LABOR LAW GUIDE

Chapter 1 The Structure of Labor Laws in Korea

Section 3: Employee and Employer - Ⅲ. Judgment of Employee Status, with a Checklist

Ⅲ. Judgment of Employee Status, with a Checklist

1. Introduction

With the arrival of the Fourth Industrial Revolution, various new occupations have been created, and while a number of intermediate occupations for both workers and the self-employed have surfaced, the criteria for determining employee status have also expanded. There has been a tendency for companies to reduce direct employment by outsourcing marginalized tasks in order to reduce labor costs and generate more profit. These outsourced services include owner-operated truck drivers, onsite after-service technicians, delivery people, shop operators, call center employees, debt collectors, commissioned delivery contractors, car sales personnel, and freelancers. Companies are directly involved in the performance of their outsourced and subcontracted tasks in order to gradually expand their operating profit. The main characteristic of subcontracting or of individual business owners is that they accomplish their tasks independently. If the employer directly manages and supervises them, this can be considered a form of illegal contract or dispatch. In such cases, the company would immediately bear additional labor costs such as employment obligations, severance pay and social insurances premiums.
Judgment on the characteristics of employee status is based on a 2006 court ruling, although it can be difficult to judge employee status because issues have to be considered on a case-by-case basis and judgments vary depending on the intuition and inclination of the judges. Therefore, it could be said that it is necessary to establish a quantification standard that will take into consideration the characteristics of the work involved and the relevant issues for various individual situations, within the standard principles of the judgment. In the following paragraphs, a checklist for the determination of employee status is presented to assist in the understanding of employee status.

2. Criteria for Determining Employee Status

(1) Employee status in the Labor Standards Act

First of all, I would like to look at employee status as it relates to the standard court ruling on this issue, concentrating on the definition of “employee” in the Labor Standards Act.
Article 2 (1) of the Labor Standards Act stipulates that the term “worker” refers to a person who offers work to a business or workplace to earn wages, regardless of the type(s) of job he/she is engaged in. The concept of “employee” includes the following factors: ① it is not determined by the type(s) of job he/she is engaged in; ② the person works at a business or workplace ; ③ the person offers work to earn wages. Under this definition, wages are put at the center, while the key point to be considered is whether a subordinate relationship exists between the work provider and the party who authorizes the work. That is, “employee” means “a person who offers work to earn money through a subordinate relationship.”
A subordinate relationship is one where a person hired by an employer provides work under the employer’s direction and orders, and carries out tasks as required by the employer. In other words, an employee who offers work to earn wages can be considered as “a person offering work under a subordinate relationship with an employer.”

(2) Understanding subordinate relations

When judging worker status, the case is judged based on the above-mentioned “Substantial criteria for determining employee status,” and the method of judging is to evaluate the worker under the Labor Standards Act if a large number of these criteria are met, by reviewing each case individually and comprehensively. The criteria can be divided into human subordinate relations, economic subordinate relations, and the dual judgment factors.

1) Human subordinate relations
Human subordinate relation factors are the degree to which an employer manages and supervises workers in the course of their work. In recent years, this situation has been judged by reducing the employer’s work instructions from “specific and individual command and supervision” to “significant command supervision” in determining human subordinate relations in consideration of the occurrence of various jobs and the related independent contractors. Specifically, such items include ① the type of contract; ② the exercise of disciplinary authority such as hiring, firing, disciplinary action etc., ③ control over situations such as commutes or leave; ④ supervision and control during work performance; ⑤ whether working hours and place of work are controlled.

2) Economic subordinate relations
Economic subordinate relations depend on whether workers can make a profit on their own. In the case of part-time instructors, a performance-based pay system was used to apportion tuition fees with an employer according to the number of students who attended an academy. In this case, part-time instructors were not considered workers. Specifically, consideration of such items includes ① whether the company owns the necessary supplies, raw material work tools, etc.; ② whether the company is responsible for expenses incurred in the work; ③ whether a third party can perform the work for the person on his behalf and whether it is possible to engage in other tasks simultaneously; ④ whether or not the intent is to generate profit and manage their own business; ⑤ whether it is possible to engage in other business during working hours; ⑥ whether business risks are compensated for; ⑦ whether remuneration is paid for the work; and ⑧ whether long-term work is possible and whether there is any reference to exclusiveness (whether work is prohibited from other companies while performing the business).

3) Dual judgment factors
The dual judgment factors are whether a basic or fixed salary has been established: matters concerning remuneration, such as whether income tax is withheld, and whether the relationship is recognized as a worker in the social security system. If this is recognized, it can be a factor in affirming a judgment of employee status. If it is not recognized, the situation should not be denied employee status solely on this basis.
Specifically, related items include ① whether there is a fixed salary for the performer, and ② the burden of earned income tax, and whether or not four social insurances are insured.

(3) The court’s judgment of subordinate relations



In the review, weighting is divided into two stages: employee status and employer status. The more checks that are calculated in the total sums, the stronger the considered status.
Judgment of employee status should be centered on subordinate relations, and each case should be analyzed individually and comprehensively. In other words, human subordinate relations (10 points), economic subordinate relations (8 points), and dual judgment factors (reflected only when positive - 2 points), are judged for a total of 20 points. If there is no relevant item to be determined, that part is not reflected.

For further questions, please
call (+82) 2-539-0098 or email bongsoo@k-labor.com

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