The Korea Fair Trade Commission (“KFTC”) has announced a proposed amendment to its “Guidelines on the Standards for Imposing Administrative Fines for Violations of the Fair Transactions in Subcontracting Act” (hereinafter, the “Fine Guidelines”). The public consultation period for the amendment runs from October 29 to November 17, 2025.
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Purpose of the Amendment
The amendment aims to strengthen the incentive for principal contractors to adopt measures for preventing industrial accidents and tighten their management of safety related protocols by defining “unfair special agreements” that improperly shift costs related to industrial accidents as constituting “high” degree violations, which has the effect of increasing the percentage multiplier for calculating the administrative fines against such agreements.
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Item
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Description
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Industrial Accident Costs
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(Article 3-4, Paragraph 2, Item 2 of the Subcontracting Act) An agreement making the subcontractor bear costs related to handling complaints, industrial accidents, etc., that the principal contractor should bear.
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Industrial Safety Costs
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(Section II.4.d of the Notification on Unfair Special Agreements) An agreement making the subcontractor bear costs for industrial accident prevention, such as safety and health measures, that the principal contractor should bear.
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2.
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Changes in Standards for Determining the Degree of Violation
Currently, the Fine Guidelines classifies the degree of violation into high, medium, and low depending on the type of violation. Notably, all violations involving prohibited unfair special agreements are uniformly classified as “medium” degree violations, without considering the specific content of the unfair special agreement.
he proposed amendment modifies this approach by classifying unfair special agreements that specifically shift costs related to preventing industrial accidents onto subcontractors as “high” degree violations. This means that, under the amended Fine Guidelines, even where there are two unfair special agreements with equal transaction value (i.e., the relevant revenues), the final administrative fine that may be levied against the agreement that involves such cost shifting may be higher.
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Implications
This proposal reflects the KFTC’s ongoing commitment to strictly sanctioning Subcontracting Act violations and aligns with the broader national focus on strengthening safety awareness.
It is critical for companies acting as principal contractors to:
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Bolster overall safety management compliance efforts.
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Thoroughly review existing subcontract agreements to ensure they do not improperly shift safety-related costs.
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Prevent any such violations in future agreements.
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Given this trend, companies are strongly recommended to closely monitor enforcement actions and potential legislative changes relating to subcontracting regulations.
[Korean Version]
