Korea: Compliance Check - Subcontract and Dispatch Arrangements

A significant decision has been released by a First Instance Court in Korea, holding that workers who had been dispatched from a service company were not dispatch workers but were in fact working under an illegal dispatch arrangement. The Korean Ministry of Employment and Labor (MOEL) permits workers to be dispatched only in limited circumstances. Is your company compliant?

Subcontract and dispatch arrangements

Korean laws governing dispatch arrangements set strict conditions for the placement of workers in other businesses, including the types of jobs and maximum periods of dispatch permissible. When a user company fails to meet these requirements, the courts may find that an illegal dispatch arrangement is in place, and impose an obligation on the user company to directly hire the dispatched workers. Importantly, the name given to a dispatch contract is irrelevant and courts will examine the substance rather than the form of the relationship.

In a recent judgment delivered by the Goyang Branch of the Uijeongbu District Court, the Court held that cashiers who had been sent by a dispatch company to work for a large distribution company Savezone were in fact directly employed by Savezone as regular employees. The workers were awarded damages from the time when Savezone's obligation to hire them arose until the time Savezone directly hired them.

Compliance

If you are a company that uses dispatch labour, consider the following:

1. Do you give instructions or directions to the dispatched workers on a specific task with binding authority?
2. Are the dispatched workers incorporated into your company's business as a single working group, along with your original workers?
3. Do you independently decide on management of the dispatch workers, such as the selection processes, job training, and details of tasks/schedules of the workers?
4. Is the work performed by dispatch workers of a simple and repetitive nature that does not require any expertise or skilled training?

If you answered 'yes' to the questions above, you may not be compliant.

Herbert Smith Freehills can assist you with achieving compliance. To discuss how, please contact Fatim Jumabhoy at fatim.jumabhoy@hsf.com.