LABOR CASES

The Structure of Labor Laws in Korea

Freelancers and Employees

I. Whether or not a Freelancer is considered an Employee (A Recent Case)
A Freelance Contract (or Service Contract) refers to an agreement where one party (the service recipient) entrusts another party (the service provider) with particular work, and the service provider accepts it (Commission: Article 680 of Civil Law). Unlike an employment contract where an employee is responsible to provide work under direction and supervision of an employer, a Freelance Contract shows that the service provider (freelancer) has been commissioned to provide a specific service, and will work independently. As a freelancer, an individual contractor independently disposes the work assigned to him or her by the service recipient, receives limited directions and is under no supervision. The service provider, therefore, is excluded from the application (and protection) of Labor Law.
On February 22, 2011, 17 native English teachers who had worked for Hagwon C, one of the biggest language institutes in the country, filed a petition with the Kangnam Labor Office against Hagwon C for unpaid wages of 350 million won for severance pay, etc. Hagwon C claimed that as these teachers were freelancers and had signed an ‘Agreement for Teaching Services’, they were not entitled to severance pay as normally required under Labor Law. However, the 17 teachers claimed that even though their contracts were Freelance Contracts, they had a) provided labor service under Hagwon C’s direction and supervision and even under its strict control, b) their workplace and working hours had been restricted, and c) they had received fixed hourly wages. The major issue in this labor case was whether the teachers were Hagwon C employees to which the Labor Standards Act applied, or whether they were freelancers (service providers under Civil Law). In the following pages, I would like to concretely clarify the issue, based upon related judicial rulings and administrative guidance on whether these 17 teachers of Hagwon C should be considered to have employee status.
II. Labor Cases Denying Employee Status to Freelancers
(1) A substitute driver is not an employee under the Labor Standards Act
“The substitute driver cannot be an employee when considering the following items collectively: The company provided the substitute driver with customer information from someone requesting a substitute driver. The substitute driver purchased a mobile phone privately in order to receive this information and also paid the mobile phone bills himself. In addition, he purchased car insurance privately to deal with possible car accidents while doing such work. The substitute driver was able to come and go to the office freely, and received payment according to work done. He did not receive fixed pay. The company could not punish him for negligence or disobedience because company service regulations did not apply to him.” (Daegu Court 2007 gadan 108286)
(2) If a director performs his work duties independently and at his own discretion without specific directions or supervision over his work performance, such a director is not considered to be an employee.
“The director cannot be an employee when considering the following items collectively: The person was registered as a director in the corporate register. He had carried out his duties independently at his own discretion. He had paid his expenses with the company credit card, used the company car independently, and had not received any directions or supervision of his work performance from the company, but simply reported to the representative director.” (Court 2005 guhap 36158)
(3) Even though the person has provided labor service, if he was not in an employment relationship, he cannot be regarded as an employee under the Labor Standards Act.
“The person cannot be an employee when considering the following items collectively: Even though the employee’s place of work was restricted to company premises and the company could not substitute him with other employees, the service provider was not limited to specific working hours when his coming to and leaving the office was controlled. The company did not have any authority to discipline the person for violation of service regulations, even though the company exercised some rights to direct and supervise in the course of work performance. His earnings were not remuneration for his labor service, and he did not receive fixed or basic pay. The establishment or termination of the labor service contract was up to the service provider.” (Court 2005 gudan 1293)
(4) A private tutor who receives a commission due to results for the number of commissioned duties performed is not an employee.
“A private tutor cannot be an employee when considering the following items collectively: The private tutor did not receive substantial or direct orders nor was supervised by the company in the process of performing the required duties. Unlike a regular employee of the company, the private tutor was hired by a branch office, and had not had his/her work hours controlled, was free to have duplicate employment, and could terminate the service contract at anytime. Payment was paid regardless of the contents of the labor provided, or the time that the private tutor worked. Rather, payment and amount were decided by the results of the commissioned duties performed. It is therefore difficult to deem the payment as remuneration paid in return for work.”(Court 2003 guhap 21411)
(5) A golf caddie cannot be considered as an employee of the Labor Standards Act.
“A caddie cannot be an employee when considering the following items collectively: the caddies in question did not receive any monetary remuneration from the company except for service fees. They were assigned to work in a specific order, but did not have their working hours regulated, and so whenever they finished their work, they could leave the golf course immediately. In the process of work performance, they did not receive any substantial or direct orders or supervision from the company, but simply provided their labor service according to the needs or direction of the golf players.” (Seoul Admin. Court 2001 gu 33013)

III. Concrete 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 wages in actual practice, regardless of whether
the type of contract is an employment contract or service agreement under Civil Law.” (Supreme Court 2008 da 27035)
The Ministry of Labor 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. There are various criteria for determining “under the direction and supervision of the employer”, but this 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

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

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