On July 10, 2024, the Daegu High Court, Civil Division 2 (Presiding Judge, Tae-hyun Kim) rendered a judgment denying the establishment of a worker dispatch relationship between Public Institution A and the plaintiffs, who were workers of a subcontractor entrusted with performing facility maintenance work for Public Institution A (Daegu High Court Decision 2021Na21952, 21969 (consolidated) and 2021Na21976, all rendered on July 10, 2025).

In this case, the trial court accepted all of the plaintiffs’ claims, recognizing both the establishment of a worker dispatch relationship and their claim for damages corresponding to the difference in wages between Public Institution A and the subcontractor. The defendant then retained Kim & Chang for the High Court proceedings, and we effectively argued that (i) the content and scope of the entrusted tasks in this case were clearly defined, (ii) the performance of the entrusted tasks required a high degree of expertise, skill and experience, and (iii) the statement of work could not be regarded to constitute substantial supervision and control, which is a sign of worker dispatch. As a result, we succeeded in overturning the district court’s judgment and obtained a decision in favor of our client.

The district court recognized the establishment of a worker dispatch relationship between the workers of the subcontractor and Public Institution A, based on the following grounds: (i) according to the statement of work, the inspection cycle and methods for each facility and equipment, as well as the procedures for performing tasks, were specified in detail, (ii) the work was carried out in a manner no different from being directly instructed on the performance of duties according to the statement of work, and (iii) for certain matters, the defendant’s supervisor could directly give instructions, and in some cases, prior consultation with such supervisor was required.

However, the High Court reversed the trial court’s decision and dismissed the plaintiffs’ claims, based on the following reasons: (i) the purpose of the statement of work was to clearly define the subject, scope and manner of execution of the tasks, (ii) the subcontractor had prepared a detailed operations manual and the contents of the statement of work prepared by the defendant could not be considered to have sufficient details to actually perform the work, (iii) there are public interest aspects to the operation and management of public institutions that require stable management, (iv) it is difficult to recognize that the defendant’s supervisors exercised substantive supervision and control over the performance of the work, and (v) Public Institution A had never actually performed the relevant maintenance tasks directly. In light of these circumstances, the High Court concluded that a worker dispatch relationship was not established.

The High Court’s decision in this case is in line with the recent Supreme Court decision regarding worker dispatch relationships involving public institutions (Supreme Court Decision 2024Da215993, May 30, 2024). This decision is also meaningful in that the High Court examined the legal nature and specific content of various documents, such as statements of work and internal regulations, to determine whether there was substantial supervision and control exercised over the workers.

Meanwhile, disputes over illegal worker dispatch are still spreading in relation to various entrustment relationships – including contracting, service relationships and other forms of outsourcing – regardless of the type of contract. This trend is affecting a wide range of industries, including public institutions. Furthermore, with the recent enactment of the Trade Union and Labor Relations Adjustment Act, also known as the “Yellow Envelope Act,” there is a growing need for comprehensive risk analyses and improvement measures regarding contractual relationships with subcontractors. Accordingly, companies will need to establish comprehensive plans to address the risks to labor-management relations arising from illegal worker dispatch disputes and the implementation of the Yellow Envelope Act.