[Published on May 10, 2023 edition of the "Korean Law Insights" column in the Korea Daily’s Economic Expert Section]
Exceptionally, Korean labor law may apply.
Review is needed from the labor law perspectives of both Korea and the U.S.
Numerous Korean government agencies, public enterprises, and private companies (hereinafter referred to as "Korean companies expanding to the U.S.") have established a presence across the United States. These companies either receive employees dispatched from Korea or hire local staff in the U.S. In such cases, does Korean labor law apply to these companies?
Labor law is fundamentally territorial in nature and generally follows the principle of territoriality. Article 12 of the Korean Labor Standards Act also stipulates that the Act applies to workers within the Republic of Korea, in accordance with this principle. From this perspective, labor issues concerning Korean companies expanding to the U.S. are, in principle, governed by U.S. federal and state labor laws.
However, depending on the structure and operational methods of Korean companies expanding to the U.S., as well as the way employees are hired, managed, and supervised, Korean labor law may apply, requiring careful attention. The applicability of Korean labor law is determined by a comprehensive review of Korea’s labor-related statutes, official interpretations by government authorities (such as responses from the Ministry of Employment and Labor), and Supreme Court precedents. Therefore, it is difficult to make a definitive judgment based on limited factors alone. Nevertheless, we will examine common scenarios where Korean labor law is more likely to apply.
First, if a Korean company expanding to the U.S. is established as a corporation or limited liability company (LLC) with an independent legal personality in the U.S., U.S. labor law generally applies. However, Korean labor law may apply to employees in the following cases: (1) The employee was not hired locally in the U.S. but was instead recruited by the Korean headquarters and then dispatched to the U.S. entity. (2) The Korean headquarters oversees the employee’s HR and labor management, including determining their salary and key working conditions. In such cases, Korean labor law may apply to the employee, regardless of their nationality or whether the employment contract with the Korean headquarters designates U.S. law as the governing law.
Next, if a Korean company expanding to the U.S. is established as a branch office, liaison office, or factory without an independent legal personality, it typically remains under the management of the Korean headquarters in terms of HR, labor, and accounting. In such cases, even if the employees perform their work in the U.S., the Korean headquarters may be considered the actual party to the employment contract and the ultimate recipient of the labor provided.
Therefore, regardless of the employee’s hiring location or whether they were dispatched, Korean labor law applies to them. In this case, even if the employment contract specifies a different governing law, it does not exclude the application of Korean labor law. However, if the employee was hired locally in the U.S. and is not a Korean national (e.g., a U.S. citizen), Korean labor law does not apply.
Meanwhile, even when Korean labor law applies, it is important to note that U.S. labor law may not be entirely excluded. As discussed earlier, determining the applicability of Korean labor law to Korean companies expanding to the U.S. is complex. Therefore, it is essential to consult with a Korean attorney. Labor issues involving Korean companies in the U.S. should be reviewed from the perspectives of both Korean and U.S. labor laws.
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Jin Hee Lee/K-Law Consulting Korean Attorney
[Reference link in original Korean]
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