Korean industrial accident compensation insurance: Settlement Following an Occupational Fatality

Korean industrial accident compensation insurance: Settlement Following an Occupational Fatality

?by Bongsoo Jung / Korean labor attorney

I. Introduction

In October 2015, the Seoul International Fireworks Festival was held at the Han River Park and provided a fantastic show and good memories for many. However, during the night just before the fireworks began, a daily worker (hereinafter referred to as “the deceased worker”) drowned while working on preparations for this event.?While the deceased worker was moving laser equipment for the fireworks from a boat to a barge, he lost his balance, fell into the water and died. The deceased worker was hired as a daily worker by the company that would operate the laser equipment (hereinafter referred to as “Company A”), which in turn was in a subcontract with the primary contractor (hereinafter referred to as “Company B”) in charge of the whole fireworks project. In addition, the boat where the accident happened belonged to a third company (hereinafter referred to as “Company C”).

A funeral could not be held due to disputes with the surviving family, so the president of Company A visited KangNam Labor Law Firm and asked for its assistance in resolving this occupational accident case. This labor law firm, representing Company A, explained the legal responsibilities to each party and successfully helped them to reach an amicable settlement. Here, I would like to explain how the claims in this occupational accident were resolved, and the legal points of the disputes.??

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II. Facts

On Saturday October 3, 2015, the Seoul International Fireworks Festival 2015 was held at the Han River Park in Yeouido. Company A had entered into a subcontract with Company B (presiding over the fireworks for the festival), and was engaged in leasing, installing and operating the laser equipment. Company A had hired the deceased worker as a daily worker to be paid a daily rate of 100,000 won from September 29 to install the laser equipment. The deceased worker had been working on this installation with the president of Company A from 2 pm to late night on Friday, October 2. At 10:30 in the evening, three persons (Company A’s president, the deceased worker, and another employee) were moving the laser equipment from a 5 meter-long boat to a barge floating on the river between Wonhyo Bridge and the Han River Train Bridge near Yeouido. While the deceased worker was lifting the laser equipment from the motor boat to the barge, he lost his balance and fell into the water. An underwater search begun very shortly after by the police failed to find him. It was only on Sunday October 4, at 8:30 am, that his body was found floating near the Han River Park (Yeouido area) and recovered by the police.

The deceased worker was unmarried at the time of death, and did not live with any family members. His parents passed away years ago, and he is survived only by a brother and a sister. On November 6, 2015, the surviving family reached a settlement with the president of the contractor, Company B, and the president of the subcontractor, Company A. The total amount of compensation came to 260 million won, with the surviving family applying for part of that compensation to the Industrial Accident Compensation Insurance (IACI) Agency directly, with the remainder (totaling 150 million won) to be paid by Company A and Company B to the surviving family no later than November 10, 2015.

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III. Responsible Parties for Survivor’s Compensation

Company B, responsible for the fireworks project, had exclusively subcontracted the related laser operations to Company A. The daily worker, working for Company A but while moving laser equipment from a boat belonging to Company C, fell into the water and drowned. In this case, who is considered responsible as the employer?

Article 90 (Exception to Subcontracted Work) (1) stipulates “If a business is operated based upon several tiers of subcontracts, the primary contractor shall be regarded as the employer for purposes of accident compensation.” For occupational accidents, the employer who hired the employee shall be responsible as the employer with the duty of ensuring safety. However, for construction projects, the primary contractor is charged with general responsibilities of safety and health regarding the safety facilities, safety nets, etc. required by the Occupational Safety and Health Act. Accordingly, in cases where the primary contractor does not fulfill its safety responsibilities, the primary contractor shall have the first obligation to provide compensation.[1]

In this case, Company A, which had hired the deceased worker directly shall be first responsible as his employer. Provided, as Company A was a subcontractor assigned to part of the fireworks project by the primary contractor, as Article 90 of the Labor Standards Act (Exception to Subcontracted Work) states, the primary contractor shall be responsible for compensation for damage. Accordingly, Company A and Company B shall hold joint responsibility. In reality, it was agreed that Company A was responsible for the IACI’s obligation, while Company A and Company B were both obligated to cover any amount exceeding IACI compensation. On the other hand, as the deceased worker had fallen to his death from a boat operated by Company C, the surviving family may have legal claim separately against Company C. It was thus agreed that the elements related to Company C could be handled separately from this particular case.?

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Ⅳ. Details of Compensation for Damages & Determining Settlement Amount

It is essential to calculate substantial amounts for compensation under the IACI Act and for compensation for damages from civil claims to reach an amicable settlement.?Through accurate calculation of compensation, the amounts the surviving family could claim and the proportion to be covered by the related companies can be understood.??

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1. Calculation of compensation for damages under the IACI Act

(1) Basic data

??- Average daily wage: 73,000 won (daily wage 100,000 x 0.73: Applying to daily worker’s average working rate)

(2) Compensation under the IACI Act: 104,712,340 won

??- Survivor’s compensation: One day’s average wage x 1300 days =

73,000 x 1300 = 94,900,000 won

??- Funeral allowance[2] : One day’s average wage x 120 days =

73,000 x 120 = 8,760,000 won.

The minimum official funeral allowance for 2015 is 9,812,342 won.

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2. Compensation for damage through civil claims[3]

(1) Basic data

1) Date of birth: May 13, 1972

???2) Date of accident occurrence: October 4, 2015 (43 years, 4 months, 21 days)

???3) 1 day’s average wage: 73,000 won (daily wage 100,000 x 0.73: Applying to daily worker’s average working rate

?4) Standard unit of wage[4]: 102,144 won (based upon a supporting worker’s standard unit of wage in the second half of 2015)

5) End of expected working period[5]: May 12, 2032 (199 months of potential working life remaining between the date of death to 60 years of age)

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(2) Substantial calculation

1) The deceased worker’s lost wages

??○ Between the date of death to 60 years of age (100% in terms of lost working ability)??

????- Standard unit of wage for supporting worker x 22 days[6] x deduction of living expenses[7] x the loss of working ability x Hoffmann’s figure[8]?from his death to 60 years

????- 102,144 won x 22 days x (1-1/3) x 100% x 144.7001 = 216,776,956 won

- 20% deducted due to mistakes made by the deceased worker:

216,776,956 won x 80% = 173,421,564won

2) Compensation for emotional damages

- 100,000,000 won[9] x 100% (Loss of working ability) x [1-(mistakes by the victim x 0.6)]

- Deducting 20% for victim’s actions brings this number to 88,000,000 won.

3) Compensation through civil claims: The deceased worker’s lost wages (173,421,564 won) + Compensation for emotional damage (88,000,000 won)

= 261,421,564 won

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3. Further details on reaching settlement??

It was important to accurately calculate the compensation according to the IACI Act and compensation through civil claims in order to reach a settlement between the surviving family and Company A & Company B. Total compensation for this occupational fatality was calculated as 261,421,564 won, which included 104,712,342 won in compensation to be claimed under the IACI Act. The surviving family, Company A and Company B negotiated with one another and finally agreed that Company A and Company B would pay 150 million won directly to the surviving family, while the surviving family would apply to the IACI Agency directly for the remaining compensation.[10]?This agreement stipulated that after the related companies had paid the agreed compensation, the surviving family would take no further civil, criminal, or administrative action against them. In addition, the surviving family promised to submit a petition to the relevant administrative offices to reduce the criminal charges against Company A and Company B.

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Ⅴ. Content of Settlement (Settlement Agreement)

1. Parties to Agreement

1) Party A: Subcontractor (Company A) and Contractor (Company B)

2) Party B: Deceased worker’s siblings (brother and sister)

2. Details of the accident: -omitted-

3. Content of the settlement

1) Party A will pay Party B 150 million won as settlement (excluding compensation under the IACI Act) and compensation for emotional damages claimed under civil and other laws, to the bank account designated by Party B. Party B will apply for and receive compensation (Survivor’s compensation and funeral allowance) under the IACI Act from the Korea Workers’ Compensation and Welfare Service.?

2) Since Party B amicably agreed with Party A on the above settlement for claims by Party B and other relatives (lineal blood relatives, collateral blood relatives, other relatives), Party B will not make any civil or criminal claims such as filing of complaints, additional compensation, lawsuits, or any other type of claims including for unexpected items at the time of agreement regarding this accident in the future, and waive any claims regarding this accident against Party A.?

3) Since the settlement in the above Article (1) includes all compensation for emotional damages to Party B’s other relatives (lineal blood relatives, collateral blood relatives, other relatives), Party B will be responsible for any particular person among Party B’s other relatives making complaints or other claims against Party A or persons related to Party A.

4) As Party A and Party B have reached settlement amicably, Party B confirms that Party?A and Party A’s employees related to this accident will not receive criminal charges, and if necessary, Party B will cooperate in submitting this intention to the related agencies.

5) Party B confirms that this settlement agreement has been concluded with sincere intentions after understanding all situations sufficiently on equal footing, without fraud, coercion, or mistake.

6) Party A and Party B shall compose four copies of the settlement agreement, print and sign their respective names on each copy, and keep one copy each after notarization of those copies, in order to certify this settlement agreement.

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Ⅵ. Conclusion

Two lessons presented themselves in the course of resolving the claims from this occupational accident. The first is the importance of industrial safety. This occupational accident occurred through the failure to have safety measures at the workplace, and could have been avoided if the deceased worker had worn a life jacket while on the boat. The second is the importance of having an expert resolve the complicated interests and disputes in an occupational accident. This labor attorney was able to explain the legal obligations to the respective parties, propose appropriate compensation, and successfully persuade each party to reach agreement on a settlement.?

[1] Jongryul Lim, 「Labor Law」, 13th Edition, 2015, Parkyoung sa, pg. 487; Sanggook Lee, 「Industrial Accident Compensation (I)」, 3rd Edition, 2014, Daemyung Publishing Co., pg. 153.

[2] A funeral allowance equivalent to 120 days’ average wages is paid to the surviving family conducting a funeral service. As the employee’s wages are too low to cover the funeral expenses, a system was introduced to determine maximum and minimum allowances.

?- As of 2015, the funeral allowance shall be a maximum 13,848,542 won, and a minimum 9,812,342 won.

[3] Introduction of Calculation Sheet for the Amount of Damage Compensation (2005): Kiman Hong, Judge of Southern Seoul District Court

[4] Construction Association of Korea, Standard unit cost of wage (Wage survey on the construction industry): Effective from September 1, 2015.

* Daily workers can be categorized in the following three groups:

??1) Non-professional workers (daily wage 89,566 won): Workers engaged in light work not requiring specific skills; simple, manual jobs.

2) Skilled workers (daily wage 111,771 won): Workers engaged in relatively skilled jobs, performing duties under special working conditions.

3) Supporting workers (daily wage 102,144 won): Workers engaged in supporting a skilled worker and under the directions of that skilled worker.?

[5] Remaining working period is the period remaining in terms of working years up to the retirement age determined by the Collective Agreement or the Rules of Employment, and if a retirement age has not been introduced, the legal retirement age (60 years) is regarded as the end of the expected working period. (Article 73 of the IACI Enforcement Decree (Paragraph 3))

[6] Daily workers in agriculture are determined to work 25 days a month, while other daily workers are determined to work 22 days a month.?

[7] Living expenses equivalent to one third (33.33%) are deducted from total wages.

[8] 1. (Sisa Encyclopedia, Park Moon Kak) Hoffmann and Leibnitz calculation methods

If compensation is made in the form of a lump sum paid in advance, rather than each month until a certain ending period, deductions should be made equivalent to the interest that would be paid in the latter case for payments made in the future. In this case, the Hoffman method is for simple interest, while the Leibnitz method is for compound interest.

2. Generally, the Hoffmann method is preferable for employed victims, and is more often used in compensation for civil claims. In the IACI Act, the Leibnitz method is designated only for calculating Special Disability Benefits. Which method is used for calculating compensation should be determined exclusively by the court according to a Supreme Court ruling (Supreme Court July 28, 1983, 83 da 191).

[9] As of March 1, 2015, the standard compensation amount for emotional damage for an occupational accident is 100 million won.

[10] Related judicial ruling (Seoul High Court ruling on September 10, 2000, 99 nu 15343): The compensation that a person receives for an occupational accident from the employer separately from the compensation under the IACI Act refers to compensation received other than the compensation under the IACI Act. Therefore, the right to claim benefits for the occupational accident under the IACI Act shall not be extinguished.?