777 repeat wage defaulters hit with loan, subsidy bans before conviction

A total of 777 employers who have repeatedly withheld wages will face restrictions on loans and participation in government support programs for one year — the first time sanctions have been applied under a system designed to penalize serial wage defaulters before a court conviction is secured.

The Ministry of Employment and Labor convened the Wage Arrears Information Review Committee on Tuesday and approved credit sanctions against the 777 employers, the ministry said Wednesday. The action was taken under the repeat wage defaulter sanctions system introduced last October.

The sanctioned employers will be listed as credit-risk subjects for one year with Korea Credit Information Services, the central credit information repository. The listing restricts their access to financial services including loans and bars them from participating in national and local government subsidy and support programs. They will also face disadvantages in pre-qualification screening and contract award decisions for public procurement bids.

Whether an employer qualifies as a repeat defaulter is assessed based on wage arrears records from the preceding year. Those who have withheld three or more months of wages — excluding severance pay — or who have accumulated five or more violations with total arrears, including severance pay, of at least 30 million won ($22,400) are subject to the sanctions.

Under the existing framework, public disclosure of defaulting employers and credit sanctions required a court conviction — specifically, two or more guilty verdicts within the past three years for wage arrears. The disclosure period is three years and the credit sanction period seven years, but the system made it difficult to act swiftly against employers who continued to withhold wages while their cases were still before the courts.

The new system was designed to close that gap, allowing credit sanctions of up to one year to be imposed on confirmed repeat defaulters even before a conviction is handed down. The ministry notified the employers in advance, gave them at least three months to submit explanations, and then reviewed the submitted materials before the committee made its final determination.

"The government views wage theft as equivalent to theft and will impose swift and strong credit sanctions on repeat defaulters," Deputy Minister Kwon said. "We will do our utmost to eradicate wage arrears through comprehensive on-site inspections targeting industries with high rates of violations and through cooperation with local governments."