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Subject   April 2019 - Extinctive prescription system under the Labor Standards Act
Extinctive prescription system under the Labor Standards Act

I. Introduction
The extinctive prescription system recognizes the status of rights or claims that have not been exercised for a certain period of time, even if that status does not conform to a true rights relationship. In other words, if people do not exercise specific rights for a certain period of time, they can no longer exercise those rights due to extinctive prescription. The reason for this is to limit rights that have not been exercised, and to promote the establishment of legal security and expedite claims or the use of rights. The Labor Standards Act (LSA) also attaches extinctive prescription to non-performance of rights to promote their exercise and thereby protect workers.
Since the extinctive prescription for deferred wages kicks in after only three years, the amount of claimable wages is gradually reduced as the period before extinctive prescription passes. In particular, at the stage of petitions and accusations filed with the Ministry of Employment and Labor, suspensions of the extinctive prescription on deferred wages are not allowed, and so action in a civil court is required. In other words, as labor inspectors handle investigations of complaints regarding deferred wages, and determine the facts behind the delay by examining the workers affected and their employers, these legal actions have no effect on the extinctive prescription. On the other hand, claims for compensation for occupational accidents are recognized as filing for work compensation with the court. The extinctive prescription is suspended and claims for industrial accident compensation can be extended to 5 years.
Since they are both special laws designed to protect workers, the LSA and the Industrial Accident Compensation Insurance Act (IACI) differ from other laws in terms of suspensions and duration before the extinctive prescription kicks in. I will look into the overall extinctive prescriptions in the LSA.

II. 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.

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 are not 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. 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 15 days' annual leave if he works at 80 percent or more for 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).
2) Benefits under the Industrial Accident Compensation Insurance Act (IACI Act)
Rights protected by the IACI Act shall extinguish unless they are exercised within 3 years of when the right to claim compensation for a work injury or disease begins. However, the right to receive disability benefits, survivor benefits, funeral expenses benefit, compensation pensions for pneumoconiosis, and survivor’s pensions for pneumoconiosis will expire within five years if not exercised (enacted Dec. 13, 2018, Law No. 15665). The insurance benefits of the IACI Act can be divided into the following three categories: ① Claims for continuous insurance benefits, ② Claims for lump sum insurance benefits, and ③ Claims for pension benefits. Each type of pension insurance benefit has a different point when the extinctive prescription kicks in.
① Claims of continuous insurance benefits include claims to medical care benefits and work suspension benefits. Medical care benefits are paid when a worker is injured or becomes sick in relation to work, and in principle is paid as reimbursement of actual medical expenses (Article 40 of the IACI Act). That is, the period before the extinctive prescription for the right to claim this insurance benefit kicks in begins the day after the cost of medical treatment is paid, not when a worker’s occupational injury or illness first occurs. Since the work suspension benefit is paid for a period that a worker who has been injured or sick cannot work, the extinctive prescription begins the day after the worker first becomes unable to work so they can receive medical treatment (Article 52 of the IACI Act).
② Claims for lump-sum insurance benefits include claims to lump sum payments of disability compensation, survivor compensation, or an allowance of some sort. A lump sum disability compensation payment shall be paid to a worker who has been injured on the job or suffered from a work-related illness, and whose disability continues after recovery. A disability benefit is provided when a worker has completed his/her treatment and the disability is fixed (Article 57 of the IACI Act). Survivors' compensation is paid in the form of a pension in principle, but if there is no legal beneficiary, a lump sum compensation is possible. The period before the extinctive prescription kicks in begins on the day after the relevant worker has died (Article 62 of the IACI Act). Funeral expenses are only paid when they have actually occurred (Article 71 of the IACI Act).
③ Pension insurance benefits include pensions for disabilities and survivors, with payment beginning the first month after the month in which the reason for payment occurred.
In the case of noise-induced hearing loss, the Labor Welfare Corporation's Guidelines for Work Disabilities previously claimed that the 3 years’ limitation begins "when leaving the noisy workplace," but the court ruled that it could be considered to have begun at the time of "healing" instead. As a result, in 2016, the Ministry of Employment and Labor changed the extinctive prescription for noise-induced hearing loss so that the calculation date begins from diagnosis. Therefore, in recent cases, the court has ruled that "the extinctive prescription for a person diagnosed with noise-induced hearing loss after a long absence from the noisy workplace cannot be considered to have come into effect even if he/she has applied for a disability benefit after three years have passed from the time of diagnosis."

3. The extinctive prescription for wage bonds and the extinctive prescription 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. Thus, an employee may file a claim for unpaid wages for a period of five years.

III. 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) ⑧ Approval (Article 177): meaning that the debtor has confirmed a debt to the creditor.

2. Details
(1) 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.
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, responses to reconciliation, has seizure or accepts a provisional disposition.

(2) 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. However, in the event of unfair dismissal, when the related workers are involved in the administrative court’s proceedings as auxiliary participants while the National Labor Relations Commission is working as the defendant, the extinctive prescription is suspended.
2) Whether issuance of a labor supervisor's confirmation of unpaid wages can be an 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.

(3) Relationship to the IACI Act
In accordance with the IACI Act, a worker’s filing of a claim that he/she has an occupational injury or illness can terminate the extinctive prescription, which will affect all claims related to industrial accident compensation insurance benefits (Article 113 of the IACI Act). In general, submitting a complaint to the Ministry of Employment and Labor regarding unpaid wages will not be considered a trial claim. However, if an industrial accident application is filed with the Labor Welfare Corporation, it shall be regarded as a trial claim which can terminate extinctive prescription. As a precedent, a worker filed an application for occupational accident compensation benefits, but was rejected. Then after he did not apply for review within 90 days after the rejection, the corporation dismissed his late claims due to extinctive prescription. However, the Supreme Court recognized that the claim for insurance benefits pursuant to Article 36 (1) of the IACI Act as a reason for termination of extinctive prescription, separate from the reason for the extinctive prescription under the Civil Act.

V. Conclusion
The extinctive prescription system promotes legal stability and quick remedy for violation of rights. In industrial accident compensation, it is moving toward better protection of workers by extending the period prior to extinctive prescription or terminating it. However, for claim for deferred wages, a lawsuit should be filed with a civil court because the payment of those wages or the filing of a complaint with the Labor Office will not be regarded as a suspension of extinctive prescription. In other words, unpaid wages would be reduced gradually due to the completion of extinctive prescription as the time would pass by while complaining to the labor office for unpaid wages. Therefore, it is necessary to improve the extinctive prescription system against delayed payment of wages. First of all, it is necessary to suspend the extinctive prescription just like the claims to the court when a worker takes a petition or complaint to the labor office over unpaid wages. Secondly, the extinctive prescription for prosecution was extended from three years to five years in 2007, which has caused some confusion in applications for remedy against late payment of wages. Therefore, in terms of protecting workers, the extinctive prescription for wage bonds should be extended from 3 years to 5 years as well.


164 (1/9)
No Subject
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149 May 2018 - Legal Effect of a Retention Bonus (Signing Bonus)  
148 April 2018 - The Right of Fixed-term Workers to Expect Renewal of their Employment Contract  
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146 February 2018 - The Employment System for Foreign Workers and Available Remedies for Violation of Their Legal Rights  
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