Illegal dispatch cases involve violations of the Act on the Protection, etc., of Dispatched Workers (the “Dispatch Act”) that can have both criminal and non-criminal implications: (i) vicarious criminal liability of the responsible individual(s) and the company, and (ii) statutory duty to directly hire the relevant subcontractor employee (i.e., irregular workers). The Dispatch Act further provides that a service recipient company that is non-compliant will be subject to an administrative fine not exceeding KRW 30 million. In illegal dispatch cases, the established practice of the Ministry of Employment and Labor (the “MOEL”) is to issue a corrective order to the service recipient company to directly hire the irregular workers and then to impose the administrative fine if the service recipient company does not comply with the corrective order.
However, there were some recent cases where the service recipient company objected to the MOEL’s imposition of administrative fines and took the matter to court. In these cases, the court ruled that even if the subject in-house subcontracting arrangement constitutes illegal dispatch, it would be unreasonable to impose an administrative fine for non-compliance with the duty to directly hire the relevant irregular workers. The courts based their decisions on the following key factors as the basis of the decisions.
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It is theoretically possible for a single act to result in the imposition of both criminal sanctions and administrative fines. However, due to “double jeopardy” concerns, the court must take a prudent approach. The service recipient company has either been subjected to criminal punishment for violating the Dispatch Act or is in the middle of the criminal proceedings. However, the underlying facts of the criminal violation and non-compliance of the duty to directly hire the irregular workers are the same (or there is significant overlap), so the imposition of an administrative fine in addition to the criminal punishment is unnecessary.
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The finding of illegal dispatch in the relationship between the service recipient company and the pertinent irregular workers is the underlying premise of the duty to directly hire the irregular workers. However, the findings of the relevant authorities (such as the labor office, Prosecutors’ Office and courts) are often changing or inconsistent. Under these circumstances, forcing the service recipient company to comply with the direct hiring duty through the imposition of administrative fines would be unreasonable.
Considering these recent developments, businesses facing illegal dispatch issues and the administrative fines for non-compliance with the direct hiring duty should actively look into whether there is any room to challenge the administrative fine which has been, or may be, imposed.
