In the Seoul office of a foreign company (hereinafter referred to as “the Company”) that has about 300 employees and is engaged in the apparel business, a labor case occurred due to escalating disputes between directors in April 2015. With two departments of the Company combining into one, the executive managing director told the managing director that it would be not desirable to have two directors in one department, and told the managing director that she needed to resign from the Company. The managing director (hereinafter referred to as “the Employee”) told the Company that she would sue it for violating the Labor Standards Act and would also report additional claims of other employees unless the Company paid her a severance bonus of two years’ annual wages. The Company responded that it did not order the Employee to resign, rejected her demand for a severance bonus, and explained that the Company had not violated the Labor Standards Act. Just after that, the Employee began a lawsuit against the Company and visited the Gangnam Labor Office to claim the Company had violated the Labor Standards Act, and had not paid annual leave allowance for unused leave or additional allowance for her overtime work.

The main item in these accusations: First, the Company regulated in the Rules of Employment that it would not compensate for unused annual leave and instead would promote its use, which the Company did through individual emails to all personnel. Where the promotion of annual leave use has been done through email, the main point is whether or not the Company must give financial compensation for unused leave. Herein, I would like to look substantially into these two main points of dispute to confirm whether or not the Company had violated the Labor Standards Act.

1. Measures for Promoting the Use of Annual Leave

(1) Current situation

The Company regulated in the Rules of Employment that it would not compensate for unused leave, had informed personnel of the number of available annual leave days in the early part of the year, and sent similar emails again after six months to the employees to actively promote their use. In October, it notified each individual employee by email that he or she needed to use his/her remaining annual leave days by the end of the year, and that there would be no financial compensation for unused leave. In reality, the Company had not paid any allowance for unused annual leave so far.

2. Related law and guidelines regarding measures for promoting use of annual leave

1) Regulation of the Labor Standards Act (LSA)
The current LSA regulates the provision of ‘promoting the use of annual paid leave’ in relation with ‘annual paid leave’. Article 60 (Annual Paid Leave) (1) An employer shall grant 15 days’ paid leave to a worker who has registered not less than 80 percent of attendance during one year.
(2) An employer shall grant one day’s paid leave per month to a worker whose consecutive service period is shorter than one year or whose attendance is less than 80 percent, if the worker has offered work without absence throughout a month.
(3) In case an employer grants a worker paid leave for the first one year of his/her service, the number of leave days shall be 15 including the leave prescribed in paragraph (2), and if the worker has already used the leave prescribed in paragraph (2), the number of used leave days shall be deducted from the 15 days of leave.
(4) After the first year of service, an employer shall grant one day’s paid leave for each two years of consecutive service in addition to the leave prescribed in paragraph (1) to a worker who has worked consecutively for 3 years or more. In this case, the total number of leave days including the additional leave shall not exceed 25.
(7) The leave referred to in paragraphs (1) through (4) shall be forfeited if not used within one year. However, this shall not apply in cases where the worker concerned has been prevented from using the leave due to any cause attributable to the employer.
Article 61 (Measures to Urge Workers to Take Annual Paid Leave) If a worker’s leave has been forfeited for non-use pursuant to Article 60 (7) despite the fact that the employer has taken measures described in any of the following subparagraphs to promote the use of paid leave prescribed in Article 60 (1), (3) and (4), the employer shall have no obligation to compensate the worker for the unused leave, and shall not be deemed to have caused the non-use through reasons attributable to the employer’s action(s) under the proviso of Article 60 (7):
1. Within the first 10 days of the six months before unused leave is to be forfeited pursuant to Article 60 (7), an employer shall notify each worker of the number of his/her unused leave days and urge them in writing to decide when they will use the leave and to inform the employer of the decided leave period; and
2. If a worker, despite the urging prescribed in subparagraph (1), has failed to decide when he/she will use whole or part of the unused leave and to inform the employer of the decided leave period within 10 days after they were urged, an employer shall decide when the worker uses the unused leave and notify the worker of the decided leave period in writing no later than 2 months before the unused leave is to be forfeited pursuant to Article 60 (7).

2) Related MOEL guidelines
The ‘written document’ mentioned in Article 61 of the LSA refers to a paper document. Electronic documents are only possible in exceptional cases where the company has handled every operation by means of electronic documents in the process of its drafting, obtaining approval and implementing through equipped electronic work-processing systems (Guideline Gunjung-1128, Feb. 7, 2012). Accordingly, informing by email in the course of promoting the use of annual leave cannot be regarded as the notification by written document. Labor Ministry Guidelines: Gujung-6488, Nov. 1, 2013.


If the employee has submitted a vacation plan with stipulated dates of leave after the employer has promoted the use of annual leave, the stipulated dates of leave shall be regarded as the employee’s declaration of intent to use his/her annual leave. Provided, in cases where the employee comes to work on the stipulated date of leave, if the employer received the employee’s labor and did not express a rejection of his/her coming in to work, it shall be regarded that the employer has approved the labor service on the expected date of leave, and so the employer shall pay an unused leave allowance. Guideline Limjang-285, Oct. 21, 2005.


3. The Employer’s Countermeasures

The Company has promoted the use of annual leave through email, but has not done so through written documents. Also, the Company did not evidentially reject the provision of the employee’s labor when the employee provided work on dates expected to be used as annual leave. Based upon these facts, the employer recognized that it had not taken measures promoting the use of leave as stipulated by the LSA, and then paid unused annual leave allowance for the past three years in the salary payment for June 2015.

4. Conclusion

The labor case herein is a very common one that can occur easily for companies. Regarding promotion of the use of annual leave, it is frequent for companies to take formal measures without assigning annual leave for definite working days to employees and in this way avoid paying allowance for the unused annual leave. That is, companies promote the use of annual leave by informing through email only. In cases where the employees come to work on days designated for annual leave, companies do not pay annual leave allowance for unused annual leave owing to their efforts to promote the use of annual leave. However, as this case shows, the Company did not provide the use of annual leave on the designated days, so the fact that employees could not use annual leave was due to reasons attributable to the Employer. The Employer therefore had to pay an unused annual leave allowance.