Introduction to Korea’s Severe Accidents Penalties Act for Construction Companies

Origins and Purpose of the Act

Korea has long had a variety of statutes aimed at workplace safety. These include a general workplace safety law, the Occupational Safety and Health Act (“OSHA”), and several other safety-related statutes tailored to the characteristics of different industries. However, over the past several years there have been a number of high profile industrial and other accidents which captured media and public attention, and brought calls for more severe accountability to be imposed on the top executives at the businesses involved.

These calls led to the enactment of a new law, the Severe Accidents Penalties Act (“SAPA”). SAPA was enacted on January 26, 2021, in response to strong public sentiment that top executives with real decision-making power should be held accountable for severe accidents both at the workplace and in other public settings.

SAPA and its primary enforcement regulations will become effective on January 27, 2022, though an additional two-year grace period will apply to construction businesses involving projects that cost less than KRW5 billion, and other employers with fewer than 50 employees. Due to the nature of construction work, construction sites have a high risk of industrial accidents. Therefore, the construction industry has been very keen to establish strong SAPA compliance measures.

Pre-Enforcement Preparations

SAPA differs from existing workplace safety laws in that it specifically targets the company’s top executives. The new obligations and penalties under SAPA are all imposed on “responsible executives,” which is defined as:

1.  the representative of the business who is responsible for its overall management; or
2.  a comparable individual responsible for safety-and-health matters for the business.

It is generally understood that this will usually mean that the top decision-maker of the business—the CEO or company representative—is the “responsible executive,” at least. And it may be the case that there are multiple responsible executives at a given business.

In the event of a “severe workplace accident” or “severe public accident” as defined in SAPA, the responsible executive is subject to serious criminal penalties if the accident was caused by the responsible executive’s failure to fulfil SAPA’s new health-and-safety obligations. Given the potential for CEOs to receive severe criminal punishments under SAPA, many companies are currently engaged in significant preparations to comply with the law.

Unlike OSHA, which requires that specific operational safety and health measures be taken, SAPA is more focused on a business’s system for managing and overseeing health and safety. Due to the nature of the construction industry, particular care is needed in designing and implementing such compliance systems because construction businesses frequently undertake high-risk work at temporary worksites, where various subcontractors may also carry out high-risk work. Under SAPA, a construction company which substantively controls and manages a worksite has health and safety obligations with respect to subcontractors and their employees who work at the same worksite.

Enforcement of SAPA is already being taken very seriously. The Ministry of Employment and Labor (“MOEL”) has restructured its internal safety and health enforcement operations by establishing a department dedicated solely to severe accidents, and adding more personnel who can review and determine the causes of severe accidents. It has also established a construction safety inspection department dedicated to the construction sector. The prosecutor’s office, which will oversee criminal investigations in the event of severe accidents, is also preparing for SAPA by providing relevant training to their personnel.

Overview of SAPA

If a severe accident occurs due to a responsible executive’s failure to satisfy SAPA’s new safety-and-health obligations, the responsible executive can receive a heavy criminal sentence. If a severe accident results in death, a sentence of at least 1 year’s imprisonment, or a fine of up to KRW1 billion, or both, is to be imposed.

The company itself may also be fined: in the worst case, a fine of up to KRW5 billion may be imposed on the company. And SAPA also allows plaintiffs in civil litigation to receive punitive damages from the responsible executive or the company, with a damages cap of up to 5 times the actual damages. Korea generally does not allow the award of punitive damages at all, except where specifically authorized by statute.

These penalties are only imposed if a responsible executive does not carry out the responsibilities imposed by SAPA and this results in a severe accident. The core responsibilities imposed by SAPA are: (1) establishing and implementing a safety-and-health management system with the personnel and budget necessary to prevent accidents; (2) if an accident occurs, establishing and implementing measures to prevent its reoccurrence; (3) taking measures to comply with any corrective orders by national or local governments agencies, in accordance with relevant laws and regulations, and (4) taking measures necessary to ensure that obligations under other safety-and-health-related laws and regulations are met.

However, there are few specific and clear standards pertaining to what the above-mentioned measures are and how much preparation should be made to satisfy the requirements. The regulations passed to implement SAPA flesh these requirements out with some more specific obligations, but much is left unspecified. Until there are judicial precedents applying SAPA, practitioners must rely on their experience with other health and 

safety laws, the purpose of the law, and guidance from MOEL to interpret SAPA’s requirements.

Recommendations for Construction Projects

Because SAPA and its regulations do not spell their requirements out in detail, it is difficult to clearly predict how the authorities will apply SAPA. It is thus difficult to formulate any kind of one-size-fits-all plan to fulfil SAPA’s obligations to ensure safety and health.

Nevertheless, it is imperative to effectively establish a health-and-safety compliance system centered around those who are likely to be considered “responsible executives,” to allow the responsible executives to discharge their responsibilities under SAPA. In light of MOEL’s commentary and guidelines relating to SAPA, the following are some basic pointers on what should be done:

• Establish a dedicated safety-and-health organization responsible for the whole company as required by SAPA. Then the responsible executive should review major safety-and-health issues with the assistance of that dedicated organization.
• Review safety and health-related chain-of-command and reporting systems at the head office and each construction site, and implement a system for managing and supervising major health-and-safety issues for every construction site.
• Appoint more than the required number of safety-and-health personnel based on the scale of the construction work, and ensure those personnel devote sufficient working hours to perform their responsibilities.
• Review statutory expenses such as OSHA and Construction Technology Promotion Act-related costs and prepare procedures to manage the actual use of the statutory expenses related to safety-and-health.
• Establish procedures to assess risk and solicit and consider site workers’ opinions, make improvements based on these assessments, and review the implementation of each standard and procedure at least once every six months.
• Establish standards and procedures for ensuring the health-and-safety capacity of potential subcontractors, support improving subcontractors’ health-and-safety practices, and conduct regular inspections on whether subcontractors or service providers practice such standards at least once every six months.
• In the event of an imminent risk of a severe accident, or if a severe accident occurs, prepare a manual to prevent future accidents of a similar nature, and periodically review the implementation of the guidance at least once every six months.
• Prepare a checklist for evaluating legal compliance at each construction site, such as whether required training has been conducted, and make periodic compliance checks at least once every six months.

By Yulchon, Korea, a Transatlantic Law International Affiliated Firm. 

For further information or for any assistance please contact korea@transatlanticlaw.com 

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