On December 30, 2019, the Ministry of Employment and Labor (the “MOEL”) revised its Guidelines on Criteria for Judgment of Employee Dispatch and communicated the guidelines to regional employment and labor agencies.
The Protection of Dispatched Workers Act (the “PDWA”) does not clearly differentiate between “worker dispatch” for which the PDWA is applicable and “legitimate contracting arrangements” for which the PDWA is not applicable. As a result, disputes have continued over whether the usage of on-site contracting by public agencies, companies and others for budget reasons or competitiveness constitute worker dispatch in which the PDWA is applicable.
The guidelines of the MOEL reflect the Supreme Court decisions (the “2015 Supreme Court Decisions,” including the Supreme Court Decision 2010Da106436, rendered on February 26, 2015) made after the MOEL guidelines of 2007. Specifically, the guidelines provide the following five criteria with relevant considerations for each.
1. Significant direction and order on work
To review whether significant directions and orders are made, directly or indirectly, including whether binding directions are made on the detailed work process (e.g., work assignment/re-assignment, workload, work methods, work details, work speed and workplace) to which employees are bound, considering factors such as the nature of work, work directions and work systems.
2. Substantial integration into the business of the principal employer, etc.
To review whether the principal employer controls its contractor’s employees by integrating them into the business as its employees (e.g., causing them to work together in one work group, perform duties that are not prescribed in the agreement, or substitute its employees’ vacancies).
3. Exercise of the decision making rights on HR/labor issues
To review whether the contractor independently exercises its decision and management rights over HR/labor-related matters including the selection and replacement of employees, education and training, work and recess, leave, performance evaluation, and promotion/discipline/dismissal.
4. Establishment of the contract purpose and separation of work, specialty/expertise
To review whether the purpose of the contract is for completion of a certain project, considering factors such as whether the content and scope of work are finalized, and whether the work requires specialty/expertise.
5. Retention of corporate organizations/equipment as necessary for achievement of the contract purpose
To review whether the contractor, etc. retains independent corporate organizations, or equipment and expertise, etc. as necessary to achieve the purpose of contract.
In practice, each regional employment and labor agency has been basing their judgment regarding employee dispatch on the 2015 Supreme Court Decisions even prior to the recent revision of the guidelines. Thus the recent revision will not lead to notable changes in how judgments regarding employee dispatch are made.
Nonetheless, considering that courts have continued to broaden the scope of recognizing worker dispatch as below even after the 2015 Supreme Court Decisions were made, the MOEL may be seen as taking a stronger initiative in conducting labor inspections by directly reflecting the criteria set forth in the 2015 Supreme Court decisions in its guidelines.
(i) Court decision broadly recognizing widespread illegal dispatch for tasks not constituting part of the direct manufacturing process such as production management including transportation and rust prevention (“indirect process”).1
(ii) Court decision recognizing an on-site manager of a supplier as a dispatched worker.2
(iii) Court decision finding that where the principal company determines the specific scope of work to be conducted by contracted workers (e.g., the work volume and location where the work will be conducted) through an integrated production management system, this constitutes an indication of worker dispatch.3
The revised guidelines provide more specific criteria and considerations than before, and, in the event that violations of the PDWA occur, the guidelines require measures such as criminal punishment, fines, administrative disposition and administrative guidance to be taken. As such, employers should review in advance whether worker dispatch exists under the criteria established in the Supreme Court decisions as reflected in the recent revision, as well as their compliance with the PDWA.