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Jipyong News|Newsletter_Labor & Employment

[Case Highlight 1] Successfully defended a representative director of a company who was accused of violation of the Act on the Guarantee of Employees’ Retirement Benefits to be acquitted

2021.01.14

A company (the “Company A”) entered into an agreement with another company (the “Company B”) for acquisition of shares of the Company B and management right (the “Agreement”). Thereafter, the Company A entered into new employment agreements with two individuals who were then employees of the Company B (collectively, the “Employees”) and resigned from the Company A after their service for seven months of employment (with the Company A). The Employees accused the representative director of the Company A of alleged violation of the Act on the Guarantee of Employees’ Retirement Benefits (the “Act”), claiming that the Company A was obligated to pay retirement benefits to the Employees since it succeeded to the employment relations with them while it was acquiring the business from the Company B. A criminal prosecution was subsequently instituted against the representative director of the Company A.  
 
Representing the representative director, JIPYONG’s Labor Team argued that the Company A is not obligated to succeed to the employment relations toward the Employees since the Agreement does not involve business transfer. Furthermore, we argued that his intention to violate the Act could not be recognized because he had a reasonable basis to dispute succession of the employment relations for the Employees, on the ground of the retroactive effect of the Agreement that had already been rescinded.  
 
Finding that it is hard to conclude that the proofs produced by the prosecutor demonstrated beyond a reasonable doubt that the accused had an intention to violate the Act, the first-instance court declared the accused not guilty. Moreover, in the appeal case where the court determined whether the Agreement covers the business transfer, it found that the accused cannot be deemed to have the obligation to pay the retirement benefits since they can hardly conclude that the substantiality of the Agreement equates to the business transfer in which succession of personal/physical properties occurs. Therefore, the prosecutor’s appeal was rejected.

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