The Incheon Port Authority (“IPA”) case involved an employee of a subcontractor falling from a certain height during a floodgate repair work resulting in death. At the trial court level, the IPA’s representative (President) was sentenced to imprisonment of one and a half years and was immediately put under court custody for violating the Occupational Safety and Health Act (“OSHA”) (Incheon District Court Decision 2022Godan1878, June 7, 2023). Kim & Chang represented the IPA and the representative on appeal and successfully defended the case leading to the appellate court reversing the trial court’s decision by finding that the IPA and the representative were not guilty (Incheon District Court Decision 2023No2261, September 22, 2023, “Appellate Decision”).
 
The appellate court found the defendants not guilty on grounds that the IPA outsourced the construction work in question as a “construction project owner” under the OSHA, and it was difficult to find the representative’s intent to violate the OSHA. This recent decision by the appellate court is meaningful in that the appellate court set forth specific standards for interpreting the concept of a “construction project owner,” which is a term that was newly introduced with the recent amendment of the OSHA.
 
We explain below the key issues and implications of the Appellate Decision.
 
Key Issues of the Appellate Decision
 
In this case, IPA (the principal), which manages and operates the port of Incheon, ordered a large-scale construction project (i.e., floodgate repair work) as a project owner that involved suspending a certain floodgate’s operations for eight months. During the repair work, while the subcontractor’s employee, without wearing a safety harness, was pulling down H-beams from the upper part of the floodgate using a winch, the winch frame fell down, and an H-beam fell to the ground from the floodgate; and as a result, the employee who was holding the connected rope also fell to the ground and died. Regarding this accident, the trial court sentenced the representative (President), who was indicted for a violation of the OSHA, to imprisonment for one and a half years (actual sentence) and the IPA (a corporation) to a fine of KRW 100 million, but the Appellate Decision reversed such decision and acquitted both the representative and the IPA. With respect to the subcontractor’s site manager, who was also indicted for a violation of the OSHA and occupational negligence resulting in death, the appellate court ordered imprisonment of one year (with a stay of execution for two years), reversing the decision of the trial court, considering the fact that a settlement agreement was entered into with the bereaved family and other such mitigating circumstances.
 
The appellate court reviewed issues such as whether IPA (the principal) had the obligation to install safety equipment or the obligation to prepare a heavy equipment handling work plan as principal contractor under the OSHA. The appellate court found that (i) based on relevant legal principles and relevant facts, the IPA was merely the construction project owner, not the principal contractor, and (ii) the IPA did not or could not know the work method that caused the accident, and therefore, it was difficult to acknowledge the presence of the intent to violate the OSHA.
 
Implications of the Appellate Decision
 
The Appellate Decision has the following significance:
 

The recent Appellate Decision is viewed as an important and meaningful decision in that, in addition to confirming the existing legal principle requiring to make a judgment according to whether the person was in a position to lead and generally manage the construction process, not whether the person actually led and generally managed the construction process, it provided more specific factors that need to be considered, and elements that need to be present, when determining whether the person was in a position to lead and generally manage the construction process.

Regarding the term “construction project owner” under the OSHA, the appellate court maintained the trial court’s reasoning that it should be judged from the normative perspective with focus on whether the person is in a position to lead and generally manage the construction process.

However, the appellate court ruled that a construction project owner cannot be deemed a principal contractor based on the mere fact that it fulfilled its responsibilities and obligations to prevent accidents, separately from the principal contractor’s obligation to take safety and health measures. The appellate court reasoned that if the principal contractor’s liability is recognized only for the reason that a construction project owner took industrial accident prevention measures, then this would mean that the lower the degree of involvement in construction safety management, the more distant one is from the position of principal contractor, which might go against the purpose and intent of relevant laws and regulations, which is to prevent and lower the risk of industrial accidents.

The Appellate Decision also clarified that, as the purpose of the amended OSHA was to respond to the common practice of “risk outsourcing,” even with respect to distinguishing a construction project owner and a principal contractor, the following elements should be specifically examined to determine the status as a construction project owner: (i) whether the principal contractor took on the appearance of a construction project owner to avoid its responsibility under the OSHA despite its capacity or capability to perform the construction project; or (ii) whether there are circumstances to deem that the construction involves special risk factors under the control of the construction project owner, which made it practically difficult for the construction companies, etc. to take safety and health measures.

Based on these legal principles, the appellate court held that simply because the principal performed the roles that are originally within the scope of obligation to be performed by the construction project owner specified in a construction service contract, such as project planning and progress rate review, it cannot be deemed that the principal could perform or participated in the construction work, and that since relevant laws including the Framework Act on the Construction Industry and the OSHA set forth a construction project owner’s safety management responsibilities, it should not be deemed that the IPA led and generally managed the construction process simply based on the fact that it inspected and managed safety-related matters of the construction project.
 

The Appellate Decision confirmed again that the intention to violate the OSHA should be acknowledged only where the violating act was caused by the business owner, such as cases where a business owner directed to perform work without taking a safety measure or knowingly neglected the fact that the work was being conducted without taking a safety measure (Supreme Court Decision 2007Do7987, August 11, 2008).

In particular, based on facts such as IPA’s provision of safety equipment and regular safety trainings and other relevant facts identified at the accident site, the appellate court reasoned that it is difficult to deem that the IPA knew or could have known that the employee who suffered the accident would conduct the heavy cargo work in an unusual manner; and in this regard, the Appellate Decision held that it was difficult to recognize that IPA’s representative had even willful negligence to violate the OSHA.

The Appellate Decision is consistent with the existing Supreme Court and lower court decisions in that it found it difficult to recognize the intent of the representative of principal company to violate the OSHA, in cases where an accident occurs due to an exceptional work method that has not been reported to the company (the principal). We expect subsequent court decisions to rule similarly with respect to finding the intent to violate the Occupational Safety and Health Act.
 

As the prosecutor appealed against the Appellate Decision, the case will be reviewed by the Supreme Court. If the legal principle set forth in the Appellate Decision regarding the standard to distinguish the construction project owner and the principal contractor of a construction project is finalized by the Supreme Court’s decision, it would be necessary to keep an eye on whether this will cause any change in the current practice of the labor office, which has maintained a somewhat strict stance on the recognition of a construction project owner.

In addition, as the criteria for determining the construction project owner under the OSHA may serve as reference to find whether or not there exists “practical control, operation, and/or management responsibility” under the Serious Accidents Punishment Act, it is expected that the standard on the scope of responsibility for safety management will become clearer from the perspective of the principal company, which places orders for various construction projects.

In light of the above, it would be necessary to closely pay attention to the Supreme Court’s decision on the Appellate Decision and subsequent court decisions in other similar cases.

[Korean Version]