[Market Eye] Companies fret over new industrial accident law

South Korean companies are fretting over a new industrial safety law that goes into effect Thursday, voicing concerns over the law’s lack of clarity and “excessive penalties” to hold CEOs accountable for fatal industrial accidents. 

According to the Serious Accident Punishment Act, which targets companies with more than 50 employees, business owners or management held responsible could face a criminal penalty of a minimum one-year prison term or fines of up to 1 billion won ($835,000) for fatal industrial accidents under circumstances where safety measures are deemed insufficient.

In Korea, manufacturing and construction firms proceed with on-site projects involving dozens of smaller subcontractors. For accidents at building sites -- where the country’s highest number of severe accidents happened last year based on the Labor Ministry data, at 58 percent -- the people held responsible for safety accidents have mostly been on-site leaders, not executives.

To avoid becoming the first company punished under the new industrial accident law, companies have recently bolstered their safety manuals in preventive measure. Some companies adopted an automated or uncrewed system to minimize human accidents, others have also newly appointed safety experts to minimize risk. 

Earlier this week, Hyundai Motor Group tapped Vice Presidents Lee Dong-seok and Choi Jun-young as chief safety operators. They will lead the group’s safety management organization and come up with preventive measures to minimize safety accidents, according to the group. 

In an industry first, Samsung C&T’s engineering unit has introduced a rule to allow on-site workers to order the temporary suspension of a project upon identifying a risk factor, while the company covers related costs. 

Lotte Chemical has said it will inject 500 billion won over the next three years to set up a strengthened safety system at the workplace.

Companies in shipbuilding, steelmaking and heavy industry, which require hundreds of on-site workers, have also restructured their safety establishments ahead of the law’s enforcement. 

In the latest reshuffle, Posco has filled 40 percent of its executive director positions with those with a background in on-site working experience, focusing on expanding the number of management figures responsible for safety. 

Market insiders view that the latest industrial safety law has also spurred companies’ adoption of uncrewed tasks and automation at workplaces.

Hanwha Group has conducted a large-scale transformation toward automated and unstaffed work processes at its Daejeon site, following consecutive fatal accidents in 2018 and 2019. Since then, the company has reported no accidents. 


Lack of clear legal framework 

According to a Federation of Korean Industries survey of 215 member companies and 434 employees responsible for safety at work, 43.2 percent said the lack of specificity in the law was the biggest difficulty in its enforcement. 

About 25 percent of respondents said the new law places undue burden of responsibility on the management or CEOs. Under the new law, a top executive can be held criminally liable for fatal accidents if the company did not have sufficient safety measures.

Nine in 10 working-level managers said the law needs revision or correction. 

Another survey conducted by the Korea Enterprises Federation with the participation of 314 local companies also showed that 74.2 percent said the law should be revised to include penalty exemptions for top executives. Some 32 percent said the scope of the management’s responsibility for fatal accidents should be clearer. Eighteen percent said even the term “top management” should be clarified. 

Experts agree that the law’s key terms remain vague and open to interpretation.

“The Serious Industrial Accident Law’s obscurity is so big that it creates confusion over who is subject to take responsibility and how to fulfill the duty. That may lead to the government’s subjective interpretation of the law,” said Jeong Jin-woo, a professor at Seoul National University of Science and Technology.

For example, if an employee has an accident while on a commuter bus, it remains unclear whether the top management is accountable for punishment, as it could be deemed either the bus driver’s fault or the company’s mismanagement or faulty operation of the bus. 

“Since not all injuries caused during employment come under the category of ‘serious industrial accident,’ the new industrial safety accident law will require to closely look into cause and effect,” said Kang Seong-kyu, a professor at Gachon University’s Gil Hospital. 

Meanwhile, small and medium-sized enterprises have expressed frustration over a lack of workforce and capital to strengthen their safety measures under the new law.

SMEs argue it is impossible to establish such a safety management system while working with subcontractors. 

Considering that employees of subcontracted companies work at several construction sites as day laborers, it is difficult to set up a separate safety manual to educate those who would leave once their daily duty is finished. 

Others also said the latest law is only benefitting law firms, consulting firms, and external safety management firms. 

To enhance safety awareness among employees, conglomerates have been requesting law firms and consultants come up with responsive measures to the new law as well as evaluation of their safety manuals or educational materials. 

“The purpose of the law was intended to minimize industrial accidents, not to spend money on getting legal advice for safety measures at the company. If the government does not spare the cost for following the safety measures, SMEs will merely prepare safety manuals to not get punished,” said a business owner who runs a facilities manufacturing firm in Suwon, Gyeonggi Province.

By Kim Da-sol (ddd@heraldcorp.com)