'Non-issuance of Seo-myeon and Unfair Special Agreements' Included as Reasons for Subcontract Penalty Reduction... Reduction Rate Increased up to 30%

Fair Trade Commission Issues Administrative Notice on Amendment to "Notice on Criteria for Imposing Surcharges on Subcontractors Violating the Subcontracting Act"

Detailed Criteria for Seriousness Evaluation by Violation Type
Up to 1.5 Times Increase in Fixed Penalty for Long-Term Violations

[Sejong=Asia Economy Reporter Joo Sang-don] In the future, cases of subcontracting law violations where it is difficult to calculate the damage amount, such as failure to issue written documents and unfair special contracts, will also be eligible for penalty reductions. The reduction rate will also be raised to a maximum of 30%. This is to ensure prompt compensation for damages to parties involved in subcontracting law disputes.

On the 15th, the Fair Trade Commission announced that it has prepared a revision of the "Notice on Criteria for Imposing Penalties on Businesses Violating the Subcontracting Act," which includes these details, and will conduct a 21-day administrative notice period until October 6.

The current penalty notice reduces penalties for voluntary correction based on the "degree of damage relief to the subcontractor." If the subcontractor's damage is fully compensated, the penalty is reduced by up to 20%, and if more than 50% of the damage amount is compensated, the penalty is reduced by up to 10%.

Because of this, violations such as failure to issue written documents, unfair special contracts, and technology misappropriation, where it is difficult to calculate the damage amount, were not eligible for penalty reductions even if corrected.

Accordingly, even if the damage amount cannot be quantified, the grounds for reduction have been expanded to allow penalty reductions when the effects of the violation are substantially or entirely eliminated. Additionally, the reduction rate will be increased to recognize reductions up to a maximum of 30%.

The criteria for seriousness evaluation by violation type will also be subdivided. The current penalty notice considers three factors?▲violation type ▲scope of damage occurrence ▲degree of damage?to assess the seriousness of the violation and calculate the basic penalty amount. However, this has limitations in sufficiently reflecting the diverse characteristics of subcontracting law violations. Therefore, differentiated seriousness evaluation criteria by violation type will be established to reflect the characteristics of the violation when calculating penalties.

For malicious violations mainly targeting one or two companies, such as technology misappropriation, retaliatory measures, and illegal acts, the "scope of damage occurrence" factor will be removed, and evaluation will be based only on ▲violation type ▲degree and scale of damage ▲unfairness. For obligation violations unrelated to monetary damage, such as issuing written documents and payment guarantees, evaluation will be improved to consider only ▲violation type ▲scope of damage occurrence ▲unfairness instead of the "degree of damage" indicator. For violations of the prohibition obligations by the original contractor, evaluation will consider ▲violation type ▲scope of damage occurrence ▲degree and scale of damage ▲unfairness.

A penalty increase provision for long-term violations will also be newly established. When it is difficult to calculate the amount of violation, a fixed penalty within 1 billion KRW is calculated, but a new standard will be established to allow penalty increases based on the period of repeated or continuous violations or the duration of the effect. Penalties for long-term violations can be increased up to 1.5 times.

A Fair Trade Commission official said, "It is expected that the incentive for businesses to voluntarily correct violations will be expanded, enabling prompt damage relief and encouraging voluntary improvement of transaction practices." He added, "During the administrative notice period, we will fully collect opinions from stakeholders and finalize and implement the revision after a plenary meeting resolution."

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