Supreme Court Recognizes Worker Status Despite 'Not an Employee' Clause in Contract Indicating 'Employment Intent'

"Judgment Should Be Based on Substantive Work Content, Not Worker Status Contract Form"
"Lack of Specific and Individual Supervision Due to the Nature of Medical Practice"

The Supreme Court has ruled recognizing the employee status of a doctor who signed a contract explicitly stating, "Since I am not an employee, I will not make unfair claims related to labor laws."

The ruling emphasizes that whether someone qualifies as an employee under the Labor Standards Act should be judged based on the actual nature of the work, not the form of the contract.

Supreme Court, Seocho-dong, Seoul.

According to the legal community on the 8th, the Supreme Court's First Division (Presiding Justice Seo Kyunghwan) overturned the lower court's acquittal in the appeal case involving Mr. Lee, the representative of a clinic located in Jungnang-gu, Seoul, operated by a medical consumer cooperative, who was indicted for violating the Employee Retirement Benefit Security Act, and remanded the case to the Seoul Northern District Court.

The court stated, "The lower court acquitted Mr. Oh on the grounds that he was not an employee under the Labor Standards Act based solely on the reasons stated, but this judgment contains an error in the legal interpretation of employee status that affected the verdict," explaining the reason for overturning and remanding.

Mr. Lee was prosecuted for failing to pay approximately 14 million KRW in retirement pay to Dr. Oh, who worked at his clinic until July 31, 2019, within 14 days of retirement.

The key issue in the trial was whether Dr. Oh could be considered an employee under the Labor Standards Act.

Mr. Lee argued that since Dr. Oh was not an employee under the Labor Standards Act, he had no obligation to pay retirement benefits and had no intent to withhold payment.

Dr. Oh had signed a consignment contract, not an employment contract, with Mr. Lee. The contract stipulated that Dr. Oh would perform medical duties entrusted by Mr. Lee and receive compensation for them. However, the contract explicitly stated, "Dr. Oh is not an employee and will not make unfair claims related to labor laws."

Nevertheless, the first trial court found Mr. Lee guilty.

Although the contract stated that Dr. Oh was not an employee, the court followed the Supreme Court's position that employee status should be judged by the actual nature of the work rather than the contract's form, concluding that Dr. Oh could sufficiently be recognized as an employee. Evidence included withholding income tax on Dr. Oh's earnings in 2018, the year before retirement, and Dr. Oh's enrollment in health insurance with the clinic as the workplace.

However, the second trial court ruled differently.

The appellate court overturned the first trial's guilty verdict and acquitted Mr. Lee.

The court stated, "Based solely on the evidence submitted by the prosecution, it is difficult to consider Dr. Oh as an employee under the Labor Standards Act, and there is no other evidence to support this. Therefore, the prosecution's case falls under the category of lack of proof of crime, and pursuant to Article 325, latter part, of the Criminal Procedure Act, the defendant is acquitted."

The court cited the following reasons: ▲ The consignment contract between the two parties explicitly stated that Dr. Oh was not an employee; ▲ There were no employment rules or service regulations for Dr. Oh; ▲ Dr. Oh did not receive any instructions or supervision from Mr. Lee regarding his medical duties (the contract stated, "Dr. Oh shall perform medical duties sincerely and at his discretion, and Mr. Lee shall not issue any direct or specific orders beyond requests related to duties of a good manager, such as duty of care and reporting obligations"); ▲ Unlike other hospital staff, Dr. Oh did not record attendance using a fingerprint scanner nor attend staff meetings; ▲ There were no separate vacation regulations for Dr. Oh, and when Dr. Oh could not perform medical duties due to vacation, Mr. Lee personally found a substitute doctor to cover; ▲ Although the contract stipulated that Dr. Oh would receive 6 million KRW monthly, it also allowed for adjustment or postponement of payment by mutual agreement if business losses made payment difficult.

The Supreme Court reversed the decision once again.

The court first reaffirmed the Supreme Court's previous stance on the criteria for determining employee status.

Previously, the Supreme Court stated, "Whether a person qualifies as an employee under the Labor Standards Act should be judged based on the substance of the relationship rather than the form of the contract, whether it is an employment contract or a contract for work. The key is whether the worker provides labor to the employer in a subordinate relationship for wages. The existence of subordination is determined by factors such as whether the employer controls the work content, whether employment rules or service (personnel) regulations apply, whether the employer exercises significant direction and supervision during work, whether the employer designates working hours and location and the worker is bound by them, whether the worker independently owns tools or hires third parties to perform work, whether the worker bears the risk of profit or loss, the nature of the compensation, whether a fixed or base salary is set, whether income tax is withheld, the continuity and exclusivity of the labor relationship, and whether the worker is recognized as an employee under social security laws, among other economic and social conditions."

It also stated, "However, factors such as whether a fixed or base salary is set, whether income tax is withheld, or whether the worker is recognized as an employee under social security systems can be arbitrarily determined by the employer using their economic superiority, so the absence of these factors alone should not easily negate employee status."

The Supreme Court then examined the background of Mr. Lee entering into the consignment contract with Dr. Oh.

Mr. Lee, the cooperative representative, opened and operated the clinic in April 2012. In April 2013, he was fined 2 million KRW by summary order for violating the Labor Standards Act by failing to pay wages on time to a doctor named Mr. A who worked there. At that time, Mr. Lee also claimed that Mr. A was not an employee and requested a formal trial, but the Supreme Court ultimately confirmed the fine of 2 million KRW.

Afterward, with the help of a certified labor consultant, Mr. Lee adopted consignment medical contracts to resolve labor relations and signed such a contract with Dr. Oh on August 1, 2017. The contract stipulated that Dr. Oh would perform medical duties at Mr. Lee's clinic and receive 6 million KRW plus 1.35 million KRW in cash monthly.

The court pointed out, "Dr. Oh was the only doctor at the clinic, with fixed working hours and a specific workplace?the examination room (director's office). Even if the contract is in the form of a consignment medical contract, the most important part of the contract is that Dr. Oh performs medical duties at the clinic during set hours, and Mr. Lee pays him fixed compensation."

Furthermore, the court stated, "Dr. Oh worked most weekdays and Saturdays at the clinic and had to report monthly on the status and performance of his medical duties to Mr. Lee. Therefore, it is reasonable to consider that Mr. Lee managed Dr. Oh's working hours and location and exercised significant direction and supervision over his work."

In fact, the contract stipulated that Dr. Oh must notify Mr. Lee once a month about the status and performance of his medical duties under mutual adjustment, and if Dr. Oh neglected or performed his reporting duties insincerely, Mr. Lee could terminate the contract.

The court judged, "Dr. Oh performed medical duties using medical equipment and office devices provided by Mr. Lee and received fixed monthly payments regardless of patient treatment results. Therefore, the money Dr. Oh received is reasonably considered compensation for labor itself."

Additionally, the court cited Dr. Oh's health insurance registration with Mr. Lee's clinic as the workplace as further evidence of employee status.

In conclusion, the court stated, "Considering these circumstances comprehensively, Dr. Oh is deemed an employee under the Labor Standards Act who provides labor to the employer in a subordinate relationship for wages."

Regarding the fact that Dr. Oh did not receive specific work instructions from Mr. Lee, the court noted, "Although Dr. Oh did not receive specific or individual direction and supervision during his medical duties, this is due to the nature of a doctor's work and cannot be a decisive criterion for judging employee status."

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