The
Kim Young-ran Act and the Employer’s Joint Penal Liability

Bongsoo
Jung, Labor Attorney / KangNam Labor Law Firm

I. Introduction                                                                                                     

Although Korea has
reached the level of an advanced country in terms of economic scale and
international standing, eliminating improper solicitation and entertainment
practices between the public sector and the private sector, and enhancing
fairness and transparency, remain important social tasks. According to the most
recent Corruption Perceptions Index published by Transparency International,
Korea has received improved evaluations compared with the past; however, public
expectations regarding integrity in the public sector continue to rise. Accordingly,
issues involving improper solicitation and the receipt of money or valuables by
public officials are no longer viewed merely as individual misconduct, but have
expanded into matters of corporate compliance management and internal control.

Against this background,
the Act on the Prohibition of Improper Solicitation and the Receipt of Money,
Goods, etc., commonly known as the Kim Young-ran Act or the Improper
Solicitation and Graft Act, was enacted and promulgated on March 27, 2015, and
took effect on September 28, 2016. In the early stage of enforcement, there was
social controversy because the Act applied not only to public officials,
employees of public institutions, faculty and staff of private schools, and
employees of media companies, but also to their spouses. However, following the
Constitutional Court’s decision upholding the constitutionality of the Act, it
has become an important standard for changing Korea’s culture of solicitation
and entertainment.

Since its enforcement,
the Improper Solicitation and Graft Act has undergone several institutional
improvements and has been adjusted to reflect practical realities. In
particular, the value limits for meals, gifts, and congratulatory or condolence
money have been revised to reflect social and economic conditions. From a
corporate perspective, the need has grown to review in advance whether meals,
gifts, entertainment, sponsorships, and invitations to events provided by
employees to public officials and related persons may constitute violations of
the Act. Even where the amount does not exceed the statutory limit, legal
issues may arise if there is a direct job-related connection, such as licensing
or permits, bidding, supervision, investigation, or evaluation. Therefore,
special caution is required in corporate sales activities and external
cooperation.

In particular, the
Improper Solicitation and Graft Act contains a joint penal liability provision.
Therefore, if an employee of a company makes an improper solicitation or
provides money, goods, or other benefits in connection with the company’s
business, not only the individual offender but also the company may be subject
to sanctions. However, if the company has exercised due care and supervision to
prevent the violation, it may be exempt from liability. Accordingly, companies
should not rely solely on the ethical awareness of individual employees, but
should establish an effective compliance management system, including internal
rules on entertainment, gifts, and external events; prior approval procedures;
employee training; and disciplinary measures for violations.

Below, this article will
review the main contents of the Improper Solicitation and Graft Act, namely the
principles and exceptions regarding the prohibition of improper solicitation
and the prohibition on receiving money, goods, and other benefits. It will also
examine in detail the joint penal liability provisions and the requirements for
exemption from liability for employers, which are particularly important in
corporate practice.

 

 

II.
The Anti-corruption Act

1.
Concept and scope of application

(1) Concept: The purpose of this Act is to ensure that civil servants and relevant
persons fulfill their duties in an upright manner and to secure the public’s
confidence in public institutions by forbidding improper solicitation of civil
servants or other relevant persons and by prohibiting them from accepting
financial or other advantages. This Act is composed of two major parts: anti-solicitation
measures and prohibited financial and other advantages.

(2)
Scope of application

1)
“Civil servants and relevant persons” refers to ①civil servants and employees working in
②
public service-related organizations,[1]③public
institutions, ④schools of various levels and educational corporations, and ⑤media
companies.

2) Spouses of civil servants and
relevant persons

3) Private persons performing
public duties: ① members of various committees, ② persons
who have authority delegated by a public institution, ③ persons
on assignment from the private sector to a public institution, ④
professionals who engage in deliberation or assessment in relation to public
duties.

4) General people: persons who
improperly solicit civil servants or who offer them financial or other
advantages

 

2.
Prohibition of improper solicitation[2]

(1) Details (15
types): ① Authorization, permission,
and any other actions, ②mitigating or remitting various administrative
dispositions or punishments,③ intervening or exerting
influence in the appointment, promotion, or any other personnel management of civil
servants, ④ using influence so that a person is appointed to or
rejected from a position which is involved in the decision-making of a public
institution,⑤ using influence so that a specific individual is
chosen or rejected by a public institution, ⑥using influence so
that duty-related confidential information on tenders, auctions, etc., is
disclosed, ⑦using
influence so that a specific person is selected or rejected as a party to a
contract, ⑧intervening
or exerting influence so that subsidies, etc., are assigned to, provided to,
invested in, or deposited with a specific person, ⑨using influence so that a specific person buys,
exchanges and/or uses goods and services that are produced, provided or managed
by public institutions beyond the normal monetary value, ⑩using influence so that admissions, grades, performance
tests or other matters related to schools of various levels are handled and/or
manipulated, ⑪using
influence so that physical examination for conscripts, assignment to a military
unit, appointments or any other matters related to military service are handled
in a specific way, ⑫using
influence so that, in various assessments and judgments performed by public
institutions, specific assessments or judgments are made, ⑬ using influence so that a certain person is selected
or rejected as the subject of administrative guidance, control, inspection or
examination, or where the outcome thereof is manipulated or discovered
violations are ignored, and ⑭using
influence so that the investigation, judgment, adjudication, decision,
conciliation, arbitration, or settlement of a case or any other equivalent
function is handled in a specific manner.

(2) Exceptions: In order not to
discourage claiming legitimate rights, claiming, or demanding, the following 7
items are permitted under the Anti-corruption Act:

①Requesting certain actions, such as asking for
remedy against or resolution of infringement of a right; suggesting or
recommending the establishment, amendment or rescission of related Acts and/or
subordinate statutes and standards; ②Publicly
soliciting a civil servant or relevant person to take a certain action; ③Where an elected public
official, political party, civil society organization, etc., conveys a third
party's complaints and grievances  the
public interest; ④Requesting or demanding that a public
institution complete a certain duty within a statutory deadline, or inquiring
or asking verification about progress; ⑤Applying or
making a request for verification or certification of a certain duty or
juristic obligation; ⑥Requesting an explanation
or interpretation of systems, procedures or Acts and/or subordinate statutes
related to a certain duty in the form of an inquiry or consultation; and ⑦Any other conduct not deemed as contravening social norms.

 

3.
Acceptance
of financial or other advantages[3]

(1) Details: The previous Anti-Corruption
Act required both a “work-related connection” and clear “benefits given in
return for favors” in order for an action to be subject to punishment, but this
new Act does not require directly-related “bribery in return for favors”, and
any civil servant who receives more than KRW 1 million
will be punished without the need for any work-related connection. In cases
where a civil servant or
relevant person accepts, requests, or promises to receive any financial or other advantage with a value in excess of KRW
1 million at one time or a total of KRW 3 million within
the same fiscal
year from the same person, regardless of the relationship
between such offer and his or her duties, he/she is subject to criminal
punishment. However, in instances where less than KRW 1 million is accepted at one
time, or less than a total of KRW 3 million within the same fiscal year, the civil servant is
subject to criminal punishment only if there is a connection with his/her duty.

 
Financial and other advantage refers to money, goods, and other
financial gain, as well as tangible or intangible gains which provide
convenience or satisfy the person’s needs or desires. Examples are 1) money,
property, hotel vouchers, memberships, admission tickets, etc., 2) meal,
alcohol or golf, provision of transportation, etc., 3) providing economic
benefits such as relief of debt, provision of employment, offering of favors,
etc.

“Work-related
connection” refers to the “duties handled by one’s position.” Examples are: 1)
duties authorized generally and abstractly under the law, 2) duties performed actually
or habitually, 3) duties to support or influence decision makers, and 4) duties
closely related to the job.  

(2) Exceptions: There are 8 valid situations for accepting financial or
other advantages: 

①Financial or
other advantages that a public institution offers to civil servantsor
relevant persons who belong to the institution or are on assignment thereto, or
which a senior civil servant or relevant person offers to his or her
subordinates to either raise their morale or console, encourage, or reward
them;

②Food and
drink, congratulatory or condolence money, gifts, or other items that are offered
to facilitate performance of duties or for social relationships, rituals, or assistance
to festivities and funerals, the value of which is within the limit provided by
Presidential Decree:

 - Meals are allowed to a value of not
exceeding KRW 30,000;

 - Gifts are allowed to a value of not
exceeding KRW 50,000 (however, up to 100,000 won for agricultural and fishing
gifts);

 - Congratulatory and condolence payments
are allowed to a value of not exceeding KRW 50,000 (However, up to 100,000 won
for congratulatory and condolence floor, but in case of Chuseok and Sulnal, up
to 300,000 won);

③Financial or
other advantages that are offered from a legitimate source due to a private
transaction;

④Financial or
other advantages that relatives (under Article 777 of the Civil Act) of a civil
servant or relevant person offer;

⑤Financial or
other advantages that employees' mutual aid societies, clubs, alumni associations,
ethnic societies, friendship clubs, religious groups, social

organizations, etc. related to a civil servant or relevant person offer to
their

members in accordance with the rules prescribed by the respective organizations,
and financial or other advantages from those who have long-term and continuous relationships
with a civil servant or relevant person;

⑥Financial or
other advantages that are uniformly provided by an organizer of an official
event related to the duties of a civil servant or relevant person to all participants
thereof, including transportation, accommodation, and food and drink;

⑦Souvenirs or
promotional goods distributed to many and unspecified persons, or awards or
prizes that are given by a contest or lottery; and

⑧Financial or
other advantages that are permitted by any other Acts and/or subordinate statutes,
standards or social norms.

      

III. Joint Penal Provisions and
the Employer’s Obligations

1. Concept

The joint penal provisions refer
to a system of punishing the employee and the employer together for violations of
the law by the employee in the course of his/her work. Article 24 of the
Anti-corruption Act (Joint Penal Provisions) stipulates that “Where an employee commits a
violation: improper solicitation and/or provision of financial or other
advantage, the violator and his/her employer are punished together. Provided,
that this shall not apply where the employer has not been negligent in giving
due attention and supervision concerning the relevant duties so as to prevent
such violation.”

The
Supreme Court ruled, concerning the reasons for the employer to be exempted
from liability, that whether the employer has been negligent in giving due
attention and supervision shall be determined by considering the following
items collectively: ①the violation and its relevant situation, such as the purpose for
enacting that law, the severity of damages coming from infringing rights due to
violation of the relevant law, and the purpose for introducing the joint penal
provisions in that law; ②the concrete details of the violation
and actual damage caused by the violation of this law; and ③ the size
of the business, along with the degree of command and supervision by the
employer; and ④ the company’s efforts to prevent violations.[4]

2. Related
cases[5]

 1) Improper solicitation

Case 1: In a case where employee X of a construction company
solicited civil servant A of 00 District Administration Office for permission for
a building project in violation of construction laws: In applying the joint
penal provisions, the construction company will receive a fine not exceeding KRW
20 million.

Case 2: In a case where employee X
of a construction company solicited civil servant A of 00 District
Administration Office for permission for a building project, providing whiskey
worth KRW 700,000: If “bribery” as defined in the Criminal Act, is applied, the
construction company will not be punished by the joint penal provisions, but if
the case is not admitted as “bribery” under the Criminal Act, the joint penal
provision is applied and a fine will be given, not exceeding KRW 20 million.

2) Accepting
financial or other advantages

 Case 1: While a construction company was
waiting to receive a construction permit from the District Administration
Office, in a case where employee X provided whiskey worth KRW 700,000 to the civil
servant in charge of construction permits, employee Y provided gift tickets
worth KRW 500,000 to the same person, and employee Z provided a meal equivalent
to KRW 200,000 to the same person, all in different work-related meetings: In
applying the joint penal provisions, the construction company shall bear a fine
of between KRW 2.8 million and KRW 7 million won. 

Case 2:
In a situation where employees X and Y of a construction company invited newspaper
reporters A, B, C, D to a work-related dinner and spent KRW 120,000 for the dinner,
and paid KRW 240,000 at the bar in a second location: As entertainment of the
civil servants by employees X and Y is evaluated as one behavior, in applying
the joint penal provision, one fine will be levied, which will be between KRW 120,000
and KRW 300,000 won: A fine for negligence of two to five times the
received amount → (120,000/6 persons) + (240,000/6 persons)
= KRW 60,000.

3. Cases
in other countries

1) The
United States’ Anti-corruption Compliance: Whether the company established and normally
operated effective anti-corruption compliance plays an important part in cases
where the court decides to prosecute the company or determine a level of
corporate punishment. A company simply preparing the compliance documents is
not sufficient, but whether in actuality their preparations were effective or
not. The US provides guidelines in its anti-corruption law and stipulates
substantial obligations that the employer must strictly adhere to.

2) The
United Kingdom’s Anti-corruption Act: In cases where an employee of a company
or other related person in its agency and/or subordinate company provides
bribes to other people in order to acquire more business or expect favors, the
company itself will be charged for criminal violation. Provided, the company
will not be liable if the company can verify its efforts to implement appropriate
measures to prevent persons from giving bribes.   

 

IV. Conclusion

In
relation to the Kim Young-Ran Act, a company’s main concern is how it can avoid
activities that may be punishable by the joint penal provisions. In order to avoid
such liability, the company must prepare both preventative and disciplinary measures
as well as rules for compliance, conduct ethics education, and actually take disciplinary
action for offenders. In particular, with the introduction of the Kim Young-Ran
Act, it is necessary to recognize that a company’s existing entertainment
practices could be detrimental not only to the employee him or herself, but to the
company as well. The Anti-corruption Compliance program in the United States or
its equivalent in the United Kingdom can be good reference points for adequate
procedures to prevent corruption. The best way for a company to avoid this
joint punishment is to exert real effort in terms of implementing considerable
attention and supervision.