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Guidance Concerning Service Recipient Companies’ Duties to Prevent Workplace Accidents Under the Occupational Safety and Health Act

2020.04.20

The Occupational Safety and Health Act (as amended with effect on January 16, 2020, the “OSHA”) substantially enhanced service recipient companies’ obligations and responsibilities to prevent industrial accident via introduction of new provisions addressing (i) definition of contract (“Dogeup” in Korean), (ii) pre-approval of contract & prohibition of subcontract (“Hadogeup” in Korean), (iii) expanded scope of service recipient company’s obligations and responsibilities on safety & health measures, and (iv) heightened level of penalties, etc.

To lessen potential confusion that may result in the workplace in connection with the implementation of the new regulations and to maintain consistency in enforcement, the Ministry of Employment and Labor (the “MOEL”) has continued to roll out guidance on implementation concerning these heightened regulatory requirements. 

In this update, we have compiled a summary of the emerging guidance of the MOEL concerning these safety and health regulation measures, particularly in relation to (i) scope of prohibited contract activities; (ii) classification of service recipient company and construction project owner and (iii) place subject to control and management of service recipient company.

1.    Scope of Prohibited Contract Activities

Category Key Contents Note
Prohibition of Contract   Previous Current
  • Plating work: Including pre-processing + main work + finishing work
  • Substances subject to permission: Dichlorobenzidine and 11 others
Work at Issue (i) Plating work
(ii) Smelting, injection, processing or heating of heavy metals (e.g., mercury, lead and cadmium)
(iii) Work manufacturing or using substances subject to permission
(i) Plating work
(ii) Smelting, injection, processing or heating of mercury, lead and cadmium
(iii) Work manufacturing or using substances subject to permission

 
Prohibition Level Contract within company is possible with approval Prohibited in principle (contract is possible with approval if it relates to temporary or intermittent work, or requires professional technique)
Prohibition of Subcontract (New) Prohibition of subcontracting work approved as exception to prohibition of contract (Article 58 of OSHA)
Penalties Imprisonment up to five years, or criminal fine up to KRW 50 million Administrative penalty up to KRW 1 billion
Approval of Contract   Newly Introduced Exemption from the contract approval:
In the event that the relevant chemicals are all removed and the removal is reported to the MOEL
Work at Issue Work involving remodeling, disassembly, demolition or dismantling of equipment handling 1% w/w or greater of sulfuric acid, hydrogen fluoride, nitric acid or hydrogen chloride, or work to be performed inside the above equipment
Prohibition of Subcontrac Prohibition of subcontracting work subject to the contract approval (Article 59 of OSHA)
Penalties Administrative penalty up to KRW 1 billion


2.    Classification of Service Recipient Company and Construction Project Owner 

Category Key Contents
Definition of Contract, Service Recipient Company, and Construction Project Owner   Newly Introduced
Contract Agreement that entrusts another person to manufacture, construct or repair an object, to provide service, or to perform other tasks, regardless of its label
Service Recipient Company Business owner who contracts out manufacturing, constructing or repairing an object, providing services, or performing other tasks to another person (excluding construction project owner)
Construction Project Owner Business owner who contracts out manufacturing, constructing or repairing an object, providing services, or performing other tasks to another person (excluding construction project owner)
Standards to Determine Contract
  • Regardless of completion of work or payment of fees, any agreement entrusting another person to do a task (irrespective of its label such as service or outsourcing) would be considered a contract.
  • Whether (i) there is a direct relevance or (ii) no direct relevance to the business purpose of the service recipient company, such agreement would be considered a contract.
    • Examples of (i): regular or ordinary service, maintenance, repair of production facility, etc.
    • Examples of (ii): services (e.g., security, cleaning and gardening), operation of welfare facilities (e.g., commuter bus and cafeteria)
Standards to Determine Service Recipient Company or Construction Project Owner
  • Standards to determine whether a person actively manages or directs construction work
     (i) Whether the construction work is essential for the business’s maintenance or operation
     (ii) Whether the construction work frequently occurs or there is a corporate division that manages such work
     (iii) Whether the construction work is a predictable work, and other various factors must be considered to make an ultimate determination.
  • Scope of construction work under the OSHA:
    Construction work under the Framework Act on the Construction Industry, electrical construction under the Electrical Construction Business Act, information and communications construction projects under the Information and Communications Construction Business Act, fire-fighting system installation under the Fire-Fighting System Installation Business Act, and repair of cultural heritage under the Act on Cultural Heritage Maintenance, Etc.
Service Recipient Company (example)
  • In the case of contracting service, maintenance or repair of industrial equipment/facility in a manufacturing business
Construction Project Owner (example)
  • In the event that the person at issue is not actively managing or directing implementation of major overhaul or maintenance in a large-scaled process industry (chemical industry, steel industry, etc.)
  • In the event that the person at issue is not actively managing or directing installation, replacement or dismantlement of plant facility (e.g., storage tank or boiler), which is not in use in a manufacturing business


3.    Place Subject to Control and Management of Service Recipient Company 

Category Key Contents
Place subject to Control and Management of Service Recipient Company
  • A place which is located outside a service recipient company’s place of business may be deemed to be subject to the service recipient company’s control or management, if the following conditions are satisfied.  In such case, the obligations on safety and health measures would be applicable to the place.
     (i) A service recipient company provided the place to a service providing company (or designated the place for a service providing company) as workplace
     (ii) The place is under control of service recipient company as it is able to recognize, manage and improve hazard or risk of the place
     (iii) The place falls under any of the 21 places where there is a risk of industrial accident (Article 11 of the Enforcement Decree of the OSHA; Article 6 of the Enforcement Rule of the OSHA)
Subject to control or management (example)
  • In the event that a service providing company cannot install, disassemble or change a safety or major facility in its discretion, or must obtain service recipient company’s approval to do so
  • Where service recipient company provides or designates a workplace or facility to a service providing company in a form of lease agreement, if such agreement satisfies the aforementioned conditions in substance
Not subject to control or management (example)
  • In the event that a service providing company owns the workplace, facility or equipment, or leases the place from a third party other than service recipient company


Following the recent overhaul of the OSHA – particularly in relation to the regulation of the use of third party workers – it may be expected that there will be a significant confusion, at least in the near term, with respect to how the new regulatory requirements are interpreted and implemented.  The emerging guidance of the MOEL which we have summarized above represents the attempt of the MOEL to set forth the general principles; case-by-case application of these general principles to the specific facts of each business will further be necessary.  In this connection, businesses will likely need to explore what needs to be done in order to ensure effective compliance with these regulatory requirements, including amendment of internal company regulations, changes to the relevant work processes and revision of applicable contracts with service providing companies.

Given the passing of time since the amendment to the OSHA in January 2020, we anticipate that the MOEL will start to check the compliance status concerning occupational safety and health later this year, including making unannounced visits to businesses that make significant use of the labor services of third party workers in their workplaces, although the robustness of the enforcement activity by the MOEL may be impacted by the COVID-19 pandemic and the continuing need for social distancing. 

 

[Korean version]

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