• The Supreme Court’s First Decision that Found Criminal Liability for Violation of the Act on the Protection, etc. of Dispatched Workers, Where Subcontracting is Substantively Recognized as Dispatch

On February 18, 2013, in a case where the CEO of A Company, a manufacturing company, and the CEO of the subcontracting company for A Company, were indicted for violating the Act on the Protection, etc. of Dispatched Workers (the “Act”), the Supreme Court ruled that such CEOs were subject to criminal liability and imposed fines on grounds that the CEOs made workers of the subcontracting company join the assembly and production lines of the manufacturing process at A Company’s facilities under the direction and supervision of A Company.

The subcontracting company workers were assigned to A Company’s manufacturing process under the terms of the “Subcontracting Agreement” of A Company, but the lower court decided based on the totality of circumstances that A Company, the company hiring such subcontracting company, committed an ultra vires act over the subcontracting company workers beyond the due general managing acts of direction and supervision, and that the subcontracting company workers may be deemed to be dispatched workers providing services for A Company under the direction and supervision of A Company.  The lower court further found that the CEO of A Company and the CEO of the subcontracting company were aware of the possible violation of the Act and concluded that these CEOs willfully violated the Act. The Supreme Court confirmed the lower court’s decision.

The above decision marked the first case where the CEO of a company that used dispatched workers and the CEO of the subcontracting company were held criminally liable since the workers were assigned to collaborate in the process where the use of dispatched workers is prohibited and because those workers were in a substantive employment relationship with the company.  Before this case, there have been virtually no cases where the CEO of the subcontracting company was found criminally liable based on the illegal dispatch of workers.  However, this case may open up the possibility of criminal sanctions.  Therefore, in the event that the supply of workers through subcontracting is practically recognized as “dispatch,” a company that procures workers from an external company through subcontracting may face criminal sanctions aside from its obligation of direct hiring of workers according to Article 6 (2) of the Act.  Accordingly, to minimize the risk of criminal sanctions through scrutinized legal reviews, it would be advisable to inspect possibilities that subcontracting may be recognized as “dispatch” and remove factors that may constitute dispatch of workers.