My hagwon is keeping my last month's salary and my return airfare as a "penalty" for leaving — I'm an E-2 flying home in two weeks. Is that legal?

None of what the director described is lawful. Korean labor law prohibits penalty clauses against employees outright, requires all wages and contractual payments to be settled within fourteen days of the employment ending, and treats a completed contract year as a year for severance — the "under a year" argument fails if you worked the full term, and if it does not, it is because of a calendar quirk that is checkable. Two weeks is enough to file the complaint and sign the paperwork that lets it continue without you; the case is one the labor office resolves routinely, often by the employer paying once the summons arrives.

What this is under Korean law

Article 20 of the Labor Standards Act (근로기준법, geullo gijun-beop) prohibits an employer from contracting for penalties or predetermined damages against an employee for breach of the employment contract; a clause purporting to do so is void, and a withholding of wages as a "penalty" is simply unpaid wages. Not renewing a fixed-term contract at its end is not a breach at all.

Article 43 requires wages to be paid in full, directly, in currency; an employer may not set off amounts it claims against wages. Article 36 requires all wages, severance and other payments due on termination to be paid within fourteen days of the employment ending. Non-payment is an offense under Article 109, punishable unless the employee expresses a wish not to prosecute.

The airfare is a contractual entitlement, not a statutory one, and it is recoverable as a contract debt alongside the wages; the labor office handles it as part of the complaint where the contract is clear.

Severance and the "under a year" argument

Severance pay (퇴직금, toejikgeum) under the Employee Retirement Benefit Security Act is due to an employee with one year or more of continuous service — roughly thirty days' average wages per year. A contract from the 2nd of one month to the 30th of the twelfth month later is a few days short of 365; that is the "trick." Two things defeat it in most hagwon cases. First, the counting: if you worked or were on the payroll from the 2nd through the last day of the contract month inclusive, count the days — many contracts written this way are exactly a year or over once the final day is included, and orientation or training days before the 2nd count if you were paid for them. Second, where the shortfall is real and engineered by the employer's own contract drafting to avoid severance, labor inspectors have treated the arrangement with skepticism and looked at the substance of the engagement. Get the exact dates in front of counsel; this is a numbers question.

How the process works in Korea

The complaint (진정, jinjeong) goes to the regional labor office. The inspector summons the director, verifies the amounts — salary, severance, airfare — and orders payment; most withholding-as-penalty cases end there, because the inspector will explain Article 20 to the director in terms she understands. If the director still refuses, the inspector issues a confirmation of unpaid wages, refers the criminal side, and the confirmation unlocks the government's simplified wage guarantee payment (간이대지급금, gani daejigeupgeum) for the wages and severance portion, with the state recovering from the employer. The airfare is pursued civilly, by payment order, with the same documents.

The pension refund

Separately from all of this: as a Canadian, you may be eligible for a lump-sum refund of your National Pension contributions on leaving Korea, under the pension agreement between Korea and Canada; the application is made to the National Pension Service, typically around departure, with your bank details. It is your money and unrelated to the dispute; do not let the director suggest it is contingent on anything.

Your situation as a foreign national

Leaving does not end the claim. Sign a power of attorney (위임장, wiimjang) before you go, so counsel can continue the labor complaint and the civil claim without notarization from Canada. Keep your Korean bank account open for payment. Copy the contract, payslips, attendance records, the airfare clause, and any message in which the director stated her position; a director who wrote "penalty" in a message has written the complaint for you.

What to do now, and what not to do

Do not sign any "settlement" or "resignation" document; a resignation before the contract end date can affect the airfare and the severance calculation. Do not accept a partial payment "in full settlement." Do file the labor complaint this week, with the amounts itemized and the contract attached; request the director's position in writing; and calendar the fourteenth day after your contract ends.

Practical insight

Teachers lose the last month because they leave with a promise; hagwons that withhold do so because the last teacher left without filing. A complaint on file before departure, with the director's "penalty" message attached, changes the outcome: the summons arrives after you have gone, and the money follows, because the alternative for the director is a criminal referral over an amount she can afford. The severance date argument is the one worth spending a day on — it is often wrong on the calendar, not just on the law.

Send us the contract, your start and end dates, and the director's message, and we can itemize the complaint and check the severance math today — by text consultation or at +82-2-522-3959.

— MEGA X Law Firm Korea, Labor Team