Navigating the business impact of South Korea’s Serious Accidents Punishment Act

Introduction of the Act

South Korea’s Serious Accidents Punishment Act (SAPA or the Act), enacted on 27 January 2022, has substantially impacted the country’s legal landscape. Primarily aimed at preventing grave accidents, ensuring accountability, and protecting the lives and well-being of citizens and workers, SAPA introduced significant legal consequences for businesses. The Act places a heightened level of responsibility on business owners, management executives, and corporations to ensure safety in operations and facilities that may pose risks to human health. This elevated accountability applies particularly when these entities fail to adhere to safety measures, leading to human casualties.

SAPA classifies two categories of ‘serious accidents’: ‘serious industrial accidents’ encompassing multiple fatalities or long-term recovery injuries among workers, or recurring occupational illnesses; and ‘serious civic accidents’ resulting from a defect in the design, manufacture, installation, and management of a specific raw material or product, public-use facility, or public transportation vehicle leading to deaths, prolonged recovery injuries, or widespread illness. Under the provisions of the Act, the obligation of guaranteeing occupational safety and health is placed upon business owners or those holding managerial responsibilities, also referred to as responsible managing officers (RMOs) in the Act. Additionally, the Act establishes an extended range of accountability for these RMOs, particularly in the context of outsourcing arrangements.

In the event of a serious accident, SAPA stipulates that the business owner or RMO could face significant penalties. These may include a minimum sentence of one-year imprisonment or fines up to KRW 1bn for individuals, and up to KRW 5bn for corporate entities. This represents a significant escalation in the severity of penalties compared to those previously imposed under the Occupational Safety and Health Act (OSHA).

To aid companies in complying with these changes, SAPA has provisioned a phased rollout timeline. This timeline allows businesses, particularly sole proprietors and those with fewer than 50 regular employees, a three-year enactment period to adjust to the new regulations. SAPA has been effective from 27 January 2022, for sole proprietorships or businesses with 50 or more workers, and the Act will apply to businesses with fewer than 50 workers from 27 January 2024.

Implications of SAPA in recent cases

The rigorous enforcement of SAPA has been demonstrated in several cases. In a notable legal precedent, the Uijeongbu District Court Goyang Branch delivered a judgment on a case involving a violation of SAPA. The case centered around a fatal incident at a nursing hospital construction site where a subcontracted worker lost his life due to a fall. In this case, the prime contractor representative was sentenced to one year and six months in prison, with the execution suspended for three years, while the company itself was
fined KRW 30m.

In another influential judgment by the Changwon District Court Masan Branch on 26 April 2023, a representative of a prime contractor was sentenced to one year in prison for violating both SAPA and OSHA. This case was prompted by the death of a subcontracted worker at an outdoor worksite. The subcontractor’s representative, who was the direct employer of the deceased, was also penalised with a six-month prison sentence, suspended for two years.

A third pivotal case relates to a fatal accident at S Industry’s quarry in January 2022. The S Group’s chairman was indicted by the prosecutors for violating SAPA. This indictment added another layer of complexity to the ongoing debates about who should be considered a RMO under the Act. Critically, this case underscored SAPA’s extensive reach, demonstrating that its implications are not confined to the employer company alone. It highlights the fact that SAPA can reach other figures in the corporate hierarchy, such as the chairman in this case. This broader interpretation underlines the critical need for thorough risk assessment, improvements in health and safety management systems, and the implementation of preventative measures against industrial accidents.

Implications and recommendations for the South Korean labour market

The labour market in South Korea is currently undergoing significant changes due to the government’s revitalised emphasis on workplace safety and adherence to environmental, social, and governance (ESG) principles. The enactment of SAPA, with its stricter penalties to safeguard employee health and safety, represents a crucial component of this transformation.

In response to this legislation, there has been an upsurge in inspections, investigations, and audits conducted by the Ministry of Employment and Labour (MOEL). After any serious accident, MOEL frequently enforces work suspension orders, which remain in effect until adequate safety measures are implemented. It’s crucial to note that these work suspensions can lead to substantial financial losses due to operational downtime, as well as potential reputational damage and a decrease in stakeholder trust.

Final reflections

Reflecting upon the encompassing reach of SAPA and its substantial impact demonstrated through judicial interpretations, prosecutorial actions, and rigorous enforcement, it becomes evident that the Act’s implementation possesses widespread implications for all business sectors. This indicates an undeniable need for strategic, well-informed responses from corporations operating in this evolved regulatory environment. As a pragmatic step towards efficacious navigation through these changes, businesses are advised to develop comprehensive response strategies and cultivate a thorough understanding of the Act’s enforcement rules to proactively address potential risks.

The mandate for corporate leaders and management, especially those operating in South Korea, to diligently comprehend and comply with their safety-related legal obligations has been underscored. Compliance is no longer a mere option – it has evolved into a cornerstone for maintaining operational stability. This calls for an unwavering commitment to understand, implement, and abide by these critical safety laws.