Construction Companies Giving Work to Unregistered Contractors Face 'Three Strikes' Expulsion

Construction Company Penalty Cap Raised from 100 Million to 200 Million Won

[Asia Economy Reporter Moon Jiwon] Punishments for construction companies that illegally subcontract to unregistered operators will be strengthened going forward.

The Ministry of Land, Infrastructure and Transport announced that the amendment to the Framework Act on the Construction Industry containing these provisions was approved at the Cabinet meeting on the 22nd.

The amendment, having passed the Cabinet meeting, is scheduled to be submitted to the National Assembly at the end of this month after presidential approval.

The amendment includes provisions to apply a three-strike rule to companies subcontracting to unregistered operators, thereby expelling them from the construction market.

Currently, if a company is penalized for illegal subcontracting (including blanket, same-type, or re-subcontracting) and violates the law two or more times within five years, its construction business registration is canceled (three-strike rule). However, cases of subcontracting to unregistered operators were excluded, and this amendment includes them as subject to the three-strike rule.

Additionally, the regulation has been clarified to punish the duplicate placement of construction technicians without the consent of the project owner. If construction technicians are placed on multiple sites without the project owner's consent, they effectively cannot perform construction management and other tasks, so construction businesses are punished as if no construction technicians were assigned, but due to confusion among stakeholders, this has been more clearly defined.

The upper limit of fines imposed in lieu of business suspension for violations of construction business obligations has been raised from 100 million KRW to 200 million KRW in accordance with increases in contract amounts.

Provisions have also been established to allow deferral of mandatory construction industry education in cases where it is impossible to complete due to force majeure such as infectious diseases like COVID-19 or natural disasters, by setting a grace period depending on the situation.

Kim Geun-oh, Director of Construction Policy Division at the Ministry of Land, Infrastructure and Transport, stated, "We will continuously strive to eradicate illegal subcontracting, such as subcontracting to unregistered operators, which causes poor construction quality, to ensure proper execution of construction work, establish a sound construction market, and prevent safety accidents."

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