Unlicensed and Illegal Subcontracting... Nearly 600 Legal Violations Last Year

Awareness of 'Violation of the Framework Act on the Construction Industry' After Major Accidents
Experts: "Market Disruption and Quality Decline Issues... Strengthen Legal Punishments"

[Asia Economy Reporters Jang Sehee and Hwang Seoyul] It has been revealed that illegal activities related to construction, design, and maintenance are widespread throughout the construction industry. Issues such as unfair subcontracting and poor-quality construction are pointed out to disrupt market order and potentially compromise safety.

According to the 'Status of Arrests for Violations of the Construction Industry Basic Act' received on the 13th by Rep. Jung Woo-taek of the People Power Party from the National Police Agency, the number of arrests for violations of the Construction Industry Basic Act last year totaled 588 cases, a 6% increase from the previous year (556 cases). Looking at the annual figures, the number of cases slightly decreased from 579 in 2020 to 556 in 2021, then increased again. The number of people sent to prosecution in 2020 and 2021 was recorded as 1,086 and 963, respectively.

This includes illegal lending of construction business licenses, poor construction, incomplete or non-compliance in construction ledger preparation, and failure to assign construction technicians on site. A National Police Agency official explained, "These violations occur in various forms such as illegal lending of licenses and bid interference," adding, "Since pre-indictment investigations are not reflected in the statistics, the actual number of occurrences may be even higher."

Rep. Jung stated, "Despite the prohibition of lending or brokering construction business registration certificates, illegal activities continue unabated on construction sites," and added, "We will consider legislative measures to strictly punish illegal lending of construction licenses and poor construction when detected."

◆ Unqualified Licensing and Illegal Subcontracting = Even though illegal activities continuously occur, regular crackdowns are physically difficult, and such issues only come to light when accidents, such as worker fatalities at construction sites, occur.

Last month, a total of 58 violations of the Construction Industry Basic Act were recorded. The Damyang Police Station in Jeollanam-do last month sent the representative of a roofing repair company in his 60s to prosecution without detention for causing the death of a worker by failing to install fall prevention devices at the worksite. During the investigation, the police additionally discovered that the representative carried out construction work exceeding 15 million KRW without registering a construction business license, thus performing unqualified construction. Companies that conduct construction work exceeding 15 million KRW without formal construction business registration face imprisonment of up to five years or fines up to 50 million KRW.

During the collapse disaster of Gwangju Hwajeong I-Park in April last year, which resulted in six deaths, evidence of illegal subcontracting was also confirmed. The representatives of Gahyeon Construction Industry and two representatives of pump car equipment rental companies were sent to prosecution without detention on charges of violating the Construction Industry Basic Act.

◆ Bills Are Dormant; Limitations of After-the-Fact Regulation = Recently, the political sphere paid attention when the cause of a major accident at a construction site was revealed to be poor construction, but laws related to the Construction Industry Basic Act are still dormant in the National Assembly. Rep. Kim Jeong-jae of the People Power Party proposed an amendment to stipulate that intentional or negligent poor construction causing significant damage, resulting in the death of three people or five including construction workers, be grounds for mandatory cancellation of registration and a five-year ban on new registrations. Rep. Jang Cheol-min of the Democratic Party also proposed a bill to strengthen effectiveness by specifying joint penalty provisions for violations of construction technician site assignment, but it is currently pending in the National Assembly.

Experts expressed concerns that widespread illegal activities disrupt market order and could lead to serious accidents at construction sites. Na Kyung-yeon, a research fellow at the Construction Industry Research Institute, said, "When unqualified companies win bids, diligent companies suffer adverse selection," adding, "If this trend becomes widespread in the market, companies may think they can operate without meeting normal entry standards and may not comply with regulations." Na also noted, "If companies that do not meet standards continue to win bids, it could hinder industry development."

Lee Eun-hyung, a research fellow at the Korea Construction Policy Research Institute, stated, "Due to competition in a limited construction market, problems such as illegal lending of licenses and operation of paper companies arise," and argued, "Since this can lead to a decline in the quality of construction products, it is necessary to consider strengthening penalties for legal violations and increasing rewards for internal whistleblowing of illegal activities."

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