The Seoul High Court recently rendered a decision that denied the worker-dispatch relationship between a subcontractor’s employees who performed the production management (logistics), preservation, and export shipping of the automobile manufacturer (the “Plaintiffs”) and the automobile manufacturing company (the “Defendant”) (Seoul High Court Decision 2020Na2008508, January 28, 2022, which will be appealed by both the plaintiff and the defendant to the Supreme Court).

The Defendant of this case is an automobile manufacturing company, and the Plaintiffs belonged to subcontractors that directly entered into a subcontracting agreement with the Defendant (“first-tier subcontractors”) or subcontractors that entered into a subcontracting agreement with the first-tier subcontractors (“second-tier subcontractors”) and performed tasks related to automobile production, including painting processes, production management, preservation, and release. The Plaintiffs performed the following duties:

• Painting process: The process of painting the manufactured vehicle body

• Production management (logistics): To facilitate the assembly process or material manufacturing process, the parts are arranged and supplied according to the production order of the relevant products (the Plaintiffs perform the “sequence” of selecting the parts according to the vehicle’s specifications to supply them to the assembly line, and the “supply” of the containers containing the parts to the assembly line).

• Preservation: Maintenance and repair of various production facilities, equipment, lines, facilities, etc. for automobile production

• Release: Collectively refers to the work performed at the stage prior to the sale of automobiles completed through the manufacturing process to customers, and the work related to vehicles for export is referred to as “export shipment work.”

The Plaintiffs alleged that they were in a worker-dispatch relationship with the Defendant, claiming that although in paper they belong to first or second-tier subcontractors who were in a formal subcontracting relationship with the Defendant, they received substantially specific work instructions from the Defendant.  The Plaintiffs filed a lawsuit against the Defendant seeking (i) confirmation of employee status based on the provision of deemed employment in case of illegal dispatch under the former Act on the Protection of Dispatched Workers (amended by Act No. 8076 of December 21, 2006) and (ii) payment of the difference between the wages that the Defendant’s employees would have received if they had performed the same or similar duties as the Plaintiffs starting from the proposed employment date and the wages that the Plaintiffs actually received from the first or second subcontractors.

The Seoul Central District Court, the court of first instance, ruled that the substance of the employment relationship between the Plaintiffs and the Defendant does identify as a “worker-dispatch,” given that the Plaintiffs were dispatched to the Defendant’s factory after being hired by a subcontractor then engaged in the work from the Defendant’s production of automobiles while receiving orders and instructions from the Defendant.

However, on the premise that “even if a worker-dispatch relationship between some of the Defendant’s subcontractors’ employees and the Defendant is recognized, it cannot be deemed that all of the subcontractors’ employees working at the Defendant’s factory or all employees belonging to this subcontractor company are to be readily seen as the Defendant’s dispatched employees, and the existence of a worker-dispatch relationship should be examined based on the work of each Plaintiff during the dispute period or at the time of the dispute, the work status, and the type of work, etc., which are acknowledged by the evidence,” the appellate court, the Seoul High Court, (i) maintained the lower court’s conclusion regarding the Plaintiffs who performed the painting work during the production process, but (ii) overruled the lower court’s decision by denying the worker-dispatch relationship with the Defendant regarding the Plaintiffs who performed the other tasks.  The main grounds for the Seoul High Court’s denial of the worker-dispatch relationship for each type of work task are as follows:

Production Management

• The Defendant’s provision of the sequencing information through the sequencing monitor (sequencing) is necessary for the purpose of the subcontracting agreement, and cannot be deemed as binding work supervision and control between the employer and employees.  The designation of movement routes is merely a measure for the efficiency and safety of work, and does not constitute work-related supervision and control.

• Even if the Defendant’s employees and the subcontractor's employees perform the same work, the types of parts and workplaces are divided, and there are no cases where they are mutually assigned to a vacancy, and thus, joint work or substantial incorporation into the Defendant’s business cannot be recognized.

• Although the work is connected to other production processes, due to the nature of the work, such connection alone does not automatically establish worker dispatch.

Preservation/Export Shipment

• Preservation refers to preventive inspection and maintenance of equipment, machinery or factory lighting and is clearly distinguished from the production process.

• The export shipment work is “post-production” and is clearly distinguished or different from production work.

• There is no evidence to prove the Defendant’s substantial supervision and control over the Plaintiffs who performed the preservation work and export shipment work, and their actual incorporation into the Defendant’s business.

In this case, we represented the Defendant and focused on the fact that the nature of the Plaintiffs’ responsibilities were different, thoroughly rebutting the Plaintiffs’ arguments based on the analysis of each individual task, thereby leading the appellate court to render a favorable decision.

In another recent lawsuit concerning worker dispatch, in which we represented the same automobile manufacturer, the Seoul High Court recognized worker-dispatch relationships between the plaintiffs who were employed by first-tier subcontractors that directly entered into a subcontracting agreement with the Company and performed their work at the Company’s place of business, but denied this to the Plaintiffs who belonged to a second-tier subcontractor and performed production management work at the Company’s place of business (Seoul High Court Decision 2020Na2008393, February 16, 2022).

These recent decisions are meaningful in that they confirm that even if employees of various subcontractors perform their work in the same factory, whether there exists a worker-dispatch relationship should be determined for each type of work task, and even if they perform the same task, it should be determined on a case-by-case basis based on the circumstances recognized for each employee.  In other words, this case is a meaningful precedent that confirms how even in-house subcontracting in the manufacturing industry may determine whether a worker-dispatch relationship exists based on the specific facts such as: the details of the work performed by individual subcontractors’ employees, the method of performing the task and the contractual relationship.