1. Extinctive Prescription

(1) Concept

‘Extinctive prescription’ refers to expiration of a right that has not been exercised. The principle is that the law does not protect those who ‘sleep’ on it. This means that if people have a right they can exercise but do not for a certain period of time, they will not be able to exercise it, so that the state of legal tranquility already established will be maintained. Most extinctive prescriptions in labor law start at three years. A concept similar to the extinctive prescription under the LSA is ‘exclusive period.’ After expiration of an exclusive period, no further legal appeal can be made. Since it aims at the rapid establishment of legal relations, exclusive period differs from extinctive prescription. Supreme Court ruling on Sept. 20, 1996 96da25371.


(2) Details of extinctive prescription

1) Wage bonds under the Labor Standards Act

Wage bonds will expire unless the claims for deferred wages are exercised within three years (Article 49 of the LSA). Wage bonds can be categorized as monthly salary, retirement allowance, unused annual allowance and so on. Monthly wages (base salary, overtime allowance, holiday work allowance, etc.) are paid on the salary payment date and rights can be exercised from the time when they fail to be paid, so salary calculation will begin from the regular payment date. Bonuses shall be calculated when the right to receive the bonus is incurred, while severance pay shall be calculated from the date of retirement due to the obligation to pay the employee on that day.
Annual paid leave is calculated from the date of conversion to a wage claim after using one year for granted annual leave. Supreme Court ruling on Sept. 14, 1992 92da17754.
In other words, if annual paid leave is managed on a yearly basis, if an employee enters 2018, his annual paid leave from January 1, 2019 to December 31, 2019 will be granted on the first day of 2020 if he performs his work 80 percent of the time or more during the period. During 2020, annual leave shall be used. The starting point for a claim for unused annual leave shall be 2021, and this right shall exist for three years (Article 36, Article 60 of the LSA).

(3) Extinctive prescription for wage bonds and for prosecution

Extinctive prescription refers to expiration of the period during which an employee who has the right to receive compensation may exercise a claim against the employer in the event of a delay in the payment of wages or severance pay. The extinctive prescription for prosecution refers to expiration of the period when prosecution can occur for violating labor law, such as delaying the payment of wages, and begins either on the date the violation occurred or the date a continuing violation ends.
The period before the extinctive prescription kicks in for prosecution of violation of labor-related Acts in terms of delayed payment of wages was extended from 3 years to 5 years in 2007 (Article 249, Paragraph 1, Item 5 of the Criminal Procedure Act). The period before the extinctive prescription for prosecution kicks in shall be deemed to have started 14 days from the date the wages should have been paid or the date the violations terminate (Article 252 of the Criminal Procedure Act). According to Article 49 of the LSA, the extinctive prescription for a wage bond kicks in after three years. However, since the extinctive prescription for prosecution is now 5 years, prosecution for delayed payment of wages will continue to be possible. MOEL Guide, Guide on Handling Unpaid Wages, 2016, pp. 31-32.
Thus, an employee may file a claim for unpaid wages for a period of five years.

2. Suspension of the Extinctive Prescription

(1) Concept
Termination of the extinctive prescription is the occurrence of the factual condition on which the extinctive prescription is based. The reasons for termination of the extinctive prescription are: (i) A request for trial (Article 170 of the Civil Act); ② Participation in bankruptcy proceedings (Article 171); ③ Issuance of a payment order from the court (Article 172); ④ A summons for reconciliation (Article 173); ⑤ Unilateral attendance at the court (Article 173); ⑥ Notification by registered mail (Article 174): claim for money in the case of monetary bonds, if the request is made based upon the registered mail, it is only valid for 6 months if a court filing or application for bankruptcy was not made; ⑦ Foreclosures, provisional attachment, provisional dispositions (Article 176); and ⑧ Approval (Article 177): meaning that the debtor has confirmed a debt to the creditor.

(2) Details of reasons for suspension
Since wage bonds have a 3-year extinctive prescription, if an employee has not filed a claim during the 3-year period leading up to extinctive prescription, the claim can no longer be made. However, in the event of a trial claim, seizure of the wage bond, or provisional attachment, if the employer agrees to the wage bond, extinctive prescription shall not occur. If the employer writes a memorandum on the unpaid wages and pays part of those unpaid wages, extinctive prescription shall be suspended. Supreme Court ruling on June 10, 2010: 2010da8266.

If the worker informs his/her employer of the unpaid wages by means of registered mail, this shall be the reason for a six-month suspension of extinctive prescription (Article 174 of the Civil Act). However, the notification letter shall have the effect of ceasing the extinctive prescription for six months, unless the worker requests a trial, participates in bankruptcy proceedings, responds to reconciliation, undergoes a seizure or accepts a provisional disposition. Ha, Kap-rae, Labor Standards Act, 28th ed., 2016, Jongang Kyungjaesa, p. 315.


(3) Relationship to delayed payment of wages
1) Whether an employee's claim for unpaid wages can be a reason for suspending the extinctive prescription: A criminal or civil complaint filed against a judicial authority, such as a labor inspector, is not accepted as a trial claim. Supreme Court ruling on Mar. 12, 1999: 98da 18214, Kumho construction company.
However, in the event of unfair dismissal, when the related workers are involved in an administrative court’s proceedings as auxiliary participants while the National Labor Relations Commission is working as the defendant, the extinctive prescription is suspended. Supreme Court ruling on Feb. 9, 2012: 2011da20034.


2) Whether issuance of a labor supervisor's confirmation of unpaid wages can effect termination of the extinctive prescription: In cases where a worker who has taken a petition for unpaid wages to the Ministry of Employment and Labor, if the employer simply confirms the amount of unpaid wages, this will not be regarded as extinctive prescription. However, if the employer has made a written confirmation of payment of the delayed wages, this can be regarded as a suspension of the extinctive prescription. Kang, Ji-hyeon, "Issues Regarding Extinctive Prescription on Wage Bonds", Attorneys, Vol. 49, 2016, p. 216; Seoul District Court ruling on Jan. 21, 2016: 2015na42147.