Growing Legal Risks for In-House Subcontracting in Companies: "Temporary Agency Work Should Be Allowed Like in Advanced Countries"

[Asia Economy Reporter Changhwan Lee] Recently, concerns have been raised that courts are increasingly ruling illegal dispatch in lawsuits involving in-house subcontracted workers, thereby increasing the burden on companies. It is pointed out that Korea's excessively rigid dispatch law compared to advanced countries will stifle corporate activities.

On the 6th, the Korea Economic Research Institute (hereinafter KERI) announced that among 13 major court rulings related to in-house subcontracting last year, 10 cases (76.9%) were judged as illegal dispatch.

Analyzing 5 major rulings (4 illegal, 1 legal) out of the 13, KERI explained that unlike in the past when illegal dispatch rulings were mainly made on in-house subcontracting of direct production processes within factories in the manufacturing sector, recently the same rulings have been extended to indirect processes, external subcontracting, and non-manufacturing sectors.

There were also illegal rulings on cases using computerized systems such as MES (Manufacturing Execution System) used for production process management.

KERI pointed out another problem with the expanded recognition of illegal dispatch in in-house subcontracting: in the past, whether workers were dispatched was judged mainly by whether the workers of the primary and subcontractors worked mixed together in the same space, but recently illegal dispatch rulings have been extended even to external subcontracted workers.

They added that the expansion of worker dispatch issues, which were mainly problematic in manufacturing, to non-manufacturing sectors and the recognition of illegal dispatch in transfers between affiliates are also making it difficult for companies.

A KERI official expressed concern, saying, "As cases of illegal rulings on in-house subcontracting increase, legal risks for companies have risen amid the difficult economic situation caused by COVID-19, causing considerable burdens in workforce management."

He continued, "The scope of illegal dispatch rulings, which were previously recognized mainly for direct production processes in manufacturing, has expanded to indirect processes such as logistics and transportation, which have low relevance to production processes."

Under Korea's dispatch law, worker dispatch is limited to 32 types of tasks, considering specialized knowledge, skills, and the nature of the work, excluding direct production process tasks in manufacturing. The period is allowed up to a maximum of 2 years, and if dispatched workers are used beyond 2 years or in restricted industries, the obligation for direct employment arises, and violations result in criminal penalties and fines.

In contrast, major advanced countries such as the United States, Japan, Germany, and the United Kingdom virtually allow dispatched labor for all types of work. It is argued that Korea's limited scope and heavy responsibilities under the dispatch law are stifling corporate activities.

A KERI official emphasized, "Korea's dispatch law limits dispatch to 32 types of tasks considering specialized knowledge, skills, and the nature of the work, and restricts the dispatch period to a maximum of 2 years, which, contrary to its intended purpose, increases employment rigidity. Dispatch labor at the level of advanced countries should be permitted."

This content was produced with the assistance of AI translation services.