Hello, I am Heejun Lee, an attorney at Yeoam Law Firm in Seoul.
Many business owners in Korea, including foreign investors, see the employment contract as paperwork that only matters during a labor inspection. The scenario below is a fictional composite of several consultations.
“An employee handled our bookkeeping and collections from clients for over five years. At year-end closing we found tens of millions of won missing. When we prepared a criminal complaint, she said: ‘That was never officially my job. The owner just asked me to help now and then.’ We agreed her terms verbally when she joined and never signed anything.”
As this case shows, an employment contract is not just an administrative form. When something goes wrong, it is the most basic evidence of which duties and powers the company entrusted to the employee.
1. Not issuing a written contract is itself an offence
Article 17 of the Korean Labor Standards Act requires employers to state wages, contractual working hours, holidays and annual leave when concluding an employment contract, and to put the key terms in writing and hand a copy to the employee. Under Article 114, a violation is punishable by a criminal fine of up to KRW 5 million, not merely an administrative penalty.
In Decision 2020Do16541 of 27 June 2024, the Supreme Court of Korea held that Article 17 and its penalty clause also apply to fixed-term employees, separately from the administrative fines under the Fixed-term Workers Act. Part-time or contract staff are not an exception.
2. The bigger risk appears in embezzlement and breach of trust cases
Under Articles 355 and 356 of the Korean Criminal Act, occupational embezzlement is committed by a person who holds another’s property in the course of business, and occupational breach of trust by a person who handles another’s affairs in the course of business. Investigators therefore start by asking which duties, powers and obligations the employee actually had.
In Decision 2024Do13000 of 14 November 2024, the Supreme Court indicated that a person is a subject of breach of trust only where protecting or managing another’s property on the basis of a relationship of trust is the essential content of the relationship, beyond merely performing ordinary contractual obligations. The clearer the documented duties and powers, the easier this relationship of trust is to prove.
Without a contract or written job description, the employee can argue “that was not my job” or “this is just a private money dispute with the owner.” Civil liability for damages may still remain, but pursuing criminal liability for embezzlement or breach of trust becomes much harder. In practice, police often close such complaints with a recommendation to resolve the matter in civil court.
3. Is prosecution impossible without a contract?
No. In en banc Decision 2017Do17494 of 19 July 2018, the Supreme Court held that the entrustment relationship required for embezzlement can arise not only from a contract but also from statute, custom, reason or good faith. Bank records, messenger chats and approval records can also show what the employee actually did.
However, the burden of proof falls entirely on the company. What one document would have settled must be pieced together from indirect evidence, and the investigation drags on. Defining duties and powers in writing from day one is the most reliable safeguard.
4. What should the employment contract include?
Beyond the mandatory terms, for employees who handle company money or inventory we recommend documenting:
- Specific duties and scope of work (cash management, collections, inventory and so on)
- Authority to handle company funds or property and the approval procedure
- Confidentiality and the duty to return company data and assets on leaving
- Written updates (job description or appointment notice) when duties change
- The employee’s signature or electronic receipt confirming delivery of the contract
5. Checklist for employers in Korea
- Have you signed a written contract with every employee and given each a copy?
- Are wages, working hours, holidays and annual leave all stated?
- Are the duties and powers of staff who handle money or stock specified in writing?
- Did you document changes when an employee’s duties changed?
- Do you keep a signed or electronic record that the contract was delivered?
6. Frequently asked questions
Q. What is the penalty for not issuing a written employment contract in Korea?
Under Article 17 of the Labor Standards Act, key terms such as wages, working hours, holidays and annual leave must be put in writing and given to the employee. A violation can lead to a criminal fine of up to KRW 5 million under Article 114, and the rule also applies to fixed-term employees.
Q. Can I still file an embezzlement complaint against an employee without a written contract?
Yes, but the company must prove by other evidence that the employee held or managed its property. Without a contract or job description, the employee can more easily argue that the matter is a civil dispute, which makes criminal liability harder to establish.
Q. Can I sign a contract now with an employee who is already working?
Yes. Prepare a written contract reflecting the current terms, duties and powers, give the employee a copy and keep a signature confirming delivery.
A single employment contract can be the starting point for recovering tens of millions of won. Without one, even a case that looks obvious may end as “a civil matter.”
If you would like to check whether your current employment contracts protect your business in Korea, or you suspect an employee of embezzlement or breach of trust, please gather the contract and related records and contact me through the KakaoTalk open chat below or by phone (+82-10-4692-6821). Consultations are available in Korean, English, German and French.
More videos on Korean legal cases are on my YouTube channel (in Korean).
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Attorney responsible for this advertisement: Heejun Lee, Partner, Yeoam Law Firm · Tel. +82-10-4692-6821
This post is general information on Korean law. The outcome in any specific case depends on the facts, including the type of employment, the employee’s duties and the available evidence. The scenario above is a fictional composite of several consultations.
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