The Supreme Court (Third Civil Panel) recently upheld a lower court’s decision that the statute of limitations clause under Article 766 of the Korean Civil Code (the “KCC”) (as opposed to the statute of limitations clause under Article 49 of the Labor Standards Act) shall apply to an unpaid wages claim filed by a subcontractor’s employee against the principal company (“Company A”) on the grounds that a worker dispatch relationship was established (Supreme Court Decision 2021Da213477, April 27, 2023).
An employee who had been working for the subcontractor of Company A since 2013 filed a claim against the company requesting direct employment upon receiving a termination notice from the subcontractor in February 2015. The employee also filed a damages claim against Company A for receiving discriminatory treatment compared to company A’s regular employees for the relevant period.
The Supreme Court upheld the lower court’s decision that Company A engaged in discrimination against the subcontractor’s employee in terms of wages even though the subcontractor’s employee and Company A’s regular employees were assigned to perform the same or similar duties.
The subcontractor’s employee claimed the existence of a worker dispatch relationship and declared that Company A’s discriminatory treatment without reasonable grounds (i.e., lower wages paid to the subcontractor’s employee compared to Company A’s regular employees who performed the same or similar work) constituted a violation of Article 21 (1) of the Act on the Protection of Temporary Agency Workers (the “Worker Dispatch Act”). The employee sought damages equivalent to the difference between the wage he actually received and that of regular employees. The Supreme Court accepted the employee’s claim for appeal.
The Supreme Court affirmed the lower court’s decision that the subcontractor’s employee (who was recognized as an illegally dispatched worker) would have been subject to the three-year statute of limitations clause under the KCC (three years from the date on which the victim becomes aware of the damage and the offender) instead of the Labor Standards Act had he filed a damages claim.
This is the first case where the court rendered a final decision on the statute of limitations for a damages claim based on an illegal worker dispatch. Article 766 of the KCC provides that the statute of limitations for a tort claim shall be (i) three years from the date on which the victim becomes aware of the damage and the offender and (ii) ten years from the date on which the tortious act was committed. Going forward, we expect courts to focus on the calculation of the statute of limitations in damages claims based on Article 21 (1) of the Worker Dispatch Act.