Ⅰ. Limitations on Application of the Labor Standards Act

Some workers are not protected by Korean labor law, or there are limits to the protection offered. Representative examples include ① workers at workplaces ordinarily employing fewer than five people, and ② domestic workers. The Labor Standards Act(LSA) stipulates that the LSA shall apply to all businesses or workplaces in which five or more workers are ordinarily employed. This Act, however, shall not apply to any business or workplace which employs only relatives living together, or to workers hired for domestic work(Article 11 of the LSA).

1.Employees at workplaces ordinarily employing fewer than five people

(1) Introduction

In December 2010, employees at workplaces employing fewer than five people became eligible for severance pay. This has brought a lot of attention to those workers in inferior situations. Major articles of the LSA that are not applicable to such workers include, among others, ① restrictions on dismissal, ② suspension allowances, ③ restrictions on extended work, ④ extended work, night work and holiday work , and ⑤ annual paid leave. Due to their exclusion from these protections, such employees often work in inferior working environments. In the following pages, I would like to look at and explain situations where the LSA applies, and where it does not.

(2) Criteria for determining ordinary number of employees

1) The LSA applies to all businesses or workplaces in which five or more employees are ordinarily employed. Ordinarily employed means that, in objective estimation based upon socially accepted ideas, if the company employs five persons or more regularly on average, it is regarded that the company employs five persons or more, even though there are fewer than five employees at times. When evaluating violations of the LSA per separate working condition, the applicable period related to each case shall be considered. That is, as for dismissals, the number of employees shall be considered the ordinary number of employees working for the month prior to the dismissal date.

2) The Civil Law(Article 49) stipulates that the director shall register his/her name and address in the corporate registration certificate, while the Commercial Act(Article 382-(2)) regulates that relations between the company and the director comply with the rules concerning commissions. Therefore, the director, the representative of the corporate entity or labor union, or the executive directors are not employees in principle because they hold authority as business representatives or business executives without exclusive supervision from the employer. Even though a person holds one of these types of positions, if that person is supervised and managed by a person with authority as a business executive and is in reality engaged in provision of actual labor service for the purpose of earning money, such person shall be considered an employee.

3) In cases where the head office, branch office, local office, plant, etc. are located in the same place, they are deemed one business.

4) In cases where the head office, branch office, local office, plant, etc. are located in different locations, in principle, they are deemed separate businesses. However, even though their locations are different, if the branch office, local office to the branch office, local office, plant, etc. are separate from the head office, it is regarded as an independent business or workplace: ① If the business is different according to the Korean Standard Industrial Classification table; ② If separate collective agreements or rules of employment apply; and ③ If the labor office, plant, etc. cannot be operated independently, the office together with other higher offices shall be deemed one business.

5) In cases where the following management, accounting, etc. are operated independently.

(3)Major articles applicable to workplaces ordinarily employing fewer than five people

Topics related to major articles applicable to workplaces ordinarily employing fewer than five people include, among others, ① written statement of the employment contract, ② weekly holidays, ③ recesses, ④ accident compensation, ⑤ payment of money or valuables, ⑥ payment of wage, ⑦ restrictions on dismissal timing, ⑧ advance notice of dismissal, and ⑨ maternity leave.
Even though the restrictions on dismissal are not applicable, advance notice of dismissal is required, which means that an employer shall give at least thirty days’ advance notice to a worker the employer intends to dismiss. If notice is not given thirty days before the dismissal, ordinary wage of at least thirty days shall be paid to the worker. Most articles regarding wage to be paid for labor service are also applicable. That is, minimum wage applies, payment of wage shall be observed, and penal provisions for delayed payment of wage are applicable. Of particular note, severance pay became mandatory December 1, 2010. For the two years prior to December 1, 2012, the employer had to pay 50% of full severance pay to resigning employees, and 100% for the period beginning January 2013. Regardless of the length of service, severance pay only starts accruing from December 1, 2010. Also, according to Industrial Accident Compensation Insurance requirements, accident compensation for occupational injury, including medical treatment, suspension compensation, handicap compensation, etc. are applicable in the same way as for regular employees.

(4)Major articles not applicable to workplaces ordinarily employing fewer than five people

As many of the LSA provisions do not apply to workers at workplaces ordinarily employing fewer than five people, working conditions for such employees are quite inferior.

1) Restrictions on dismissal

① An employer can arbitrarily dismiss or discipline workers without justifiable reason; ② Even though a worker is unfairly dismissed, the worker cannot apply to the Labor Relations Commission for remedy; ③ An employer does not have to notify workers in writing of reasons for dismissal; ④ As the restrictions on dismissal for managerial reasons do not apply to such workers, an employer can dismiss workers at any time if business conditions deteriorate; ⑤ The two-year limitation on the use of temporary workers such as dispatch employees or short-term contract workers does not apply, and the employer can dismiss such workers at any time.

2) Allowances during suspension of business

When an employer suspends business operations, the workers cannot receive suspension allowances. Even though business operations are suspended for reasons attributable to the employer, the employer does not have to pay allowances to workers during such suspensions.

3) Restrictions on working hours

Workplaces ordinarily employing fewer than five people do not have to follow the 40 hours per week limitation or keep to a 5 day workweek. There are no restrictions on extending the work day beyond 8 hours, or even beyond 12 hours, nor does the employer have to pay additional allowances(50%) for overtime, night shift(10:00 pm to 06:00 am) or holiday work.



4) Annual paid leave

When a worker at a workplace employing at least five people has worked continuously for one year, 15 days of annual paid leave are ordinarily granted, but workers at workplaces ordinarily employing fewer than five people are not guaranteed any paid, non-statutory holidays. A worker at such workplaces must get permission to take a day off, and the employer can deduct one day’s salary.

2. Domestic workers employed by a company

(1) Domestic worker not covered by the Labor Standards Act

This labor case involved an application for remedy for unfair dismissal, but was dropped as the domestic worker was not covered by the Labor Standards Act. The ruling stated: Even though this worker claimed he applied for a position posted by the company, his workplace was the summer house owned privately by the company president, and was employed by the president and her husband. Caretaking of the summer house was not related to the company’s main business of construction. In addition, the worker had not done anything to contribute to the profit gaining activities of the company. In light of these facts, this worker, privately employed by the employer, is considered a domestic worker to which Article 11 of the LSA applies. It is therefore not necessary to review the facts of the dismissal or its justification.

(2) Domestic worker covered by the Labor Standards Act

In looking into the background of a worker beginning to work at the CEO’s house, it was found that he had been employed by the company to work in the Management Department, and then was immediately assigned to work at the CEO’s house. Since that time, the company had managed the worker’s general matters regulated by labor law such as wage, service regulations, and payment of severance pay. The company had also handled the worker’s social security insurance and other income deductions. Even though the type of work was at the discretion of the CEO, the worker still belonged to the company organization. This worker is clearly different from a worker hired independently by an individual as a private housekeeper, driver, or gardener. Accordingly, the decision by the Employee Welfare Corporation to reject the family’s application for the survivors’ pension because of the worker’s supposed status as a domestic worker was inaccurate.

3. Comments

Employees of workplaces ordinarily employing fewer than five people are at times excluded from or have restrictions on their coverage by the Labor Standards Act. Such restrictions or exclusion from basic labor rights normally granted to other workers have resulted in poorer working conditions for them in terms of dismissal, disciplinary action, restrictions on working hours, etc. To protect their minimum labor rights, protections in three more areas shall be given: restrictions on working hours, allowances for suspension of business due to the reasons attributable to the employer, and additional allowances for extended work, night time work, and holiday work. As for domestic workers, although they are workers(since they work for payment), because they work exclusively for a particular house as housekeeper, butler, gardener, etc., they are not considered workers according to the LSA. However, in cases where a domestic worker is assigned to a particular director’s house, if the company manages his/her payment etc., and supervises his/her work, the person can be regarded as a worker under the LSA. This requires an understanding by employers of the concrete details of the work performed by the worker, regardless of his/her title.