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Supreme Court Establishes Clear Precedent on Calculating the Number of Disabled Workers a Business Owner Must Employ If Operating Multiple Businesses for Same Business Purpose

2019.04.11

Kim & Chang’s Labor & Employment Practice successfully represented the Korea Employment Agency for the Disabled (“KEAD”) in its appeal to the Korean Supreme Court.  

The plaintiff in this case challenged the criteria used to determine whether a business owner, who operates more than one facility or place of business, has complied with the mandatory hiring rate of persons with disabilities under the “Act on the Employment Promotion and Vocational Rehabilitation of Persons with Disabilities” (the “Act”).

Background:

Prior to the above landmark decision, the Supreme Court had not established clear precedent on how to calculate the number of workers ordinarily employed in cases where a business owner establishes/operates multiple places of business for the same business purpose.  This was important, since the obligation to hire those with disabilities under the Act (or payment of administrative fees in lieu thereof) is based on the number of employees within a company.  

Accordingly, some business operators had argued that, if accounting, personnel and physical structures of each place of business are separate, and the operation of the business can be distinguished from each other, the number of workers ordinarily employed in each business place or facility should be taken into account separately, not counted collectively.  Based on this argument, a number of administrative appeals and lawsuits were filed against KEAD to cancel the imposition of administrative fees (which was in lieu of the hiring obligation) against such companies.

On November 8, 2018, the Daejeon High Court held that the number of workers ordinarily employed at three medical facilities run by the same medical foundation should be counted separately, which was consistent with the argument that the status of mandatory employment of persons with disabilities should be determined for each business place.  

In response, Kim & Chang represented KEAD in the appeal to the Supreme Court and argued that: (i) the mandatory requirement to employ persons with disabilities under the Act should not be separately considered for each place of business, which is inconsistent with the purpose and intent of the legislation; and (ii) even though multiple places of business exist, if their accounting systems and facilities are merely separated to reflect the specific features of the business, each place of business should not be deemed separate from one another. 

The Supreme Court reversed the lower court’s decision by finding that the Daejeon High Court misinterpreted the concept of a business owner under the Act and misapplied the legal principle for determining the mandatory employment rate of persons with disabilities. 

Significance:

With the above ruling, the Supreme Court has established its first decision on how to determine the mandatory hiring of persons with disabilities for a business owner with multiple places of business, and this decision will lay the groundwork for facilitating the operation of the mandatory employment system for persons with disabilities.

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