Personnel and Labor Affairs (M&A)

Legal disputes related to HR and labor often arise when a company carries out a merger and acquisition (M&A) process.

This is because, when changes occur in the business governance structure and management methods during an M&A, the direction of HR and labor management may also change.

Corporate HR and labor legal disputes may take various forms, such as issues of employment succession, succession of working conditions, and civil litigation with workers, so preventing them in advance is important.

One of the important issues that must be reviewed in M&A due diligence is whether officers and employees qualify as workers.

This is because matters such as restrictions on dismissal, wage claims, payment of retirement benefits, and rights related to labor unions vary depending on whether a person is recognized as a worker.

In legal due diligence, worker status should be determined not simply by whether an employment contract exists, but on the basis of the actual contractual relationship between the individual and the company and the manner in which the work is performed.

If the target company uses various forms of personnel such as freelancers, outsourced contractors, commissioned workers, and workers in special types of employment, the possibility that worker status may be recognized regardless of the form stated in the contract should be examined carefully.

If a person is recognized as a worker, contingent liabilities such as past unpaid wages, retirement benefits, or failure to enroll in the four major insurances may arise, and the validity of any dismissal may also become an issue.

Accordingly, the manner of work, the autonomy over working hours and place of work, the contract term and method of paying remuneration, and similar factors should be reviewed closely, along with actual work records and records of work instructions.

In addition, even where a subcontracting agreement has been concluded with an outsourcing company, if the company in practice directs the work itself, this may be found to be unlawful dispatch.

In such a case, the legal risks, such as criminal punishment for violation of the relevant laws or an obligation to hire directly, are significant, so the actual state of work direction and whether the arrangement is a disguised subcontract should be examined comprehensively.

The wage system and the retirement benefit scheme are core issues that may lead to contingent liabilities in the M&A process.

If the target company does not operate wage calculation and payment, retirement benefit accruals, and similar matters in accordance with labor law, the buyer may bear an unexpected, large-scale labor cost burden.

Wage payment methods such as the comprehensive wage system, the job characteristics of each department, and actual working hours and records of remuneration paid should be checked carefully.

The management of working hours is an area carrying significant practical risk, including legal punishment and administrative fines.

Whether lawful consent has been obtained for overtime work exceeding statutory working hours and whether the corresponding allowances have been paid should be reviewed, and the operation of systems such as flexible working arrangements and the flexible working hours system should also be checked.

In particular, it should be examined carefully whether there is any unofficial overtime work, such as work instructions sent by messenger after working hours or the submission of reports on weekends, and whether the corresponding allowances are paid properly.

The HR and labor field goes beyond simple employment issues. It has a strong potential to expand into complex legal risks intertwined with various adjacent fields, such as mergers and acquisitions (M&A), compliance, and taxation.

In particular, many sensitive issues, such as employment succession, the wage system, and the determination of worker status, can arise during corporate restructuring or organizational realignment, so advance assessment and a strategic response are critical.

Our firm includes many attorneys with an average of more than 10 years of experience, and through close collaboration with experts in each field, such as labor consultants, it provides tailored legal services covering analysis of employment structures, due diligence response, and the prevention and handling of disputes.

In addition, we establish a review system so that HR and labor risks can be identified in advance, and even where a problem has arisen, we present prompt and practical response measures so that business operations are not disrupted.

If you are experiencing difficulties with M&A or management due to HR and labor issues, you may consult the mergers and acquisitions attorneys at Daeryun Law Firm at any time.