Please tell me how to respond to a report of unpaid wages.

Hello. This is a corporate attorney at Daeryun Law LLC.

If an employer fails to pay wages owed to an employee within the prescribed period, the employer may be subject to imprisonment for up to three years or a fine of up to 30 million won for a violation of the Labor Standards Act.

When a report of unpaid wages is received, the competent Regional Labor Office investigates the facts and comprehensively examines the amount of unpaid wages, whether payment has been made, and the employer’s intention to pay.

However, being reported does not necessarily lead to punishment, and the following responses are important.

It is best to pay the unpaid wages first.

Even if an employee has reported unpaid wages, the case is often concluded through withdrawal of the complaint when the unpaid wages are promptly paid and an amicable settlement is reached with the employee.

In addition, explaining your financial circumstances is also an option.

It is necessary to prepare materials that can objectively prove the circumstances behind the delayed wage payments and the current management difficulties, such as poor sales (for example, financial statements and sales ledgers), and to explain them faithfully during the Labor Office investigation.

If the unpaid wages have been paid and a settlement has been reached with the employee, this should be clearly documented by preparing a confirmation of unpaid wages or a settlement agreement in order to prevent future problems.

In the case of unpaid wages, because this is a crime not punishable against the victim’s will, criminal punishment can be avoided once a settlement with the employee is completed, so we also recommend receiving the assistance of an attorney with extensive experience in handling settlements.

By proceeding together through the entire process, from responding to the investigation, preparing documents, and drafting the settlement agreement to defense in any future criminal proceedings, an employer can also minimize any disadvantages.

When a report of unpaid wages is filed, the level of punishment varies depending on whether the employer acted intentionally, whether the unpaid amount has been paid, and the possibility of a settlement with the employee.

Resolving the unpaid-wage issue promptly and reaching an amicable agreement with the employee is most important, and if necessary, consulting a corporate attorney to establish a response strategy is a wise approach.