LABOR CASES

The Structure of Labor Laws in Korea

Criteria for Determining “Employee” Status

I. Introduction

Nowadays, there are many kinds of jobs becoming available and people working under service or freelance contracts, but those who are engaged in such jobs are not recognized as employees to whom labor laws apply. In one particular case , a large private institute (hagwon) hired instructors under contracts for ‘teaching services’, and treated them as independent business owners with freelancer status, a determination which led to serious labor disputes later on. In cases where an instructor works as an independent business owner and not as an employee, he is ineligible for various protections under labor law such as regulations regarding wages and annual leave, protection from unfair dismissal, and compensation from social security insurances for work-related accidents. However, in cases where an instructor has been determined as an employee, all labor law protections apply. Therefore, instructors look for coverage under labor law, while institute owners seek to avoid employee status for their instructors, due to the additional expenses and the risk of collective action by those instructors.
For these reasons, a clear determination of employee status can resolve labor disputes, and so hereby I would like to review the criteria for determining employee status in terms of legal provisions, expert opinions, and judicial rulings.

II. Judgment of Employee Status

1. Concept
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 wages, regardless of the kind(s) of job he/she is engaged in. The concept of “employee” includes the following factors: 1) it is not determined by the kind(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. In understanding this concept, wage is put at the center, while the key point to be considered is whether a subordinate relationship exists between the work provider and the work user. 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 the employer provides work to the employer, and under the employer’s direction and orders, carries out the tasks the employer wants done. So, an employee who offers work to earn wages can be translated as “a person offering work under a subordinate relationship with an employer.” The views of “subordinate relationship” by scholars can be classified into two groups: 1) interpretational and 2) law-based.

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 should 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 the 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 wages”; 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 of the kind of job” is not directly related to establishing employee status, and so will not be included for consideration. First, the employee provides work to earn wages. “The term ‘wages’ in the Labor Standards Act means wages, salaries and any other money and valuable goods an employer pays to a worker for his/her work, regardless of how such payments are termed.” (Article 2(5) of the LSA) Therefore, it is sufficient to prove that wages are paid in return for work, but there is no limit on how such payments are termed. Therefore, even though wages were paid per unit of work performance, without considering the unit for the number of working hours, as long as they are paid in return for labor service, such payment can be regarded as wages. Second, “at a business or workplace” means that the employee provides work on the employer’s business premises or workplace. Even though there are no particular instructions regarding working hours, place, and method of work, the person is assigned to the labor area with tangible work duties. Third, “the person offers work” means that the employee provides work to the employer, which is known to be a subordinate position. The employer’s instructions can include instructions regarding time, place, and type of work provided. In determining employee status, all three of these factors do not have to be present, but whether the employee was supervised and under the employer’s instructions or not must consider all of them.

3. Judicial ruling
(1) Criteria of the 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, “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 wages, 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, and 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

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

    • 맨앞으로
    • 앞으로
    • 다음
    • 맨뒤로