance

Article 11 (Consultation on Implementation of Labor Welfare Projects)

If a local government or a state-subsidized nonprofit corporation implements a labor welfare project, it shall consult with the Minister of Employment and Labor.

Article 12 (Financial Institutions Engaging in Loan Activities)

(1) The State or a local government may have a financial company, etc. (hereinafter referred to as “institutions engaging in loan activities”) described in any of the following subparagraphs engage in loan activities under this Act：
1. A bank established under Article 8 (1) of the Banking Act；and
2. Other financial company, etc. prescribed by the Presidential Decree.
(2) The Minister of Employment and Labor and the head of a local government may give priority to financial institutions which give preferential loans to workers, in engaging in loan activities, etc., under this Act.

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Article 13 (Tax Incentives)

The State or the head of a local government may provide tax incentives under the conditions prescribed in tax laws in order to promote workers’ welfare, including stabilizing workers’ housing, securing their livelihoods, creating their wealth, setting up and operating labor welfare facilities and labor welfare promotion funds, promoting employee stock ownership plans and employee welfare funds and so on.

Article 14 (Operation of Labor Welfare Information System)

(1) The Minister of Employment and Labor may establish and operate a labor welfare information system in order to implement labor welfare policies effectively.
(2) The Minister of Employment and Labor many provide support for the operation of employee support programs and selective welfare systems through the labor welfare information system under paragraph (1).

SECTION 1 Workers’ Housing Stability

Article 15 (Operation of Workers Housing Supply System)

(1) In order to support the acquisition or rental of housing by workers, the State and a local government may operate a system of ensuring that a housing business operator sells or leases (hereinafter referred to as “supply”) houses preferentially to workers.
(2) The Minister of Land and Transport Affairs shall include a plan to supply houses to workers (hereinafter referred to as “housing for workers”) pursuant to paragraph (1) in the comprehensive housing plan formulated under Article 5 of the Framework Act on Residence.
(3) Types and sizes of housing for workers, workers to be supplied with housing, supply methods and other necessary matters shall be determined by the Minister of Land and Transport Affairs in consultation with the Minister of Employment and Labor.

Article 16 (Lending of Workers’ Housing Funds)

(1) In any of the following cases, the State may provide support through the Housing and Urban Fund prescribed in the Housing and Urban Fund Act to ensure that a housing business operator or a worker can get necessary funds (hereinafter referred to as “workers’ housing funds”)：
1. Where a housing business operator builds or purchases housing for workers；and
2. Where a worker acquires housing for workers from a housing business operator.
(2) Necessary matters concerning those eligible for, and procedures for, getting workers’ housing funds, and other supports shall be determined by the Minister of Land and Transport Affairs in consultation with the Minister of Employment and Labor.

Article 17 (Lending of Housing Purchase Funds, etc.)

(1) For workers’ housing stability, the State may provide support through the Housing and Urban Fund prescribed in the Housing and Urban Fund Act to ensure that a worker can get necessary funds (hereinafter referred to as “housing purchase funds, etc.”) if he/she purchases, newly constructs or rents a house.
(2) The State or a local government may have institutions engaging in loan activities lend housing purchase funds, etc., to workers at an interest rate lower than the market rate and pay the balance.
(3) Necessary matters concerning those eligible for, and procedures for, getting housing purchase funds, etc, and other supports shall be determined by the Minister of Land and Transport Affairs in consultation with the Minister of Employment and Labor.

Article 18 (Support for Moving, etc. by Workers)

The State may provide necessary support for the housing stability of workers who move or live far away from their families as a result of employment, a change of workplace, etc.

SECTION 2 Workers’ Livlihood Stabilityand Wealth Creation

Article 19 (Provision of Livlihood Stability Funds)

(1) The State shall provide necessary support, such as loans for the medical, wedding, funeral expenses, etc., of workers and their families, in order to support workers’ livlihood stability.
(2) Considering the economic situation, the time when workers need livlihood stability funds, and so on, the State may provide necessary support, such as loans for living expenses, etc., in order to stabilize the livelihoods of workers, etc., who do not receive their wages.
(3) Necessary matters concerning those eligible for and procedures for, support for medical, wedding, funeral, and living expenses, etc., under paragraphs (1) and (2) shall be prescribed by the Ordinance of the Ministry of Employment and Labor.

Article 20 (Support, etc. for School Expenses)

(1) Matters requiring consultation by a council shall be as any of the following subparagraphs:

1. Improvement of productivity and distribution of results achieved;

2. Recruitment, placement, education and training of workers;

3. Settlement of workers' grievances;

4. Safety, health and improvement of other working environment, and promotion of workers' health;

5. Improvement of personnel and labor management systems;

6. General rules of employment adjustment, such as manpower transposition, retraining and dismissal due to managerial or technological reasons;

7. Administration of working hours and recess hours;

8. Improvement of systems for payment mode, system, structure, etc. of remuneration;

9. Introduction of new machinery and technologies, or improvement of work processes;

10. Establishment or amendment of work rules;

11. Employee stock ownership plan and other assistance to increase workers' property;

12. Matters on remuneration to relevant worker for an employee invention, etc.;

13. Improvement of workers' welfare;

14. Installation of surveillance equipment for workers within a workplace;

15. Protection of motherhood for women workers and matters to help combine work and home life;

16. Prevention of sexual harrassment on the job under subparagraph 2 of Article 2 of the Equal Employment Opportunity and Work-Family Balance Assistance Act and sexual harrassment by clients, etc.;

17. Other matters regarding cooperation between labor and management.

(2) A council may pass resolutions as to matters falling under any subparagraph of paragraph (1) in accordance with a quorum referred to in Article 15.

[This Article Wholly Amended by Act No. 8815, Dec. 27, 2007]

Article 21 (Preferential Savings Account for Workers)

The State shall operate a savings system giving preferential treatment to workers in order to support workers’ wealth creation.

SECTION 3 Support for Credit Guarantee for Workers

Article 22 (Credit Guarantee and Those Eligible Therefor)

(1) If a debt is incurred by a worker with a lack of collateral (including the unemployed who have been registered as job seekers and accident victims under the Industrial Accident Compensation Insurance Act；hereinafter the same shall apply in this Chapter) as a result of borrowing livelihood stability funds, school expenses, etc., from a financial company, etc., the Korea Workers Compensation and Welfare Service (hereinafter referred to as the “Corporation”) under the Industrial Accident Compensation Insurance Act may guarantee the debt in accordance with a contract with that financial company, etc. In this case, types of loans and workers subject to such guarantee shall be prescribed by the Ordinance of the Ministry of Employment and Labor.
(2) The contract made between the Corporation and a financial company, etc., under paragraph (1) shall contain the following matters：
1. A statement saying that the debt referred to in paragraph (1) is guaranteed；
2. Types of loans and workers subject to the credit guarantee；
3. Guaranteed maximum amount per worker；
4. Reasons for, and period and method of, a claim for repayment of guaranteed debts；
5. Examination for, and extent of, subrogation and the share of losses borne by the financial company, etc.；
6. Matters concerning the operation of the credit guarantee system, of which the financial company, etc. should notify the Corporation；and
7. Other matters necessary for a credit guarantee for workers.
(3) If the Corporation intends to sign or alter the contract prescribed in paragraph (1), it shall obtain approval from the Minister of Employment and Labor.

Article 23 (Guarantee Relationship)

(1) If the Corporation has decided to provide a credit guarantee for a worker, it shall notify the worker and the financial company, etc., from which the worker intends to get loans of the fact.
(2) A credit guarantee relationship is established at the time when the financial company, etc., given notification makes loans to the worker concerned pursuant to paragraph (1).

Article 24 (Fees for Guarantee)

The Service may collect guarantee fee from the employee whose credit is guaranteed pursuant to Article 22 within the limit not exceeding, per annum, 1/100 of the amount guaranteed as prescribed by Presidential Decree.

Enforcement Ordinance

Article 25 (Obligation of Notification)

If a financial company, etc., given notification pursuant to Article 23 falls under any of the following subparagraphs, it shall notify the Corporation of the fact without delay：
1. Where the main creditor-debtor relationship has been established；
2. Where all or part of the main debt is extinguished；
3. Where the worker fails to repay the debt；
4. Where the worker loses the benefit of time；or
5. Where there occur other reasons which might influence the guaranteed debt.

Article 26 (Repayment, etc. of Guaranteed Debt)

(1) A financial company, etc., which provides loan services pursuant to Article 22 (1) may make a claim against the Corporation for repayment of guaranteed debts under the same Article, if there occurs a reason to claim repayment of guaranteed debts.
(2) If a financial company, etc., claims repayment of guaranteed debts pursuant to paragraph (1), the Corporation shall make a subrogated payment in accordance with the terms of the contract under Article 22 (2).
(3) If the Corporation has repaid guaranteed debts pursuant to paragraph (2), it may directly exercise the right to indemnity or entrust the exercise of that right to a financial company, etc.
(4) The financial company, etc., entrusted with the exercise of the right to indemnity pursuant to paragraph (3) may take all judicial and non-judicial actions relating to the exercise of the right to indemnity on behalf of the Corporation.

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Article 27 (Late Interest)

If the Corporation has paid guaranteed debts, it may collect late interest on the paid amount from the worker concerned at an annual rate not exceeding 20/100 from the date of payment until when the worker reimburses the amount, under the conditions prescribed by the Presidential Decree. In this case, the late interest shall not exceed the paid amount.

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SECTION 4 Support for Labor Welfare Facilities, etc.

Article 28 (Support for Establishment, etc. of Labor Welfare Facilities)

(1) The State and a local government shall make efforts to establish and operate labor welfare facilities (hereinafter referred to as “labor welfare facilities”).
(2) The Minister of Employment and Labor may set standards for the establishment of labor welfare facilities in consideration of the type of business and the number of workers in the workplace and recommend an employer to establish them.
(3) The State and local Government may provide necessary support, if an employer (including an employers’ association；hereinafter the same shall apply in this Article), a labor union (including local chapters, branches, etc.；hereinafter the same shall apply.), the Corporation or a nonprofit corporation sets up and operates labor welfare facilities.
(4) If a local government, an employer, a labor union, the Corporation or a nonprofit corporation establishes and operates labor welfare facilities, the State and local Government may support part of the costs within the limits of its budget.

Article 29 (Entrustment of Operation of Labor Welfare Facilities)

(1) The State or a local government may entrust the Corporation or a nonprofit organization to operate the labor welfare facilities established pursuant to Article 28 (1), if it is necessary for their efficient operation.
(2) If the State or a local government entrusts the operation of labor welfare facilities pursuant to paragraph (1), it may subsidize part of the costs of operation within the limits of its budget.

Article 30 (Fees, etc.)

A person who establishes and operates labor welfare facilities may restrict some people from using the labor welfare facilities or charge different fees in consideration of the income levels, family relations, etc. of workers.

Article 31 (Support for Cost of Using Private Welfare Facilities)

(1) If a worker under Article 3 (3) uses a welfare facility operated by a private agency because he/she has difficulties in using the labor welfare facilities set up by the Sate or a local government under Article 28 (1), part of the costs may be provided.
(2) Necessary matters concerning those eligible for the support, procedures, etc., under paragraph (1) shall be prescribed by the Ordinance of the Ministry of Employment and Labor.

SECTION 1 Employee Stock Ownership Plan

Article 32 (Purpose of Employee Stock Ownership Plan)

The purpose of an employee stock ownership plan is to improve workers’ economic and social status and promote cooperation between labor and management by allowing workers to acquire and hold shares in a joint-stock company (hereinafter referred to as “company implementing an employee stock ownership plan”) where an employee stock ownership association has been set up, through the employee stock ownership association.

Article 33 (Establishment of Employee Stock Ownership Association)

(1) Workers of a joint-stock company, who intend to set up an employee stock ownership association, may organize a preparatory committee on the establishment of an employee stock ownership association with the consent of at least 2 workers qualified to become a member of an employee stock ownership association under Article 34 and establish an employee stock ownership association under the conditions prescribed by the Presidential Decree. In this case, the preparatory committee on the establishment of an employee stock ownership association shall consult with the company in advance over the matters prescribed by the Ordinance of the Ministry of Employment and Labor, including matters concerning the company’s support for the establishment of an employee stock ownership association.
(2) The provisions on incorporated associations in the Civil Act shall apply mutatis mutandis to the establishment and operation of an employee stock ownership association, except as provided for in this Act.

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Article 34 (Membership, etc. of Employee Stock Ownership Association)

(1) A worker who is qualified to join as a member an employee stock ownership association set up in a company implementing an employee stock ownership plan is as follows：
1. Any worker of a company implementing an employee stock ownership plan；
2. Any worker of a joint-stock company (hereinafter referred to as “affiliated company”) controled by a company implementing an employee stock ownership plan by owning 50/100 or more of its total issued shares under the conditions prescribed by the Presidential Decree or any worker of a joint-stock company (hereinafter referred to as “contract company”) to which a company implementing an employee stock ownership plan awards a contract and whose sales to that company account for 50/100 or more of its total annual sales of the previous year, and who meets all of the following requirements：
A. In the case of an affiliated company or a contract company, the worker should obtain consent from a majority of all workers of the affiliated company or contract company；
B. The worker should obtain consent from the employee stock ownership association set up in the company implementing an employee stock ownership plan；and
C. If there is an employee stock ownership association set up in the affiliated company or contract company, such an association should be dissolved：Provided that this shall not apply in the case described in the proviso of Article 47 (1) 4.
(2) If a person falls under any of the following subparagraphs, he/she shall not become a member of an employee stock ownership association set up in a company implementing an employee stock ownership plan, and if a member of an employee stock ownership association falls under any of the following subparagraphs, he/she shall lose his/her membership：Provided that a worker falling under subparagraph 1 may maintain his/her membership of an employee stock ownership association, but only for the shares of the company implementing an employee stock ownership plan, which are allocated to him/her under Article 37, and employee stock options granted to him/her under Article 39：
1. A person appointed as officer at a general shareholders’ meeting of the company implementing an employee stock ownership plan, affiliated company and contract company；
2. A worker of the company implementing an employee stock ownership plan, affiliated company and contract company, who is a shareholder thereof：Provided that this shall not apply to the minority shareholders prescribed by the Presidential Decree；
3. A worker of the affiliated company or contract company in case an employee stock ownership association is set up in the company to which the worker belongs after he/she has joined the employee stock ownership association set up in the company implementing an employee stock ownership plan；
4. Other workers prescribed by the Presidential Decree, whose membership of an employee stock ownership association is hard to acknowledge given his/her length of service, the unique nature of his/her employment relationship, etc.
(3) A member of an employee stock ownership association may freely withdraw from the employee stock ownership association：Provided that an employee stock ownership association member who has withdrawn from an employee stock ownership association may be restricted from joining the association again for a period of up to two years, set by the association rules under Article 35 (2) 1.
(4) If any change is made to membership of an employee stock ownership association set up in a company implementing an employee stock ownership plan as the company to which the worker belongs falls under any of the following subparagraphs, the worker shall maintain his/her membership of the employee stock ownership association set up in the company implementing an employee stock ownership plan prior to that change only for the shares of the company implementing an employee stock ownership plan, which are allocated to him/her under Article 37, and employee stock options granted to him/her under Article 39：
1. Where the company is incorporated into, or excluded from, its affiliated company；or
2. Where the company is incorporated into, or excluded from, its contract company

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Article 35 (Operation of Employee Stock Ownership Association)

(1) An employee stock ownership association shall be operated in a democratic way by reflecting the opinions of all members of the association.
(2) The matters described in any of the following subparagraphs shall be subject to resolution at a general meeting of employee stock ownership association members：
1. Matters regarding the establishment and revision of association rules；
2. Matters regarding the creation of an employee stock ownership association fund pursuant to Article 36；
3. Matters regarding the budget and settlement of accounts；
4. Matters regarding the election of officers, including the representative of the employee stock ownership association；and
5. Other important matters regarding the operation of the employee stock ownership association
(3) An employer stock ownership association may set up a meeting of delegates in lieu of a general meeting of employee stock ownership association members according to the association rules：Provided that the matters prescribed in paragraph (2) 1 shall be subject to resolution at a general meeting of employee stock ownership association members.
(4) The representative of an employee stock ownership association shall hold a general meeting of employee stock ownership association members or a meeting of delegates under the conditions prescribed by the Presidential Decree.
(5) Officers and delegates, including the representative of an employee stock ownership association, shall be elected in a direct, secret and unsigned ballot by employee stock ownership association members.
(6) A company implementing an employee stock ownership plan and an employee stock ownership association may set up a committee on the operation of employee stock ownership plan, which consists of equal numbers of members representing the company and the association, under the conditions prescribed by the Presidential Decree, to discuss the contents of, and conditions for, support for the employee stock ownership association.
(7) The representative of an employee stock ownership association shall prepare the books and documents described in any of the following subparagraphs, and keep them in its main office for ten years so as for association members to be able to inspect them. In this case, the books and documents may be prepared and kept in the form of electronic documents (hereinafter referred to as “electronic documents”) under subparagraph 1 of Article 2 of the Framework Act on Electronic Documents and Transactions：
1. List of the members of the employee stock ownership association；
2. Association rules；
3. Names and addresses of the officers and delegates of the employee stock ownership association；
4. Books and documents relating to accounting；and
5. Books and documents relating to the acquisition and management of company stocks by the employee stock ownership association and its members
(8) and (9) Deleted.
(10) General meetings of employee stock ownership association members, the specific method of operating an employee stock ownership association, and other necessary matters shall be prescribed by the Presidential Decree.

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Article 36 (Creation and Use of Employee Stock Ownership Association Fund)

(1) An employee stock ownership association may create an employee stock ownership association fund with the following resources in order to acquire employee shares, etc.;
1. Money and other valuables contributed by the company implementing the employee stock ownership program, a controlled or contracted company, or shareholders of any of such companies. In such cases, the company implementing the employee stock ownership program, or a controlled or contracted company may contribute a part of net income before deducting corporate tax for the preceding business year to the employee stock ownership association fund every year;
2. Money contributed by members of the employee stock ownership association；
3. Loans under Article 42 (1)；
4. Dividends from company stocks held in the association’s account under Article 37；and
5. Other gains, including interest, from the employee stock ownership association fund
(2) An employee stock ownership association shall manage an employee stock ownership association fund created pursuant to paragraph (1) by keeping or depositing it in a financial company, etc. prescribed by the Presidential Decree.
(3) The employee stock ownership association fund created pursuant to paragraph (1) shall be used for the following purposes, as prescribed by Presidential Decree. In such cases, for the purpose falling under subparagraph 4, only the contribution under the former part of Article 45 (4) shall be used:
1. To acquire company stocks；
2. To pay back loans and interest thereon under Article 42 (1);
3. Transactions for compensating losses prescribed in Article 43-2 ;
4. Repurchase of employee shares of the account of employee stock ownership association members under Article 37.
(4) An employee stock ownership association shall work to ensure that the company stocks acquired with financial resources provided by the company or its shareholders pursuant to paragraph (1) 1 and 3 are allocated to its members who are workers of the company.
(5) If an employee stock ownership association fund is to be used to pay back loans and interest thereon pursuant to paragraph (3) 2, the following methods shall be followed：
1. Money and goods under paragraph (1) 1 and dividends under paragraph (1) 4 should be used to pay back the loans that are promised to be repaid in accordance with the agreement under Article 42 (2)；and
2. Money contributed by employee stock ownership association members under paragraph (1) 2 should not be used to pay back the loans that are promised to be repaid in accordance with the agreement under Article 42 (2).

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Article 37 (Account Management after Acquisition of Company Stocks)

If an employee stock ownership association acquires shares of a company implementing an employee stock ownership plan through, for instance, the direct sales of shares, or allocation of newly issued shares, by the company implementing an employee stock ownership plan, it shall allocate the acquired company stocks between employee stock ownership association members’ accounts (hereinafter referred to as “members’ accounts”) and the employee stock ownership association’s account (hereinafter referred to as “association’s account”) and manage them in accordance with the account handling methods by financial resources prescribed by the Presidential Decree.

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Article 38 (Extent of Preferential Allocation to Members of Employee Stock Ownership Association)

(1) If a listed corporation under Article 9 (15) 3 of the Capital Markets and Financial Investment Services Act which is determined by Presidential Decree or a corporation which intends to be listed on the securities market determined by Presidential Decree invites subscription for, or sells, its stocks pursuant to the same Act, an employee stock ownership association member shall have the right to get preferential allocation of up to 20/100 of the total stocks offered for subscription or sold under Article 165-7 (1) of the same Act.
(2) When a corporation other than those prescribed in paragraph (1) invites subscription for, or sells, its stocks or increases capital by issuing new stocks under the Capital Markets and Financial Investment Services Act, it may preferentially allocate up to 20/100 of the total stocks offered for subscription, etc., to an employee stock ownership association member notwithstanding the provisions of Article 418 of the Commercial Act.

Article 39 (Extent, etc. of Granting of Employee Stock Options)

(1) A company implementing the employee stock ownership program may grant members of its employee stock ownership association the right to subscribe new shares or purchase treasury shares held by the company (hereinafter referred to as “employee stock option”) at a predetermined price (hereinafter referred to as “exercise price”) during the period specified in a resolution passed at its general meeting of shareholders (hereinafter referred to as “period for offering”) within 20/100 of the total number of outstanding shares, as stipulated by its articles of incorporation: Provided, That where employee stock options so granted do not exceed 10/100 of the total number of outstanding shares, such employee stock options may be granted by resolution of the board of directors, as stipulated by articles of incorporation.

(2) If a company implementing the employee stock ownership program intends to grant employee stock options, it shall stipulate the following matters in its articles of incorporation:

1. The provision that employee stock options may be granted to members of the employee stock ownership association;

2. The classes and number of shares that may be issued or transferred upon the exercise of employee stock options;

3. The provision that employee stock options already granted may be revoked by resolution of the board of directors and the grounds for revocation;

4. Requirements for resolution of the board of directors or the general meeting of shareholders on the granting of employee stock options.

(3) The resolution by the general meeting or the board of directors prescribed in paragraph (1) by a company implementing the employee stock ownership program on the granting of employee stock options shall include the following:

1. Method for granting employee stock options;

2. Exercise price of employee stock options and the adjustment of such price;

3. Periods set for offering and exercising employee stock options;

4. Classes and number of shares that may be issued or transferred upon the exercise of employee stock options.

(4) The period for offering shall not be less than six months nor more than two years from the date specified at the general meeting of shareholders or by the board of directors under paragraph (3) for granting employee stock options.

(5) When a company implementing the employee stock ownership program grants employee stock options, it may allow stock option holders to exercise the employee stock options during the period for offering or a period separately determined for exercising the stock options after the end of the period for offering. If a period after the end of the period for offering is determined as the period for exercising the options, the period of offering shall be deemed extended, notwithstanding paragraph (4).

(6) When a company implementing the employee stock ownership program intends to grant employee stock options, it may exclude members of its employee stock ownership association, who have been employed for a period less than the employment period specified by Presidential Decree, which shall not exceed three years, from employees eligible for stock options.

(7) No employee stock option may be transferred to a third party: Provided, That if a person to whom an employee stock option has been granted is dead, the stock option shall be deemed to have been granted to the deceased’s heir.

(8) Notwithstanding Article 341 of the Commercial Act, when a member of employee stock ownership association exercises an employee stock option, the company implementing the employee stock ownership program that granted the employee stock option may acquire treasury shares in order to issue the shares to such member: Provided, That the value of the shares so acquired shall be limited to the amount for which dividends can be distributed in accordance with the provisions of Article 462 (1) of the same Act, and if the value of treasury shares so acquired exceeds the limit, such treasury shares shall be sold within the period specified by Presidential Decree.

(9) Articles 350 (2), 351, 516-9 (1), (3), and (4), and the former part of Article 516-10 of the Commercial Act shall apply mutatis mutandis where new stocks are issued by exercising stock options.

(10) The procedure for granting employee stock options, the exercise price, the exercise period, and other necessary matters regarding the operation of the employee stock option program shall be prescribed by Presidential Decree.

Enforcement Ordinance

Article 40 (Revocation of Granting of Employee Stock Options)

If a company implementing an employee stock ownership plan, which has granted employee stock options, falls under any of the following subparagraphs, it may revoke the granting of employee stock options：Provided that in the case of subparagraphs 2 and 3, the revocation shall be subject to a decision made by the board of directors under the conditions prescribed by the articles of incorporation of the company：
1. Where the company implementing an employee stock ownership plan cannot accept the exercise of employee stock opinions because of its bankruptcy or dissolution；
2. Where an employee stock ownership association member granted employee stock opinions causes serious losses, willfully or mistakenly, to the company implementing an employee stock ownership plan；and
3. Where there occur any of the reasons for revocation prescribed in a contract granting employee stock options

Article 41 (Preferential Allocation of Company Stocks and Restrictions on Granting of Employee Stock Options)

When a company implementing an employee stock ownership plan preferentially allocate its stocks or grants employee stock options under Articles 38 and 39, it shall ensure that the sum under subparagraph 1 do not exceed 20/100 of the sum under subparagraph 2：
1. the sum of the stocks of the company implementing an employee stock ownership plan, managed by the employee stock ownership association, newly-issued preferentially-allocated stocks, and stocks of the company implementing an employee stock ownership plan, to be acquired in the case of exercising employee stock options；
2. the sum of the stocks newly issued by the company implementing an employee stock ownership plan, stocks of the company implementing an employee stock ownership plan, to be acquired in the case of exercising employee stock options and stocks issued already.

Article 42 (Acquisition of Company Stocks through Borrowing by Employee Stock Ownership Association)

(1) An employee stock ownership association may borrow the funds required for acquiring company stocks from an company implementing an employee stock ownership plan, an affiliated company and a contract company and their shareholders and a financial company, etc. prescribed by the Presidential Decree and acquire company stocks.
(2) A company implementing an employee stock ownership plan, an affiliated company and a contract company and their shareholders may make an agreement with an employee stock ownership association to contribute money or goods to the association for the repayment of the loans prescribed in paragraph (1).
(3) An employee stock ownership association may offer as collateral the company stocks acquired with the loan under paragraph (1) to a company implementing an employee stock ownership plan and financial company, etc., which make or guarantee that loan. In this case, it shall be required that for the company stocks corresponding to the amount of loan to be paid back, the security right shall be terminated upon the repayment.
(4) If a company implementing an employee stock ownership plan takes as collateral the company stocks acquired by an employee stock ownership association with the loan under paragraph (1), Article 341-3 of the Commercial Act shall not apply to the company implementing an employee stock ownership plan to the extent that the stocks are taken as collateral.
(5) Specific matters concerning borrowing by an employee stock ownership association, such as loan period, loan size, repayment method, how to allocate stocks acquired with loans, and so on shall be prescribed by the Presidential Decree.

Enforcement Ordinance

Article 42-2 (Prohibition of Enforcement of Acquisition of Company Stock)

(1) In case of preferential allocation to a member of an employee stock ownership association pursuant to Article 38, an employer of company implementing an employee stock ownership plan (including an affiliated company or contract company) shall not take part in actions described in any of the following subparagraphs：
1. An action which instructs a member of an employee stock ownership association to acquire company stocks contrary to the will of that member of an employee stock ownership association；
2. An action which allocates company stock to members of an employee stock ownership association according to certain criteria such as affiliation and class, etc. contrary to the will of the members of the employee stock ownership association；
3. An action which dismisses or unfairly treats a member of an employee stock ownership association because that member did not acquire company stock；
4. Other actions prescribed by Presidential Decree which do not accord with the purpose of an employee stock ownership plan pursuant to Article 32 by making a member of an employee stock ownership association acquire company stock contrary to the will of the member of the employee stock ownership association；
(2) An employer shall not dismiss or unfairly treat a member of an employee stock ownership association for the reason that the member reported a violation of paragraph (1), testified about such violation or presented evidence.
<This Article Newly Inserted by Act No. 12370, Jan. 28, 2014>

Article 43 (Deposit, etc. of Company Stocks)
(1) If an employee stock ownership association acquires company stocks, it shall deposit them in a trust institution prescribed by the Presidential Decree.
(2) An employee stock ownership association shall continue to leave the company stocks deposited pursuant to paragraph (1) in trust for a period prescribed by the Presidential Decree, but not exceeding the relevant period described in any of the following subparagraphs；
1. Company stocks acquired with the money, goods, etc. contributed by a company implementing an employee stock ownership plan or its shareholders, etc.：eight years
2. Company stocks acquired with the money contributed by employee stock ownership association members：one year. However, if a company implementing an employee stock ownership plan contributes not less than the amount of money prescribed by the Presidential Decree in its effort to cooperate in the contribution by employee stock ownership association members, it shall be five years for the company stocks acquired with the money contributed by employee stock ownership association members；and
3. Company stocks acquired with the money referred to in Article 36 (1) 3 through 5：either of the periods referred to in subparagraphs 1 and 2, chosen based on the number of company stocks divided by the number of contributors and those subject to loans
(3) An employee stock ownership association or an employee stock ownership association member shall not transfer or offer as collateral, the company stocks deposited under paragraph (1)：Provided that this shall not apply in such cases as prescribed by the Presidential Decree, where it is necessary for the financial and economic lives of the employee stock ownership association member.
(4) In accordance with the proviso of paragraph (3), a person offered company stocks as collateral shall not be able to exercise his/her right during the deposit period set under paragraph (2).

Article 22 (Trustee)
(1) “A trustee prescribed by the Presidential Decree” in Article 43 (1) of the Act refers to a company prescribed by the Ordinance of the Ministry of Employment and Labor from among financial securities companies authorized under Article 324 of the Capital Markets and Financial Investment Services Act.
(2) An association shall deposit the company stocks acquired by the association or its members with a trustee specified in paragraph (1) within one month from the base date of acquisition prescribed by the Ordinance of the Ministry of Employment and Labor.

Article 23 (Deposit Period of Company Stocks)
(1) “A period prescribed by the Presidential Decree” in parts other than each subparagraph of Article 43 (2) of the Act refers to a period determined in accordance with the following classification；
1. Company stocks acquired using the financial resources specified in subparagraphs 1 and 5 of Article 36 (1) of the Act：a period determined in consultation with the contributor, which shall be four years or more but shall not exceed eight years；
2. Company stocks acquired using the financial resources specified in Article 36 (1) 2 of the Act：one year；
3. Company stocks acquired using the loans borrowed without signing an agreement under Article 42 (2) of the Act among the financial resources specified in Article 36 (1) 3 of the Act：one year；
4. Company stocks acquired using the loans borrowed after signing an agreement under Article 42 (2) of the Act among the financial resources specified in Article 36 (1) 3 of the Act, and allocated to the accounts of the association members pursuant to Article 37 of the Act：one year；
5. Company stocks acquired using the financial resources specified in Article 36 (1) 4 of the Act and allocated to the accounts of the association members pursuant to Article 19 (1) 3：one year；
6. Company stocks acquired with the money contributed by association members if the company implementing the employee stock ownership plan cooperates in the contribution by association members pursuant to the proviso to Article 43 (2) 2 of the Act and contributes 50/100 or more of the money contributed by association members：a period determined in consultation with the company implementing the employee stock ownership plan, which shall be one year or more but shall not exceed four years；and
7. Company stocks acquired by way of an issue of bonus shares on the company stocks allocated to the accounts of the association members：the remaining deposit period of the company stocks eligible for the relevant issue of bonus shares：Provided that the stocks may not be deposited if the remaining deposit period from the date of distributing bonus shares is less than three months.
(2) The company stocks acquired by exercising the right to subscribe to new shares on the company stocks deposited pursuant to each subparagraph of paragraph (1) with the money contributed by association members may not be deposited.

Article 24 (Provision of Deposited Company Stocks as Collateral)
(1) “Such cases as prescribed by the Presidential Decree” in the proviso to Article 43 (3) of the Act refer to the following cases：Provided that among company stocks specified in subparagraphs 1 and 7 of Article 23 (1), those whose remaining deposit period exceeds one year shall be excluded from this：
1. Where an association offers the company stocks acquired with a loan as collateral to the lender of such loan and the loan guarantor thereof pursuant to Article 42 (3) of the Act；
2. Where an association member uses the company stocks allocated to the account of the association member as collateral to take out a loan for purchasing company stocks；and
3. Where an association member uses the company stocks allocated to the account of the association member as collateral to take out a loan for livelihood security.

Article 44 (Withdrawal, etc. of Company Stocks)
(1) Notwithstanding the provision of paragraph 43 (2), an employee stock ownership association member may, if there occur the reasons prescribed by the Presidential Decree, such as the dissolution of the employee stock ownership association or the death of its member, etc., withdraw the company stocks through the employee stock o

Article 43 (Deposit, etc. of Company Stocks)

(1) If an employee stock ownership association acquires company stocks, it shall deposit them in a trust institution prescribed by the Presidential Decree.
(2) An employee stock ownership association shall continue to leave the company stocks deposited pursuant to paragraph (1) in trust for a period prescribed by the Presidential Decree, but not exceeding the relevant period described in any of the following subparagraphs；
1. Company stocks acquired with the money, goods, etc. contributed by a company implementing an employee stock ownership plan or its shareholders, etc.：eight years
2. Company stocks acquired with the money contributed by employee stock ownership association members：one year. However, if a company implementing an employee stock ownership plan contributes not less than the amount of money prescribed by the Presidential Decree in its effort to cooperate in the contribution by employee stock ownership association members, it shall be five years for the company stocks acquired with the money contributed by employee stock ownership association members；and
3. Company stocks acquired with the money referred to in Article 36 (1) 3 through 5：either of the periods referred to in subparagraphs 1 and 2, chosen based on the number of company stocks divided by the number of contributors and those subject to loans
(3) Except in either of the following cases, neither an employee stock ownership association nor a member of an employee stock ownership association shall transfer employee shares deposited pursuant to paragraph (1) to any person or offer such employee shares as security to any person:
1. Where employee shares are lent under Article 43-3;
2. Cases specified by Presidential Decree as those where the transfer or offering of employee shares as security is necessary to help improve the financial and economic situation facing members of the employee stock ownership association.
(4) In accordance with the proviso of paragraph (3)-2, a person offered company stocks as collateral shall not be able to exercise his/her right during the deposit period set under paragraph (2).
(5) The employee shares lent under Article 43-3 shall be deemed deposited during the lending period in accordance with this Act.
(6) Profits arising from lending of shares allocated to the members’ account shall be distributed to the members holding the relevant accounts, and the profits arising from lending of shares allocated to the members’ account shall be reverted to the association.
(7) The trustee under paragraph (1) may conduct the duties necessary to promote the employee stock ownership system, which are prescribed by Presidential Decree, such as support for duties of an employee stock ownership association.

Enforcement Ordinance

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Article 43-2 (Transactions for Compensating Losses on Deposited Employee Shares)

(1) An employee stock ownership association may conduct transactions specified by Presidential Decree only for the purpose of compensating losses on the employee shares deposited under Article 43 (hereinafter referred to as "transactions for compensating losses") with a financial company specified by Presidential Decree.

(2) Where an employee stock ownership association conducts a transaction for compensating losses, the company implementing the employee stock ownership program may subsidize expenses incurred therein on behalf of the association.

(3) A transaction between an employee stock ownership association and a financial company for compensating losses may be permitted only where each of the following requirements are met:

1. The transaction shall not be subject to any condition that the employee shares for which it is intended to conduct the transaction for compensating losses, be sold or a loan be borrowed to fund the acquisition of such employee shares;

2. The minimum rate of compensation for losses shall not be less than the rate specified by Presidential Decree, which shall be at least 50/100 of the acquisition value of the employee shares subject to the transaction for compensating losses;

3. No transaction for compensating losses shall be conducted contrary to the will of members of the employee stock ownership association;

4. Other requirements prescribed by Presidential Decree to protect employee stock ownership associations and members thereof.

(4) The amount compensated by a transaction for compensating losses on the shares allocated to a member's account shall be paid to the account-holding member, while the amount compensated by a transaction for compensating losses on the shares allocated to an association, shall belong to the association.

[This Article Newly Inserted on Jul. 20, 2015]

Article 43-3 (Lending of Deposited Employee Shares)

An employee stock ownership association or a member of an employee stock ownership association may lend deposited employee shares to a third party through the trustee prescribed in Article 43 (1), if each of the following requirements are met:
1. The following rights arising from the lent employee shares (hereinafter referred to as "lent employee shares") shall be guaranteed:
(a) Voting right;
(b) Preemptive right to new stocks and stocks issued without consideration to increase capital;
(c) Right to receive dividends (including stock dividends);
(d) Other rights recognized by the Commercial Act and other Acts as shareholders' rights and not restricted or prohibited by this Act;
2. Any of the financial companies specified by Presidential Decree as engaging in brokerage and arrangement of lending and borrowing shall guarantee the return of lent employee shares, and the borrower shall provide security therefor;
3. The transaction shall be made in compliance with the rules prescribed by Presidential Decree with regard to the methods for lending employee shares, restrictions on lending, the period of lending, etc.
[This Article Newly Inserted by Act No. 13412, Jul. 20, 2015]

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Article 44 (Withdrawal, etc. of Company Stocks)

(1) Notwithstanding the provision of paragraph 43 (2), an employee stock ownership association member may, if there occur the reasons prescribed by the Presidential Decree, such as the dissolution of the employee stock ownership association or the death of its member, etc., withdraw the company stocks through the employee stock ownership association even in the middle of the deposit period prescribed in the same paragraph.
(2) If an employee stock ownership association member withdraws the company stocks, first the employee stock ownership association and then employee stock ownership association members shall be allowed to purchase the stocks according to the rules of the employee stock ownership association.

Enforcement Ordinance

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Article 45 (Disposition of Stocks of Unlisted Corporation)

(1) If an employee stock ownership association member of a company implementing an employee stock ownership plan which is an corporation (hereinafter referred to as an “unlisted corporation”) not listed on the securities market under Article 8-2 (4) 1 of the Capital Markets and Financial Services Act inevitably intends to dispose of company stocks, the State shall make efforts to take necessary measures concerning share transaction, etc., to ensure the conversion of the stocks into cash.
(2) Notwithstanding Article 341 of the Commercial Act, if it is necessary for guaranteeing the conversion of the employee share into cash, a company implementing the employee stock ownership program, as an unlisted corporation, may acquire the employee share held by a member or retiring member of the employee stock ownership association on its account. The share acquired in such cases shall be disposed of by any of the following methods:
(3) A company implementing the employee stock ownership program, as an unlisted corporation, may accumulate reserves for preparing the funds necessary to acquire the employee shares under paragraph (2) every year. ：
1. Contributing the stocks to the employee stock ownership association；
2. Disposing of the stocks pursuant to Article 342 of the Commercial Act；and
3. Removing the stocks as gains to be distributed among shareholders according to a decision made at a general meeting of shareholders.
(4) A company implementing the employee stock ownership program, as an unlisted corporation, may contribute to an employee stock ownership association fund to allow an employee stock ownership association to purchase employee shares of the account of association members on behalf of the relevant company implementing the employee stock ownership program. In such cases, the relevant company implementing the employee stock ownership program may enter into an agreement including the following matters with the employee stock ownership association:

Article 45-2 (Repurchase of Employee Shares of Unlisted Corporation)

(1) A member of an employee stock ownership association of a company implementing the employee stock ownership program, as an unlisted corporation, with at least the size prescribed by Presidential Decree (hereafter referred to as “company subject to obligatory repurchase” in this Article) may request the repurchase of the relevant employee shares to the company subject to obligatory repurchase, where the employee shares meet all of the following conditions: Provided, That in case of a regular retirement or the occurrence of other grounds prescribed by Presidential Decree, the member of an employee stock ownership association may request the repurchase regardless of the deposit period under subparagraph 2:

1. Employ shares are acquired by an employee stock ownership association with the contribution of a member of the employee stock ownership association by the methods prescribed by Presidential Decree;

2. Employ shares has been deposited for the period prescribed by Presidential Decree within seven years, in addition to the deposit period under Article 43 (2) 2.

(2) To ensure that the rights of the member of an employee stock ownership association to request repurchase under paragraph (1) are properly exercised, a company subject to obligatory repurchase shall enter into an agreement including the following matters with the employee stock ownership association before the employee stock ownership association acquires employee shares:

1. Whether the reserves for repurchase are accumulated and the methods of accumulation thereof;

2. Method to determine repurchase price;

3. Repurchase procedure;

4. Method of divisional repurchase;

5. Other matters prescribed by Presidential Decree.

(3) The member of an employee stock ownership association shall exercise the rights to request repurchase under paragraph (1) within six months from the day when the deposit period under subparagraph 2 of the same paragraph expires or when the ground under the proviso to the same paragraph occurs.

(4) Notwithstanding Article 341 of the Commercial Act, a company subject to obligatory repurchase shall acquire the relevant employee shares by its own calculation within 30 days when it was requested of the repurchase under paragraph (1): Provided, That where there is a circumstance that it is difficult to conduct repurchase due to reasons such as the deterioration of management of the company subject to obligatory repurchase or there is a ground prescribed by Presidential Decree such as guaranteeing the liquidity of employee shares, it may not accept the request or may conduct divisional repurchase within three years from the day when it was requested of repurchase.

(5) A company subject to obligatory repurchase shall dispose of the employee shares acquired under paragraph (4) by one of the methods falling under each subparagraph of Article 45 (2).

(6) Notwithstanding paragraph (4), an employee stock ownership association may purchase the relevant employee shares with the contribution to an employee stock ownership association fund under the former part of Article 45 (4), on behalf of the company subject to obligatory repurchase.

(7) Where a company subject to obligatory repurchase contributes to the employee stock ownership association fund under the former part of Article 45 (4), it shall be deemed that it performs the duty of acquiring the relevant employee shares under paragraph (4) within the scope of the relevant contribution.

[This Article Newly Inserted on Dec. 27, 2016]

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Article 46 (Exercise of Voting Rights at General Shareholders Meeting Based on Holding of Company Stocks)

(1) The representative of an employee stock ownership association shall exercise voting rights (hereinafter referred to as “voting right”) on the agenda of a general shareholders’ meeting according to opinions expressed by the members of the employee stock ownership association. The specific ways of exercising the voting rights shall be prescribed by the Presidential Decree.
(2) Notwithstanding the provision of paragraph (1), if an employee stock ownership association member demands to be entrusted with the exercise of voting rights, the representative of the employee stock ownership association shall entrust the member with the exercise of voting rights for the shares held by the employee stock ownership association member concerned.

Enforcement Ordinance

Article 47 (Dissolution of Employee Stock Ownership Association)

(1) An employee stock ownership association shall be dissolved, if there occurs reasons falling under any of the following subparagraphs. In this case, the liquidator shall report this, along with clearly stated reasons for the dissolution, to the Minister of Employment and Labor under the conditions prescribed by the Presidential Decree：
1. Bankruptcy of the company implementing the employee stock ownership plan；
2. Dissolution of the company implementing the employee stock ownership plan for the discontinuation of business；
3. Dissolution of the company implementing the employee stock ownership plan for the merger, breakup, and breakup and then merger of business；
4. Where workers of an affiliated company or a contract company join the employee stock ownership association of the company implementing the employee stock ownership, however, if the employee stock ownership association set up in the affiliated company or contract company is left with the company stocks or employee stock ownership association members are granted employee stock options, the association shall not be dissolved for a period prescribed by the Presidential Decree；and
5. Where the employee stock ownership association has no officer and has not held company stocks and assets, such as, by raising funds for the acquisition of company stocks, etc., for the past three fiscal years, and as a result of asking the members of the employee stock ownership association their opinions on the dissolution of the association under the conditions prescribed by the Ordinance of the Ministry of Employment and Labor, there is no opinion in favor of the continuous existence of the association.
(2) If an employee stock ownership association is dissolved pursuant to paragraph (1), the property of the employee stock ownership association shall be reverted to the members of the employee stock ownership association in accordance with the terms of the rules：Provided that in case the employee stock ownership association has debts, only the properties left after the debts are cleared off shall be reverted to the members of the employee stock ownership association.

Enforcement Ordinance

Article 48 (Support to Promote Employee Stock Ownership Plan)

In order to promote employee stock ownership plans, the State may provide necessary support, such as helping employee stock ownership association members to hold company stocks, a company implementing an employee stock ownership plan, etc., to support an employee stock ownership association, and an unlisted corporation to guarantee the conversion of company stocks into cash, etc.

Article 49 (Support for Workers’ Takeover of Company)

If workers take over their company through the employee stock ownership association due to the company’s bankruptcy, etc., the State may provide funds, etc., needed to acquire the stocks.

Article 49-2 (Special Exception for Takeover of Company by Employee Stock Ownership Association)

(1) Where an employee stock ownership association takes over the relevant company implementing the employee stock ownership program by the method prescribed by Presidential Decree, the member of an employee stock ownership association may maintain the qualification of the member of an employee stock ownership association regardless of the amount of employee shares acquired by such takeover, notwithstanding Article 34 (2) 2.
(2) Matters regarding the limitation on the size and period of borrowing under Article 42 (5) shall not apply where an employee stock ownership association borrows the fund for acquiring employee shares for the take over under paragraph (1): Provided, That the sum of amount under each subparagraph shall not exceed 25/100 of the equity (referring to the amount subtracting the total debt from the total asset in the balance sheet of the end of the previous business year) of the company implementing the employee stock ownership program:
1. Loan from a company implementing the employee stock ownership program or a controlled company;
2. Value of money and other valuables to be contributed by a company implementing the employee stock ownership program or a controlled company to an employee stock ownership association under the agreement for the return of the loan of the employee stock ownership association;
3. Limit of guarantee of a company implementing the employee stock ownership program or a controlled company for the loan of an employee stock ownership association.
[This Article Newly Inserted by Act No. 14498, Dec. 27, 2016]

SECTION 2 Employee Welfare Fund System

Article 50 (Purpose of Employee Welfare Fund System)

The purpose of the intra-company labor-welfare fund system is to contribute to the stabilization of livelihood, and promotion of welfare, of employees by requiring business owners to establish an intra-company labor-welfare fund with financial resources that consist of business income and to efficiently manage and operate the fund.

Article 51 (Protection of Workers’ Rights and Interests and Maintenance of Working Conditions)

Cases where it is necessary for executing its business affairs referred to in Article 67 of the Act shall be as follows:

1. Ownership of an office and facilities attached thereto, necessary for the operation and management of the fund corporation;

2. Deleted;

3. Ownership of labor welfare facilities under Article 62 (1) 5 of the Act;

4. Ownership of real estate donated or contributed to the intra-company labor welfare fund: Provided, That except where real estate is donated or contributed for any of the purposes referred to in subparagraph 1 through 3, the fund corporation shall not own real estate unless it converts the real estate so as to be managed in any manner provided for in Article 63 of the Act within one year from the date of donation or contribution of real estate, without unjustifiable grounds.

Article 52 (Corporate Entity and Establishment)

(1) An employee welfare fund shall be a corporation.
(2) If a employee welfare fund corporation (hereinafter referred to as “fund corporation”) is to be set up, the employer of the business or workplace concerned (hereinafter referred to as “business”) shall organize a preparatory committee on the establishment of the employee welfare fund (hereinafter referred to as “preparatory committee”), and put it in charge of administrating affairs concerning the setting-up of the fund and the appointment of directors or auditors at the time of the establishment.
(3) Article 55 of this Act shall apply mutatis mutandis to the way of organizing the preparatory committee.
(4) The preparatory committee shall draw up the articles of incorporation of the fund corporation under the conditions prescribed by the Presidential Decree, and obtain authorization of establishment from the Minister of Employment and Labor.
(5) If the preparatory committee is willing to obtain authorization for establishment under paragraph (4), documents prescribed by Presidential Decree shall be attached to an application for authorization of the fund corporation and submitted to the Minister of Employment and Labor.
(6) When receiving applications pursuant to paragraph (5), the Minister of Employment and Labor shall give authorization for establishment to applicants except for cases described in any of the following subparagraphs：
1. Where the entries of the articles of incorporation pursuant to paragraph (4) are omitted；
2. Where the contents of the articles of incorporation pursuant to paragraph (4) violate Article 50, Article 51 or Article 62；
3. Where documents which shall be submitted pursuant to paragraph (5) are not submitted or are fraudulently submitted.
(7) Upon obtaining authorization for establishment under paragraph (4), the preparatory committee shall register the establishment of the fund corporation at the seat of the main office within three weeks of the date of obtaining an authorization for establishment, and the fund corporation shall come into existence only when the registration of establishment has been completed.
(8) Necessary details concerning the registration of the establishment of a fund corporation and other registrations shall be prescribed by Presidential Decree.
(9) The preparatory committee shall be regarded as the first employee welfare fund council (hereinafter referred to as “welfare fund council”) organized under Article 55 at the same time as the corporation is brought into existence pursuant to paragraph (7).
(10) After registering the establishment of the fund corporation, the preparatory committee shall hand over business forthwith to the directors of the fund corporation.

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Article 53 (Alteration of Articles of Incorporation)

If the articles of incorporation of a fund corporation is to be altered, authorization shall be obtained from the Minister of Employment and Labor under the conditions prescribed by the Presidential Decree.

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Article 54 (Organization of Fund Corporation)

A fund corporation shall have a welfare fund council, directors and auditors.

Article 55 (Composition of Welfare Fund Council)

(1) A welfare fund council shall be composed of equal numbers of members representing the employer and workers and the number of members from each side shall be not less than two but not more than ten.
(2) The members representing workers shall be elected by the workers themselves under the conditions prescribed by the Presidential Decree.
(3) The members representing the employer shall be the representative of the business concerned and other persons commissioned by the representative.
(4) In the case of businesses where there is a labor-management council organized under the Act on the Promotion of Worker Participation and Cooperation, the members of a labor-management council may become the members of the welfare fund council, notwithstanding the provisions of paragraphs (2) and (3).

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Article 56 (Function of Welfare Fund Council)

(1) A welfare fund council shall consult and decide on the following matters:

1. Determination of the amount to be contributed to the creation of an intra-company labor-welfare fund;

2. Appointment and dismissal of directors and auditors;

3. Approval of business plans and auditor’s reports;

4. Amendments to the articles of incorporation;

5. Determination of whether to integrate the welfare fund with other labor welfare programs in the business;

6. A merger, division, or merger through division of incorporated funds.

(2) Matters regarding the operation of a welfare fund council shall be prescribed by Presidential Decree.

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Article 57 (Recording and Keeping of Meeting Minutes)

A fund corporation shall record minutes of welfare fund council meetings containing the matters described in any of the following subparagraphs, have them signed or sealed by all members present and keep them for ten years after the date of recording. In this case, the meeting minutes may be recorded and kept in the form of electronic documents；
1. Meeting date and place；
2. Members present；
3. Matters consulted and decided；and
4. Other matters discussed

Article 58 (Director and Auditor)

(1) A fund corporation shall have equal numbers of directors and auditors representing the employer and workers with not more than three directors and one auditor from each side.
(2) The directors shall represent the fund corporation and execute the following affairs under the conditions prescribed by the articles of incorporation：
1. Matters concerning the management and operation of the fund corporation；
2. Matters concerning budgeting and settlement of accounts：
3. Matters concerning the preparation of a business report；
4. Matters prescribed by the articles of incorporation；and
5. Other matters that should be executed by the directors following discussion and decision by the welfare fund council.
(3) The fund corporation shall execute its affairs when the directors take a majority decision.
(4) The auditors shall inspect the affairs and accounting of the fund corporation.

Article 59 (Term of Office of Director, etc.)

(1) The term of office of the members of a welfare fund council and directors shall be three years, respectively：and the term of office of the auditor shall be two years：Provided that the term of office of any successor to fill a vacancy in the position of member of a welfare fund council, director and auditor shall be the remaining term of office of his/her predecessor.
(2) A member of a welfare fund council, a director and an auditor shall continue to perform his/her duties until his/her successor is elected, even in case his/her term of office has expired.

Article 60 (Status of Director, etc.)

(1) A member of a welfare fund council, a director and an auditor shall serve on a part-time basis without pay.
(2) An employer shall not give unfavorable treatment to a member of a welfare fund council, a director and an auditor for performing his/her duties relating to the fund corporation.
(3) The hours a member of a welfare fund council, a director and an auditor needs to perform his/her duties relating to the fund corporation shall be seen as the hours worked.

Article 61 (Raising of Employee Welfare Funds)

(1) An employer may contribute an amount determined by the welfare fund council after discussion on the basis of 5/100 of the profits before corporate or income tax for the previous business year to the employee welfare fund under the conditions prescribed by the Presidential Decree.
(2) An employer or a person other than the employer may contribute equities, cash or other properties prescribed by the Presidential Decree to the employee welfare fund in addition to the contributions referred to in paragraph (1).

Enforcement Ordinance

Article 62 (Projects of Fund Corporation)

(1) An incorporated fund may conduct the following business activities with its profits, as prescribed by Presidential Decree:

1. Assistance to employees’ property formation, including subsidization of purchase of a house and support for purchasing the employee share;

2. Granting of scholarships or disaster relief fund, and other aid for employees’ livelihood;

3. Subsidization of expenses incurred in the protection of maternity and the balance between work and family;

4. Subsidization of expenses incurred in operating an incorporated fund;

5. Investment in or contribution to a facility specified as a labor welfare facility by Ordinance of the Ministry of Employment and Labor or purchase, installation, and operation of such facility;

6. Improvement of welfare benefits of employees employed by companies directly contracted by the relevant business and temporary agency workers placed to work for the relevant business;

6-2. Support for joint labor-welfare fund under Article 86-2 (1);

7. Business activities specified by Presidential Decree, in addition to those for which an employer is obliged to pay wages and others to employees under other statutes.

(2) An incorporated fund may use the amount computed in accordance with Presidential Decree, out of the property contributed to it and the property on which the welfare fund council has resolved to include in contributed property (hereinafter referred to as “basic property”) pursuant to Article 61 (1) and (2), for business activities specified in paragraph (1) (hereinafter referred to as “business activities of the intra-company labor-welfare fund”). If the business of an incorporated fund in such cases falls under either of the following subparagraphs, it may upwardly adjust the amount so computed within the range specified by Presidential Decree, as stipulated by articles of incorporation:

1. Where the business uses and operates the selective welfare program pursuant to Article 82 (3);

2. Where the business uses at least the amount computed pursuant to Ordinance of the Ministry of Employment and Labor, out of the amount used for the business activities of the intra-company labor-welfare fund, for the improvement of welfare benefits for employees employed by companies directly contracted by the relevant business and temporary agency workers placed to work for the relevant business;

3. Where an incorporated fund established in an enterprise prescribed in Article 2 (1) or (3) of the Framework Act on Small and Medium Enterprises implements business activities of the intra-company labor-welfare fund.

(3) In cases specified by Presidential Decree as it is deemed necessary for providing support for employees’ living security and property formation, an incorporated fund may lend loans to employees out of its basic property.

Enforcement Ordinance

Article 63 (Management of Employee Welfare Fund)

An employee welfare fund shall be managed by any of the following methods：
1. Deposits or money trust in a financial company, etc.；
2. Purchase of beneficiary certificates of an investment trust company, etc.；
3. Purchase of securities directly issued or guaranteed for repayment, by the State, local governments or financial company, etc.；
4. Where the employee welfare fund holds stocks in its company through contribution, participation in the company’s capital increase through issue of new stocks within the limit prescribed by the Presidential Decree and on the basis of the number of shares it holds；
5. Other projects prescribed by the Presidential Decree for the operation of an employee welfare fund.

Enforcement Ordinance

Article 64 (Accounting of Employee Welfare Fund)

(1) The fiscal year of an employee welfare fund shall be the same as the fiscal year of the employer’s business unless otherwise prescribed by the articles of incorporation.
(2) A fund corporation shall not be financed by loans.
(3) Any loss incurred as a result of the settlement of accounts of an employee welfare fund each fiscal year shall be carried over to the next fiscal year and its surplus earned shall be appropriated first to make up for the loss and then transferred into the employee welfare fund.
(4) Necessary matters concerning the accounting management of an employee welfare fund shall be prescribed by the Presidential Decree.

Enforcement Ordinance

Article 65 (Preparation and Keeping of Documents about Management and Operation of Fund Corporation)

A fund corporation shall prepare any of the following documents under the conditions prescribed by the Presidential Decree, and keep them for five years after the date of recording. In this case, the documents may be prepared and kept in the form of electronic documents：
1. Business report；
2. Balance sheet；
3. Statement of profit and loss；and
4. Auditor’s report

Enforcement Ordinance

Article 66 (Disclosure of Matters Concerning Management and Operation of Fund Corporation)

A fund corporation shall disclose the documents referred to in each subparagraph of Article 65 and meeting minutes of the welfare fund council under the conditions prescribed by the Presidential Decree and always make them available for inspection by workers. In this case, documents prepared and kept in an electronic form may be disclosed and made available for inspection in an electronic way, such as by using communications networks, etc.

Enforcement Ordinance

Article 67 (Fund Corporation’s Ownership of Real Estate)

An incorporated fund shall not own real estate except when necessary for performing its business.

Enforcement Ordinance

Article 68 (Relation with Other Welfare Systems)

(1) An employer shall not discontinue or scale down the operation of labor welfare systems or facilities operating at the time of the establishment of a fund corporation by reason of the establishment thereof.
(2) If an employer is implementing the projects of a fund corporation at the time of the establishment of a fund corporation, projects other than those that should be established and operated pursuant to other Acts and subordinate statutes may be integrated into the fund corporation after consultation and decision by the welfare fund council.

Article 69 (Order of Correction)

If an employer or a fund corporation violates the provisions of Article 60 (2), Article 64 and Article 66, the Minister of Employment and Labor may set a proper period and order the correction of the violation during that period.

Article 70 (Causes for Dissolution of Fund Corporation)

An incorporated fund shall be dissolved for any of the following reasons: Provided, That the foregoing shall not apply where the incorporated fund desires continued existence thereof in cases falling under subparagraph 4:

1. Business closure of the relevant business owner;

2. A merger with another incorporated fund prescribed in Article 72;

3. Division or merger through division of an incorporated fund prescribed in Article 75;

4. Participation or interim participation of the relevant business owner in creating a joint labor-welfare fund under Article 86-2 (1) or 86-7 (1).

Enforcement Ordinance

Article 71 (Disposition of Property of Dissolved Fund Corporation)

(1) The property of an incorporated fund dissolved due to business closure shall be used first and foremost for paying wages, retirement and severance benefits payable to employees at the time when the business owner operated the business and money and other valuables that the business owner is obliged to pay to employees otherwise, as prescribed by Presidential Decree, and not more than 50/100 of the residual property, if any, may be appropriated for the stabilization of livelihood of the employees employed by him or her, as stipulated by articles of incorporation.

(2) If any residual property exists even after the appropriation prescribed in paragraph (1), such residual property shall be reverted to the person designated by articles of incorporation: Provided, That if no person has been designated by articles of incorporation, such residual asset shall be reverted to the Labor Welfare Promotion Fund referred to in Article 87, as prescribed by Presidential Decree.

(3) Any property of the incorporated fund dissolved due to the cause prescribed in subparagraph 4 of Article 70 shall revert to the joint labor-welfare fund foundation under Article 86-3 in which the relevant business owner participates.

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Article 72 (Merger of Fund Corporations)

(1) An incorporated fund may be merged with another incorporated fund by merging or transferring business.

(2) When incorporated funds are merged with one another, the incorporated funds shall prepare a merger agreement in which the following matters are included, and shall present it to the welfare fund council of each incorporated fund for resolution thereon:

1. Property of each incorporated fund before the merger and the change in the property of the incorporated funds after the merger;

2. The level of assistance to employees of each incorporated fund after the merger;

3. Schedule for the promotion of the merger;

4. Other important matters regarding the merger.

(3) The level of assistance prescribed in paragraph (2) 2 to each employee of each incorporated fund before merger may be varied for a period not exceeding three years after the merger, taking into consideration the average balance of the fund for each employee of each incorporated fund before merger, the amount expected to be contributed by the business owner after the merger, etc.

Article 73 (Establishment and Registration of Fund Corporation After Merger)

(1) If a fund corporation is established as a result of a merger of fund corporations, the employer of the business established as a result of the business merger shall organize a preparatory committee and undergo the procedures for establishing a fund corporation under Article 52.
(2) A fund corporation surviving a merger of fund corporations shall make an alteration registration and a fund corporation extinguished by the merger shall make a dissolution registration.

Article 74 (Entry into Force and Effect of Merger)

(1) A merger of fund corporations shall come into force when a fund corporation established by the merger registers its establishment or a fund corporation surviving the merger registers its alteration.
(2) A fund corporation established or surviving after a merger shall succeed the rights and duties of a fund corporation extinguished by the merger.

Article 75 (Breakup and Breakup-Merger of Fund Corporation)

(1) A fund corporation may be broken up or broken up and then merged (hereinafter referred to as “breakup, etc.”) as a result of a business breakup or breakup and then merger.
(2) If a fund corporation is broken up, a breakup plan including the following matters shall be prepared and subjected to resolution by the welfare fund council：
1. Distribution of the property of the fund corporation；
2. Schedules for the breakup；and
3. Other important matters concerning the breakup
(3) If a fund corporation is broken up and then merged, a breakup-merger contract including the following matters shall be prepared and subjected to resolution by the welfare fund council：
1. Distribution of the property of the fund corporation and changes in the property of the fund corporation after the merger；
2. Level of support which each fund corporation involved in the breakup- merger will give workers after the merger；
3. Schedules for the breakup-merger；and
4. Other important matters concerning the breakup-merger
(4) When property is distributed pursuant to paragraph (2) 1 and paragraph (3) 1, the distribution shall, in principle, be made based on the number of workers, but may be made in consideration of how much contribution each business made to the creation of its employee welfare fund before the breakup.
(5) Article 72 (3) shall apply mutatis mutandis to the determination of the level of support under paragraph (3) 2. In this case, “merger” shall be read as “breakup-merger”.

Article 76 (Establishment and Registration of Fund Corporation After Breakup, etc.)

(1) If a fund corporation is established as a result of a breakup, etc., of a fund corporation, the employer of the business established as a result of the breakup, breakup-merger, etc., of business shall organize a preparatory committee and undergo the procedures for establishing a fund corporation under Article 52.
(2) A fund corporation surviving after a breakup, etc. of a fund corporation shall make an alteration registration and a fund corporation extinguished by the breakup, etc., shall make a dissolution registration.

Article 77 (Entry into Force and Effect of Breakup, etc.)

(1) A breakup, etc., of a fund corporation shall come into force when a fund corporation established by the breakup, etc. registers its establishment or a fund corporation surviving after the breakup, etc., registers its alteration.
(2) A fund corporation established by or surviving after a breakup, etc., of a fund corporation shall succeed the rights and duties of a fund corporation extinguished by the breakup, etc., under the conditions prescribed by the breakup plan or breakup-merger contract.

Article 78 (Keeping Confidentiality, etc.)

A member of a welfare fund council, a director, or an auditor shall neither divulge any confidential information learnt in the course of performing his/her duties nor hold another office concurrently nor engage in business deal for himself/herself in connection with the operation of the employee welfare fund.

Article 79 (Prohibition of Use of Similar Title)

Any person other than an employee welfare fund corporation under this Act shall not use the title of employee welfare fund corporation or other similar titles.

Article 80 (Mutatis Mutandis Application of the Civil Act)

Except as prescribed by this Act, the provisions concerning juristic persons in the Civil Act shall apply mutatis mutandis to employee welfare fund corporations.

SECTION 3 Selective Welfare System andEmployee Support Program, etc.

Article 81 (Implementation of Selective Welfare System)

(1) An employer may establish and implement a system of allowing workers to make their own choice from among various welfare items according to their preference and needs, and to receive welfare benefits (hereinafter referred to as “selective welfare system”).
(2) When an employer implements a selective welfare system, he/she shall ensure that all workers in the business concerned can equally receive welfare benefits：Provided that the levels of benefits may be set differently according to reasonable standards and in consideration of each worker’s position, years of consecutive service, number of dependent family members, etc.

Article 82 (Designing, Operation, etc. of Selective Welfare System)

(1) If an employer designs a selective welfare system, he/she shall make efforts to ensure that the system reflects basic categories for livelihood security in relation to a worker’s death, disability, disease, etc., and additional categories optional for each individual, which can support sound leisure, cultural and sport activities, etc., in a balanced way.
(2) An employer shall make efforts to directly provide computer services or to entrust a third party to provide such services so that workers are able to choose and use the welfare items provided under a selective welfare system without any inconvenience.
(3) A selective welfare system may be used for employee welfare fund projects.
(4) Necessary details concerning the designing and operation of a selective welfare system under paragraphs (1) and (2) shall be prescribed by the Ordinance of the Ministry of Employment and Labor.

Article 83 (Employee Support Program)

(1) A business owner shall endeavor to implement an employees support program, through which he or she can protect employees by assisting them in solving problems undermining business performance, such as employees’ mental stress and personal grievances arising in the course of performing their duties or in daily lives, and can provide services to employees, such as experts’ counseling services for improving productivity.

(2) Except as prescribed by Presidential Decree, each business owner and participant in employees support programs shall ensure anonymity to protect employees’ confidential information in the course of implementing the measures prescribed in paragraph (1).

Enforcement Ordinance

Article 84 (Gain Sharing)

If business targets, such as profits, etc., which are set for a given year in consultation with the workers of the business have been exceeded, the employer shall give the excess gains to workers or make efforts to use the excess to promote workers’ welfare.

Article 85 (Rewards for Inventions, Suggestions, etc.)

If an employee employed by a relevant business has contributed to increasing the business’s productivity, sales, etc. through an invention or proposal, or by developing new knowledge, information, or technology in connection with his or her duties, the business owner shall endeavor to reward such employee adequately for the contribution. In such cases, the specific guidelines for reward shall be established through the labor-management council under the Act on the Promotion of Employees’ Participation and Cooperation.

Article 86 (Support by State and Local Governments)

The State and local governments may provide necessary support to promote selective welfare systems, employee support programs, gain-sharing, and rewards for inventions, suggestions, etc.

SECTION 4 Joint Labor-Welfare Fund System

Article 86-2 (Creation of Joint Labor-Welfare Fund)

(1) At least two employers may jointly create a joint labor-welfare fund (hereinafter referred to as "joint fund") by contributing part of their income, to conduct the business activities specified in Article 62 (1).
(2) An employer participating in a joint fund and any person, other than employers, may contribute securities, cash, and other assets specified by Presidential Decree to the joint fund, in addition to the contributions made under paragraph (1).
[This Article Newly Inserted by Act No. 13412, Jul. 20, 2015]

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Article 86-3 (Organization of Preparatory Committee for Incorporation of Joint Labor-Welfare Fund Foundation)

The employers who intend to establish a joint labor-welfare fund foundation (hereinafter referred to as "joint fund foundation") shall jointly organize a preparatory committee for incorporation with the employers and persons commissioned by the employers, to authorize the committee to conduct administrative affairs for incorporation and for the election of directors and auditors as at the time of incorporation.
[This Article Newly Inserted by Act No. 13412, Jul. 20, 2015]

Article 86-4 (Organization of Joint Labor-Welfare Fund Council)

(1) Each joint fund foundation shall have a joint labor-welfare fund council (hereinafter referred to as "joint fund council") in order to deliberate on and determine important matters regarding the operation of the fund.
(2) The members of a joint fund council shall be comprised of one representative of employees and one representative of the employer respectively from each enterprise. Article 55 (2) shall apply mutatis mutandis to the election of the members representing employees, while the members representing each employer shall be comprised of the representative of each business or persons commissioned by the representative of each business.
[This Article Newly Inserted by Act No. 13412, Jul. 20, 2015]

Article 86-5 (Promotion of Joint Fund System)

Joint fund foundations may be subsidized by the Labor Welfare Promotion Fund, as prescribed by Presidential Decree, to help cover their expenses incurred in conducting the business activities specified in Article 62 (1).
[This Article Newly Inserted by Act No. 13412, Jul. 20, 2015]

Article 86-6 (Settlement of Disputes of Joint Fund Foundations)

(1) A joint fund foundation may use property contributed pursuant to Article 86-2 or property, the inclusion of which in the contributed property is decided at a joint fund council meeting (hereafter in this Article, referred to as "basic property of a joint fund foundation") in the business activities of the intra-company labor-welfare fund. In such cases, Article 62 (2) shall apply mutatis mutandis to the calculation of the amount available out of the basic property of a joint fund foundation.

(2) Notwithstanding paragraph (1), where any of the following joint fund foundations uses the basic property of the joint fund foundation in the business activities of the intra-company labor-welfare fund, it may increase the amount calculated, as prescribed by the articles of incorporation, within the scope prescribed by Presidential Decree:

1. A joint fund foundation established by a business owner of a small and medium enterprise (hereafter in this paragraph referred to as "business owner of a small and medium enterprise") under Article 2 of the Framework Act on Small and Medium Enterprises and a business owner of a large enterprise under subparagraph 2 of Article 2 of the Act on the Promotion of Mutually Beneficial Cooperation between Large Enterprises and Small and Medium Enterprises;

2. A joint fund foundation established by at least two business owners of small and medium enterprises.

[This Article Newly Inserted on Dec. 8, 2020]

[Previous Article 86-6 moved to Article 86-10 ]

Article 86-7 (Grounds for Dissolution of Joint Fund Foundations)

(1) A business owner who has failed to participate at the time the joint fund foundation was established, may participate in the joint fund foundation, following consultation and decision-making process at the joint fund council of the joint fund foundation in which he or she intends to participate.

(2) A joint fund council shall consult and decide on matters necessary for the interim participation, including the amount of contributions by the business owners who participate in the joint fund foundation pursuant to paragraph (1).

[This Article Newly Inserted on Dec. 8, 2020]

[Previous Article 86-7 moved to Article 86-11 ]

Article 86-8 (Disposal of Assets of Joint Fund Foundations upon Dissolution)

(1) A business owner who has participated in a joint fund foundation pursuant to Articles 86-3 and 86-7 may withdraw from the joint fund foundation where any cause prescribed by Presidential Decree, such as termination of relationship between contractee and contractor, arises.

(2) Where a business owner who has participated under paragraph (1) withdraws from the joint fund foundation (excluding where he or she falls under a ground for dissolution under subparagraph 1 of Article 86-11), the joint fund foundation shall distribute property calculated by the methods prescribed by Ordinance of the Ministry of Employment and Labor according to the ratio of contribution by the relevant business owner to the joint fund foundation based on the time of withdrawal.

(3) A business owner to whom the property is distributed under paragraph (2) shall establish an intra-company labor-welfare fund with such property or make contributions to the intra-company labor-welfare fund.

(4) Matters necessary for procedures for, and methods, etc. of, withdrawal from a joint fund foundation under paragraph (1) shall be prescribed by Presidential Decree.

[This Article Newly Inserted on Dec. 8, 2020]

[Previous Article 86-8 moved to Article 86-12 ]

Article 86-9 (Mergers of Joint Fund Foundations)

(1) Where a business owner who has participated in a joint fund foundation closes his or her business (excluding cases where a business owner falls under a ground for dissolution under subparagraph 1 of Article 86-11), the joint fund foundation shall apply Article 71 (1) mutatis mutandis to the property calculated by the methods prescribed by Ordinance of the Ministry of Employment and Labor according to the ratio of contribution by the relevant business owner to the joint fund foundation.

(2) Where any residual property exists after the appropriation under paragraph (1), such residual property shall revert to the joint fund.

[This Article Newly Inserted on Dec. 8, 2020]

[Previous Article 86-9 moved to Article 86-13 ]

Article 86-10 (Division or Division and Merger of Joint Fund Foundations)

Disputes arising in a joint fund foundation with regard to the methods for operating the joint fund, the purpose of use of the joint fund, the amount of contributions, etc., shall be settled in accordance with its articles of incorporation.

[This Article Newly Inserted on Jul. 20, 2015]

[Moved from Article 86-6; previous Article 86-10 moved to Article 86-14 ]

Article 86-11 (Application Mutatis Mutandis)

A joint fund foundation shall be dissolved for any of the following grounds:

1. Closure of business or withdrawal by a majority of the business owners participating in the joint fund foundation;

2. Merger of joint fund foundations under Article 86-13;

3. Division or merger through division of joint fund foundations under Article 86-14.

[This Article Newly Inserted on Jul. 20, 2015]

[Moved from Article 86-7; previous Article 86-11 moved to Article 86-15 ]

Article 86-12 (Disposal of Property of Dissolved Joint Fund Foundations)

Where a joint fund foundation is dissolved for a ground prescribed in subparagraph 1 of Article 86-11, its property shall be distributed to participating business owners in proportion to the ratio of contribution to the joint fund foundation made under Article 86-2 or 86-7; and any residual assets shall be disposed of pursuant to its articles of incorporation.

[This Article Newly Inserted on Jul. 20, 2015]

[Moved from Article 86-8 ]

Article 86-13 (Mergers of Joint Fund Foundations)

(1) Joint fund foundations may merge when a majority of participating business owners merge or take over business.

(2) Articles 72 (2) and (3) shall apply mutatis mutandis to the procedures, etc. for mergers of joint fund foundations.

[This Article Newly Inserted on Jul. 20, 2015]

[Moved from Article 86-9 ]

Article 86-13 (Mergers of Joint Fund Foundations)

(1) Joint fund foundations may be divided or merged through division depending on the division or merger through division, etc. of businesses operated by a majority of participating business owners.

(2) Articles 75 (2) through (5) shall apply mutatis mutandis to the procedures, etc. for division or merger through division of joint fund foundations.

[This Article Newly Inserted on Jul. 20, 2015]

[Moved from Article 86-10 ]

Article 86-15 (Provisions Applicable Mutatis Mutandis)

@Articles 50 through 54, 56 through 58, 60, 62 (excluding paragraph (2)), 63 through 69, 73, 74, 76 through 78, 80, and 93 shall apply mutatis mutandis to the joint fund system. In such cases, "intra-company labor-welfare fund" in Articles 50 through 52, 56, 63, and 64 shall be construed as "joint fund;" "incorporated fund" in Articles 52 through 54, 56 through 58, 60, 62, 64 through 69, 73, 74, 76, 77, 80, and 93 as "joint fund foundation;" "welfare fund council" in Articles 54, 56 through 58, 60, 62, 66, 68, and 78 as "joint fund council;" and "business activities of an intra-company labor-welfare fund" in Articles 62 and 78 as "business activities of a joint fund", respectively.

[This Article Newly Inserted on Jul. 20, 2015]

[Moved from Article 86-11 ]

Article 87 (Establishment of Labor Welfare Promotion Fund)

The Minister of Employment and Labor shall establish the Labor Welfare Promotion Fund in order to secure necessary financial resources for labor welfare projects.

Article 88 (Raising of Labor Welfare Promotion Fund)

(1) The Labor Welfare Promotion Fund shall be created with the following financial resources：
1. Contributions by the State or local governments；
2. Cash, goods and other properties contributed by persons other than the State or local governments；
3. Money transferred from other funds (excluding the employee stock ownership fund under Article 36 and the employee welfare fund under Article 52)；
4. Loans under paragraph (2)；
5. Fees for guarantee, amount of indemnity and late interest under Articles 24, 26 and 27；
6. Proceeds from the sales of lottery tickets distributed under Article 23 (1) of the Lottery Tickets and Lottery Fund Act；
7. Properties that should be reverted to the Labor Welfare Promotion Fund according to the articles of incorporation in the event of the dissolution of a fund corporation under Article 71；
8. Donations by an employer or an employers’ association；
9. Funds raised pursuant to Article 35 of the Framework Act on Employment Policy；
10. Profits generated from the management of the Labor Welfare Promotion Fund；and
11. Other revenues.
(2) If it is necessary for the management of the Labor Welfare Promotion Fund, money may be borrowed from financial companies or other funds at the expense of the Labor Welfare Promotion Fund.

Enforcement Ordinance

Article 89 (Fiscal Year of Labor Welfare Promotion Fund)

The fiscal year of the Labor Welfare Promotion Fund shall correspond to that of the State.

Article 90 (Operation and Management of Labor Welfare Promotion Fund)

(1) The Labor Welfare Promotion Fund shall be managed and operated by the Corporation.
(2) When the Corporation manages the Labor Welfare Promotion Fund, it shall handle the accounting of the Fund separate from its other accounting.
(3) Necessary matters concerning the management and operation of the Labor Welfare Promotion Fund shall be prescribed by the Presidential Decree.

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Article 91 (Use of Labor Welfare Promotion Fund)

The Labor Welfare Promotion Fund shall be used for the following purposes：
1. Loans for workers’ housing purchase, etc.；
2. Loans for workers’ livlihood security；
3. Scholarships and loans to workers and their children for school expenses；
4. Operation of the labor welfare information system under Article 14；
5. Expenses for supporting credit guarantee under Article 22；
6. Support for employee stock ownership plans；
7. Support for the employee welfare fund system and the joint fund system;
8. Financial support for the establishment and operation of labor welfare facilities；
9. Support for cultural and sport activities to enrich workers’ life；
10. Support for selective welfare systems；
11. Support for employee support programs；
12. Expenses for medical-care activities to promote workers’ health；
13. Expenses for research and development regarding labor welfare projects；
14. Expenses for the implementation and operation of unemployment measures under Article 34 of the Framework Act on Employment Policy；
15. Investment in profit-making businesses to manage the Labor Welfare Promotion Fund；
16. Expenses for the creation, management and operation of the Labor Welfare Promotion Fund；and
17. Other necessary supports for the activities prescribed by the Presidential Decree to promote workers’ welfare.

Enforcement Ordinance

Article 92 (Separation, etc. of Accounting)

(1) The funds referred to in subparagraphs 5 and 9 of Article 88 (1) shall be accounted for apart from the funds from the Labor Welfare Promotion Fund, which are raised and managed for other business purposes.
(2) The funds referred to in subparagraphs 5 and 9 of Article 88 (1) shall be used to cover the expenses referred to in subparagraphs 5 and 14 of Article 91.
(3) Notwithstanding the provisions of paragraphs (1) and (2), the Corporation may, with the approval of the Minister of Employment and Labor, divert the funds from the Labor Welfare Promotion Fund, which are separately accounted for, to cover the expenses referred to in subparagraph 5 of Article 91.

Article 93 (Guidance, Inspection, etc.)

(1) Where it is necessary to promote employees’ welfare, the Minister of Employment and Labor may require the person concerned to report the following matters or may instruct his or her public official to inspect the relevant accounting books, documents, and other goods, and if deemed necessary, order redress in its operations, as prescribed by Presidential Decree:

1. The current status of the Service’s management and operation of the Labor Welfare Promotion Fund;

2. The business affairs, accounting, and property of the non-profit organizations entrusted with the operation of employees’ welfare facilities pursuant to Article 29 (1);

3. The business affairs, accounting and property of an incorporated fund under Article 52.

(2) Where necessary for the purpose of supervising a business owner, an institution providing loan services, an employee stock ownership association, a trustee prescribed in Article 43, or a person offered subsidy or loans, the State or a local government may require the relevant person to report and submit the materials relating to the business affairs referred to in this Act as prescribed by Presidential Decree or issue an order to such person as necessary, or may require a public official under his or her jurisdiction to ask questions to the relevant person or investigate and inspect relevant accounting books, documents, etc.

(3) Any public official who conducts any inspection pursuant to paragraph (1) or (2) shall carry a certificate indicating his or her authority and shall present it to interested persons.

(4) Any public official who conducts an inspection pursuant to paragraphs (1) and (2) shall notify the persons subject to the inspection of the date, time, and details of inspection and other necessary matters at least seven days before the date of inspection: Provided, That the foregoing shall not apply to urgent cases and cases where it is deemed impracticable to achieve the purposes of inspection if a prior notice is given.

(5) The Minister of Employment and Labor or other competent authority shall give written notice of the results of inspection conducted under paragraph (1) or (2) to the persons subject to the inspection.

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Article 94 (Delegation and Entrustment)

(1) The Minister of Employment and Labor may delegate or entrust part of his/her authority prescribed in this Act to the head of a local labor office.
(2) Part of the duties of the Minister of Employment and Labor, prescribed in this Act, may be entrusted to a labor welfare-related agency or organization under the conditions prescribed by the Presidential Decree.

Enforcement Ordinance

Article 95 (Return Order)

(1) The State or a local government may order a person who violates Article 6 to return all or part of the received subsidies and loans under the conditions prescribed by the Presidential Decree.
(2) The State or a local government may order a person who has received subsidies or loans pursuant to this Act in a false or other fraudulent ways to return all or part of the received subsidies and loans under the conditions prescribed by the Presidential Decree.
(3) A person who has received a return order pursuant to paragraphs (1) and (2) shall make that repayment even before the repayment deadline.

Article 95-2 (Special Exception for Workers in Special Type of Employment)

Notwithstanding subparagraph 1 of Article 2, any of the following persons shall be deemed to be employees engaging in the business for the purposes of Articles 19 through 27 and 31:

1. A person who, although he or she is not an employee, provides labor in person for another person's business and receives remuneration from the relevant business owner or recipient of labor, without employing another person;

2. Small and medium business owners referred to in Article 124 (1) of the Industrial Accident Compensation Insurance Act (excluding business owners who employ employees).

[This Article Newly Inserted on Jul. 20, 2015]

[Title Amended on Dec. 8, 2020]

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Article 96 (Penal Provisions)

Any of the following persons shall be punished by imprisonment with labor for not more than one year or by a fine not exceeding 30 million won:

1. A person who commits an act specified in any subparagraph of Article 42-2 (1);

2. A person who dismisses or otherwise treat unfavorably a member of the employee stock ownership association in violation of Article 42-2 (2) on the grounds that the employee reported a violation of paragraph (1) or gave testimony about or presented evidence of such violation.

[This Article Newly Inserted on Jan. 28, 2014]

[Previous Article 96 moved to Article 97 ]

Article 97 (Penal Provisions)

Any of the following persons shall be punished by imprisonment with labor for not more than one year, or by a fine not exceeding 10 million won:

1. A director who operates an incorporated fund or a joint fund foundation in violation of Articles 62 (including cases applied mutatis mutandis in Article 86-15), 63 (including cases applied mutatis mutandis in Article 86-15), and 86-6;

2. A director of an incorporated fund or the employer of the relevant business, who violates the prohibition against ownership of real estate by the incorporated fund or the joint found foundation under Article 67 (including cases applied mutatis mutandis in Article 86-15);

3. An employer who discontinues employees’ labor welfare programs or the operation of employees’ labor welfare facilities or downsizes such programs or facilities in violation of Article 68 (1) (including cases applied mutatis mutandis in Article 86-15);

4. A liquidator who violates any of the methods of disposal of property of a dissolved incorporated fund or dissolved joint fund foundation under Article 71 or 86-12;

5. A member of a welfare fund council or a director or an auditor of a welfare fund council and a joint fund council, who divulges confidential information that he or she has obtained in the course of performing his or her duties, holds another office concurrently, or engages in self-dealing in connection with business affairs of the incorporated fund or the joint fund foundation, in violation of Article 78 (including cases applied mutatis mutandis in Article 86-15);

6. A director of a joint fund foundation who violates any of the methods of disposal of property under Articles 86-8 (2) and 86-9;

7. A user of participating businesses which violate the methods of disposal of property under Article 86-8 (3).

[Moved from Article 96; previous Article 97 moved to Article 98 ]

Article 98 (Joint Penal Provisions)

If the representative of a corporation or an agent, a servant or any other employee of a corporation or an individual commits the offences described in Article 96 in relation to the business of the corporation or individual, the fine prescribed in the respective Article shall be imposed on the corporation or individual, in addition to punishment of the offender：Provided that this shall not apply unless the corporation or individual neglects to give considerable attention and supervision to the business concerned in order to prevent such offence.

Article 99 (Fines for Negligence)

(1) An employer, an incorporated fund, or a joint fund foundation who violates a corrective order issued under Article 69 (including cases applied mutatis mutandis in Article 86-15), shall be subject to an administrative fine not exceeding five million won.

(2) A person who uses a subsidy granted or a loan received under this Act for employees’ welfare for any purpose other than as originally intended in violation of Article 6 shall be subject to an administrative fine not exceeding three million won.

(3) A person who falls under any of the following subparagraphs shall be subject to an administrative fine not exceeding two million won:

1. An incorporated fund or a joint fund foundation that fails to prepare and preserve relevant documents in violation of Article 57 (including cases applied mutatis mutandis in Article 86-15) or Article 65 (including cases applied mutatis mutandis in Article 86-15;

2. A person who fails to comply with a request made for reporting under Article 93 (1) 3 (including cases applied mutatis mutandis in Article 86-15) or makes a false statement in such report, a person who fails to comply with an order issued as necessary, or a person who refuses, obstructs, or evades an inspection conducted by a public official.

(4) Any of the following persons shall be subject to an administrative fine not exceeding one million won:

1. The representative of an employee stock ownership association, who violates the proviso to Article 35 (3) or Article 35 (4), (5), or (7);

2. A representative of employee stock ownership association who fails to provide separate account management in accordance with the method prescribed for the management of the relevant accounts in violation of Article 37;

3. A representative of employee stock ownership association who deposits employee shares in violation of Article 43 (1);

4. A representative or a member of employee stock ownership association who transfers the employee share deposited or provides such employee share as security in violation of Article 43 (3);

5. A representative of employee stock ownership association, who violates the method prescribed in Article 46 for the exercise of the voting rights of the employee stock ownership association;

6. A liquidator who violates the procedure prescribed in Article 47 for dissolution of an employee stock ownership association;

7. A person who fails to comply with a request for report or files a false report under Article 93 (1) 1 or 2, a person who fails to comply with an order issued as necessary, or a person who refuses, obstructs, or evades an inspection conducted by a public official;

8. A person who fails to comply with a request for report or files a false report under Article 93 (2), a person who fails to submit required materials or who submits false materials, a person who fails to comply with an order issued as necessary for supervision, or a person who refuses, obstructs, or evades an inspection conducted under the same provisions.

(5) Administrative fines under the provisions of paragraphs (1) through (4) shall be imposed and collected by the Minister of Employment and Labor, as prescribed by Presidential Decree.

[Moved from Article 98 ]

Enforcement Ordinance