Ⅰ. Concept of Employee

1. Definition

Article 2(1) of the Labor Standards Act stipulates that the term “worker” in this Act refers to a person who offers work to a business or workplace to earn wage, regardless of the kind of job(s) he/she is engaged in. Whether someone is an employee or not is dependent on the following factors: ① it is not determined by the kind of job(s) he/she is engaged in; ② the person works at a business or workplace; ③ the person offers work to earn wage. In understanding this concept, wage are at the center, while the key point to consider is whether a subordinate relationship exists between the work provider and the work user.

2. Scholarly views

(1) Interpretational

This view claims that the current judicial ruling regarding the criteria for determination of employee status has some difficulty in understanding because its criteria are enumerated with factual evidence in parallel order. To overcome this problem, the criteria can be categorized into substantial signs and formal signs from which employee status can be determined as existing or not. Such substantial signs include whether there is command and control, the relationship between the work offered and the current business, and the work provider’s situation. The formal signs refer to items whose existence depends on the employer’s decisions, which include whether income tax and social security insurance premiums are paid, whether personnel evaluations for the person are performed, and whether the person has a contractual duty to receive permission before getting a second job. That is, this view holds that employee status can be determined through the substantial signs, and formal signs can be excluded from the factors that determine a subordinate relationship.

(2) Law-based

This view holds that the concept of ‘employee’ should be interpreted in accordance with the related legal provisions. Korean labor law has the definition of employee in Article 2(1) of the Labor Standards Act(the LSA), and any judgment of employee status should begin with interpretation of this provision. The LSA definition of ‘employee’ contains four determining factors: ① the status can be determined regardless of the kind of job; ② the person offers work to earn wage; ③ the person offers work at a business or workplace; and ④ the person offers work. Of these four factors, status can be determined regardless if the kind of job is not directly related to establishing employee status, and so will not be included for consideration.

3. Judicial ruling

The Supreme Court gave clear criteria for determination of employee status in a lawsuit case involving a full-time instructor at a private institute: first, employee status may exist regardless of the type of contract; second, the criteria for determination of a subordinate relationship are enumerated to 12 items; third, the conditions suggested as signs of employee status shall be determined as decisive or not by considering whether the employer can unilaterally decide whether those conditions exist. These criteria are used to determine employee status, and they are stipulated in the following paragraph.
The Supreme Court ruled that whether a person is considered an employee under the Labor Standards Act shall be determined by whether, in actual practice, that person offers work to the employer as a subordinate of the employer in a business or workplace to earn wage, regardless of the contract type such as an employment contract or a service contract. Whether or not a subordinate relationship with the employer exists shall be determined by collectively considering: ① whether the rules of employment or other service regulations apply to a person; ② whether that person’s duties are decided by the employer, ③ whether the person has been significantly supervised or directed during his/her work performance by the employer; ④ whether his/her working hours and workplaces were designated and restricted by the employer; ⑤ who owns the equipment, raw materials or working tools; ⑥ whether the person can be substituted by a third party hired by the person; ⑦ whether the person’s service is directly related to business profit or loss as is the case in one’s own business; ⑧ whether payment is remuneration for work performed or ⑨ whether a basic or fixed wage is determined in advance; ⑩ whether income tax is deducted for withholding purposes; ⑪ whether work provision is continuous and exclusive to the employer; ⑫ whether the person is registered as an employee by the Social Security Insurance Act or other laws, and the economic and social conditions of both sides. Provided, that as whether basic wage or fixed wage is determined, whether income tax is deducted for withholding, and whether the person is registered for social security insurances could be determined at the employer’s discretion by taking advantage of his/her superior position, the characteristics of employee cannot be denied because of the absence of these mentioned items.
The above criteria are not applied formally or uniformly, but in the event facts equivalent to the above items exist, it should be determined after reviewing whether these facts were decided by the employer’s superior position or required naturally by such job characteristics.

4. MOEL Guidelines: Criteria for determining “employee” status

Whether a person is considered an employee under the LSA shall be decided by whether that person offers work to the employer as a subordinate of the employer in a business or workplace to earn wage in actual practice, regardless of whether the type of contract is an employment contract or service agreement under Civil Law.
The MOEL determines whether the contractor has employee or freelancer status when considering collectively the seven items suggested below by the aforementioned Supreme Court ruling.

(1) Whether the rules of employment or service regulations apply to a person whose duties are decided by the employer, and whether the person has been supervised or directed during his/her work performance specifically and individually by the employer
Supervision and direction mean that the person implements the work that the employer wants him/her to do under the employer’s direction and command. Whether the work is performed under the direction and supervision of the employer shall be determined by considering the following criteria collectively:
1) Whether such things as employment, training, retirement, etc. apply to said person;
2) Whether said person can decide what work he/she will do, or whether said person has freedom to obey or reject work instructions.

(2) Whether his/her working hours, working days and workplaces are designated and restricted by the employer
1) Whether his/her working hours or working days are designated: falls under Restrictions in working hours;
2) Whether his/her workplaces are designated or the times determined when said person shall provide labor service in the directed workplaces: falls under Restrictions in workplaces

(3) Whether a third party hired by said person can be a substitute for him/her
The inability to substitute someone for oneself to do the labor service is not a basic criterion in determining whether a subordinate relationship exists or not, but when a substitute is possible, this becomes a significant indicator that a relationship of direction and supervision may not exist.

(4) Whether said person owns the equipment, raw material, or working tools he/she uses
If the machine or tools owned by the work performer are very expensive, and if the person shall be responsible for his/her own workplace injuries, he/she is closer to being a business owner who judges and takes on risk at his/her own discretion, and indications that he/she is an employee are weak.

(5) Whether payment is remuneration for work and whether a basic wage or fixed wage is determined in advance:
1) If remuneration is a fixed amount regardless of work performance and paid at a fixed rate for work, and if the fixed amount is designed to provide a living for the person, this can be described as characteristics of being an employee;
2) If the person’s level of remuneration is remarkably higher than other employees who do the same or a similar job in a corresponding company, this can be remuneration for a business assignment with individual responsibility and risk and not a characteristic of being an employee.

(6) Whether work provision is continuous and exclusive to the employer
If the person is restricted from simultaneous employment with another company by company regulations, or if the person cannot work for two or more companies at the same time due to his/her unavailability in reality, said person’s provision of labor service can be regarded as exclusive to the employer.

(7) Whether the person is registered as an employee under the Social Security Insurance Acts or other laws
In cases where the person pays income tax on his/her remuneration, this is a supplementary fact that can be positively determined as an employee characteristic. However, simply because remuneration has not been subject to income tax is not a clear indication that this remuneration isn’t a wage.

5. Comments

The scholarly view and judicial view are consistent in the following criteria: ①In employment relations, employee status shall be determined by whether there is a subordinate relationship between the parties or not(judgment by subordinate relations); ② whether there is a subordinate relationship between the parties or not shall not be determined by the type of contract or title, but by actual facts of the labor provision relations(judgment based upon actual relations); and ③ the actual facts of the labor provision relations shall be determined in consideration of an overall collective evaluation of all items(overall consideration). Accordingly, employee status according to subordinate relations shall be determined after considering practical facts of the employment and reviewing them overall. Judicial ruling states that the criteria for ruling on employee status shall not be determined by the format of employment relations, and shall not consider as important in judgment whether the person paid corporate tax or was registered for the social security insurances, which can easily be decided by the employer due to his/her superior position. These points emphasize that employee status shall be determined by employment relations in actuality.