"Even if Raw Material Prices Rise, Subcontracting Fees Cannot Be Increased"... Fair Trade Commission Sanctions Wooshin General Construction's 'Unfair Special Contract'

Issuance of Administrative Order and Imposition of 16 Million Won in Fines

[Sejong=Asia Economy Reporter Joo Sang-don] Wooshin General Construction, which set unfair special clauses preventing subcontractors from applying for subcontract payment adjustments even when construction material costs rise, has been ordered by the Fair Trade Commission to take measures to prevent recurrence. Additionally, the company was fined for failing to issue documents reflecting changes in construction volume and payment amounts.

On the 4th, the Fair Trade Commission announced that it imposed corrective orders and a fine of 16 million KRW on Wooshin General Construction for failing to issue documents, setting unfair special clauses, non-payment of bill discount fees, and violating the obligation to guarantee subcontract payments.

According to the Fair Trade Commission, Wooshin General Construction did not issue documents reflecting changes in construction volume and payment amounts following a change in construction methods after subcontracting reinforced concrete work for an apartment construction project in Dalseong-gun, Daegu, in October 2016.

Wooshin General Construction also set a special clause stating that contract amounts would not change due to price fluctuations, thereby restricting subcontractors' rights to apply for subcontract payment adjustments. The Subcontracting Act grants subcontractors the right to request adjustments to subcontract payments from the primary contractor when price changes in raw materials make such adjustments unavoidable. Furthermore, Wooshin General Construction established a special clause that places full liability for compensation in case of accidents on the subcontractor, making the subcontractor bear responsibility regardless of the cause of safety incidents.

The company also failed to pay bill discount fees. Wooshin General Construction paid subcontract payments via promissory notes with maturity dates exceeding 60 days from the date of receipt of the goods but did not pay 18.27 million KRW out of the 282 million KRW bill discount fees for the excess period. Additionally, the company did not provide the required subcontract payment guarantee within 30 days after the contract.

A Fair Trade Commission official stated, "This action is significant in sanctioning unfair special clauses where the primary contractor uses its superior position to restrict subcontractors' rights to request payment adjustments or shift responsibility for industrial accidents." The official added, "Due to the economic downturn, it is expected that many primary contractors impose additional special clauses outside of contracts to transfer burdens to subcontractors, so we plan to strictly enforce the law."

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