The moment the salary is delayed, recovery is 'over'... What is the golden time that business leaders need to know?

Homeplus, which is currently undergoing corporate rehabilitation procedures, has sparked controversy over non-payment of salaries to executives and employees for the first time since its founding. It is analyzed that legal risks have reached their peak as management difficulties such as store seizures and inventory shortages due to tax delinquency are worsening, and wage arrears, which is the 'worst obstacle' to revival, have occurred.

Many corporate managers often misunderstand that all debt repayments will stop once the decision to initiate rehabilitation is made, but the reality is different. Article 179, Paragraph 1, Item 10 of the 'Debtor Rehabilitation and Bankruptcy Act' specifies workers' wages and severance pay as 'public interest claims'. This means that, unlike general rehabilitation bonds that are converted into equity (or written off) or repaid in installments according to the rehabilitation plan, public interest bonds are the highest priority bonds that must be repaid immediately as soon as the payment due date arrives, regardless of the rehabilitation procedure. In other words, it may be possible to approve the rehabilitation plan even if the bank loan is not repaid, but if the overdue salary is not resolved, the rehabilitation procedure itself may be abolished due to the impossibility of carrying out the rehabilitation plan. This is why labor costs should be considered an essential constant rather than an adjustable variable when establishing a fund balance plan.

The problem is the risk of criminal punishment that arises when wages cannot be paid in a situation where funding is blocked. In accordance with Articles 43 and 109 of the Labor Standards Act, anyone who fails to pay wages may be subject to imprisonment for up to 3 years or a fine of up to 30 million won. Executives who are subject to investigation often deny intentionality, citing worsening management as the reason. However, the Supreme Court's precedent maintains a strict stance that simple financial difficulties alone cannot deny the intentionality of wage arrears.

In particular, if arrears are prolonged due to failure to transfuse emergency funds, as in the Homeplus case, there is a very high possibility that the CEO will be criminally charged with violating the Labor Standards Act. If the management, who is supposed to take the lead in preparing the rehabilitation process, is called in by an investigative agency or a new recruit is arrested, the worst situation could be that they will miss out on the golden time for corporate normalization.

Therefore, companies must establish a detailed strategy to minimize risks during the rehabilitation process. First, when raising new funds, it is necessary to clearly persuade the court and creditors that 'wage repayment' is the primary purpose of use of the funds and obtain approval. It must be emphasized that resolving wage arrears is a prerequisite for revival rather than investing for operating profits.

If it is impossible to repay on your own, you must actively utilize the payment in lieu system under the Wage Claims Guarantee Act, well-known as substitute payment. This is not simply a welfare system for workers. It is a strategy that allows the government to first resolve a significant portion of wage debt by confirming the fact of non-payment by the company and assisting in the process. If this substantially reduces the amount of arrears and proves management's will to liquidate, it can be a powerful defense for reduced criminal liability.

For revitalized companies, non-payment of wages is like a trigger that causes judicial risk for management and quenches the momentum of revival. Therefore, corporate legal affairs and human resources managers should set 'resolving labor risks' as the top priority rather than securing operating profits when establishing a rehabilitation plan, and should strive to preemptively establish specialized legal safety measures.
 

Small Business Team

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The moment the salary is delayed, the recovery process 'ends'... What is the golden time that business leaders need to know? (Shortcut)