Seoul, South Korea – Recent labor oversight at the popular London Bagel Museum (LBM) is sparking debate in South Korea regarding the legality of clauses imposing financial penalties on employees for disclosing company information. The case, which follows previous allegations of overwork and unfair labor practices at the bakery chain, centers on whether such “liquidated damages” clauses violate the nation’s labor standards laws. The scrutiny comes as South Korean authorities increasingly focus on protecting the rights of young workers and addressing issues of workplace exploitation.
The London Bagel Museum gained widespread popularity for its authentic British-style bagels, but its rapid growth has been shadowed by concerns over employee welfare. Earlier this year, the company faced significant criticism following reports of employees working excessively long hours and experiencing wage theft and workplace harassment. These allegations prompted investigations by the Ministry of Employment and Labor, revealing a pattern of non-compliance with labor regulations. The current dispute over non-disclosure agreements and associated financial penalties adds another layer to the controversy surrounding the company’s labor practices.
The core of the current legal question revolves around whether clauses requiring employees to pay substantial sums for revealing confidential information constitute an undue restriction on their rights. According to reports, LBM implemented clauses stipulating financial penalties for employees who disclosed internal information, raising concerns about potential violations of the Labor Standards Act. The act aims to protect workers from unfair treatment and ensure reasonable working conditions. Legal experts are divided on whether these clauses are enforceable, with some arguing they are a legitimate means of protecting trade secrets, although others contend they are a form of intimidation and a violation of workers’ rights to freedom of expression.
Allegations of Overwork and Labor Violations
The current scrutiny builds on previous allegations of systemic labor violations at LBM. In February 2026, reports surfaced alleging that employees were working upwards of 80 hours per week, with one 20-year-old employee reportedly dying after working nearly 80 hours a week before his death, raising suspicions of death by overwork, or gwanlyeongja (과로사), as This proves known in South Korea. The Korean Bar Association reported that the employee had sent a message to a friend stating he hadn’t eaten all day the day before his death.
Further investigations revealed instances of wage deductions for minor infractions, such as arriving even a minute late, with a 15-minute wage reduction for a one-minute delay. MBC News reported on these practices, highlighting the harsh working conditions faced by LBM employees. The Ministry of Employment and Labor subsequently imposed a substantial fine of 800 million won (approximately $587,000 USD as of March 6, 2026) on the company for these violations. An Instagram post detailing the findings further amplified public outrage.
“Upwork 쪼개기” and the 5-Person Rule
The LBM case also highlights a broader trend in South Korea known as “업장 쪼개기” (upjang jjogae-gi), or “workplace splitting.” This practice involves businesses dividing their operations into smaller units, often with fewer than five employees, to circumvent regulations designed to protect workers, particularly the 52-hour workweek law. The JoongAng Ilbo reported in November 2025 that some popular restaurants were employing this tactic to avoid complying with labor standards.
Businesses with fewer than five employees are exempt from certain provisions of the Labor Standards Act, including the 52-hour workweek. By artificially reducing their employee count through workplace splitting, companies can avoid these regulations and potentially exploit their workers. The practice has drawn criticism from labor groups and calls for stricter enforcement of labor laws to prevent such abuses. The Ministry of Employment and Labor has pledged to crack down on workplace splitting and ensure that all businesses comply with labor standards, regardless of their size.
Geopolitical Context and Regional Stakes
South Korea has been grappling with high youth unemployment and increasing concerns about precarious employment conditions. The LBM case resonates with broader anxieties about the exploitation of young workers and the need for stronger labor protections. The government’s response to the LBM controversy and its commitment to addressing workplace splitting will be closely watched by labor advocates and businesses alike. The outcome of this case could set a precedent for future labor disputes and influence the government’s approach to enforcing labor laws.
The focus on worker rights also aligns with broader international trends towards greater corporate social responsibility and ethical business practices. As South Korea seeks to strengthen its position as a global economic leader, it faces increasing pressure to uphold international labor standards and protect the rights of its workforce. The LBM case serves as a reminder of the challenges involved in balancing economic growth with social justice.
Looking ahead, the Ministry of Employment and Labor is expected to continue its investigations into LBM’s labor practices and consider further enforcement actions. The legal challenges surrounding the non-disclosure agreements and liquidated damages clauses are likely to be closely watched by legal experts and businesses. The outcome of these proceedings will have significant implications for the future of labor relations in South Korea and the protection of workers’ rights.
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