NLRC Decision

The National Labor Relations Commission (the “NLRC”) ruled, in a recent decision, that a company making use of temporary agency workers is liable for discrimination against those workers in comparison to the using company’s own employees.  And the NLRC went as far as to award punitive damages against the using company.

This case concerns discrimination against temporary agency workers who were used by a certain corporation (the “Company”). Eight of those temporary agency workers (the “Agency Workers”)filed an application for remedy with the Incheon Regional Labor Relations Commission (the “IRLRC”), claiming that they have been discriminated against in comparison to the Company’s own employees. In response, the IRLRC decided on March 17 that such an application cannot be filed against the using company and issued a corrective order only addressed to the temporary-worker agency(the direct employer of the Agency Workers). The Agency Workers appealed to the NLRC, and the NLRC overturned the initial decision and ruled that the Company and the temporary-worker agency should be jointly and severally liable to pay punitive damages of KRW 44,900,000, which is double the actual amount of damages incurred due to the discriminatory treatment.

Prohibition of Discrimination and Punitive Damages Awards

The Protection of Fixed-Term and Part-Time Workers Act (the “PFPWA”) and the Protection of Temporary Agency Workers Act (the “PTAWA”) provide, respectively, that fixed-term or part-time employees, and temporary agency workers(often referred to collectively as “non-regular workers”)cannot be discriminated against in comparison to permanent full-time employees or the using employer’s own employees, as the case may be, engaged in the same or similar kinds or work, and these acts explicitly prohibit such discrimination with respect to wages, bonuses, working conditions, and benefits.

While the Labor Relations Commission (the “LRC”) has for sometime had the power to issue corrective orders awarding compensation for damages incurred due to discrimination against non-regular workers, more recent amendments to the PFPWA and the PTAWA now allow such orders to award punitive damages (Article 13(2) of the PFPWA and Article 21(3) of the PTAWA). Pursuant to these punitive-damages provisions, the LRC is now capable of  ordering an employer to pay up to three times the amount of actual damages incurred if prohibited discriminatory treatment is clearly intentional or repeated. Whereas, in the past the LRC could only order the employer to compensate non-regular workers who suffer unlawful discrimination, for the actual damages incurred.

However, before the case at issue, there had not yet been anycase in which these punitive damages were actually awarded. This case is meaningful in that the NRLC has actually applied these punitive-damages provisions and ordered an employer to pay the workers twice the amount of damages actually suffered.

Liability of the Using Company for Discrimination Against Temporary Agency Workers

While the PFPWA makes clear who bears the liability to compensate workers for damages incurred due to prohibited discrimination (the employer), the PTAWA does not provide clear guidance as to whether the using company should also pay damages in addition to the temporary-worker agency. In the past, the LRC had imposed such liability only on the temporary-worker agencies themselves and not the using companies.

However, in this decision the NLRC imposed liability not only on the temporary-worker agency but also the using company, on the following grounds: i) according to Article 21 of the PTAWA, both the using company and the temporary-worker agency bear the obligation to refrain from and correct any unlawful discrimination; and ii) the using company knew or should have known that the Agency Workers were being discriminated against, since the using company was involved in deciding their employment conditions when entering into the contract with the temporary-worker agency.

Implications

This decision is significant in the following two respects:

  • It is the first decision to award punitive damages for discrimination against non-regular workers. The amount of damages awarded in the Korean legal system is normally confined only to the actual amount of damages incurred, and punitive damages are rarely recognized. The fact that the NLRC awarded punitive damages in this case suggests that it is probable that punitive damages will be awarded again in future cases where “the discrimination is clearly intentional or repeated.”
  • And, this is the first case in which the LRC found a using company liable for discrimination against temporary agency workers. This decision demonstrates that using companies may also be liable for damages in discrimination cases, unlike in the past where the LRC held that using companies were not liable for such damages (NLRC2009Discrimination2, K Corp. Case).

It is not yet clear how the courts will decide these issues if the Company appeals the NLRC’s decision. But in our opinion, it is probable that the courts will arrive at the same conclusion, at least with respect to the legal questions (as opposed to factual findings). Thus, it appears to be reasonably probable that the LRC will continue to issue corrective orders to using companies and award punitive damages, and that the courts will accept this approach in the  future. And if such practice becomes established, corporations that frequently use non-regular workers may face significantly increased risks relating to discriminatory treatment.

Therefore, corporations with a large number of temporary agency workers or fixed-time or part-time employees should be attentive to the stance taken by the LRC and the courts concerning these forms of discrimination. And they should meticulously review whether such discrimination issues could arise in their workplaces, and take corrective action at an early stage if it is possible that such problems exist.