Employee estimation system 'D-DAY' to coincide with Labor Day... How to prevent corporate risks?

In January, the Ministry of Employment and Labor announced legislation for the 'Work Package' to comprehensively protect freelancers and platform workers starting this year's Labor Day (May 1), and the risk of corporate labor management is reaching its peak. This is because we have entered a legal inflection point where the responsibility to prove employee status, which was previously borne entirely by labor providers, is now transformed into the company's 'responsibility to disprove', with the purpose of concretizing the 'right to work' stipulated in Article 32 of the Constitution of the Republic of Korea.

The core of this amendment is the establishment of Article 104-2 (Presumption of Worker) Paragraph 1 of the Labor Standards Act. This provision defines a person who directly provides labor for another person's business as a labor provider, and specifies that in the event of a dispute, they are presumed to be 'workers'. In the current legal system, labor providers claiming rights had to prove their status as employees according to the general legal principle of burden of proof, but in the future, if employers cannot completely disprove the status of independent business operators, they will have all responsibilities under the Labor Standards Act, including the obligation to pay wages and severance pay.

This 'power of presumption' has an immediate ripple effect on all civil disputes, including dispute mediation by the Labor Relations Commission, which has the effect of reconciliation under civil law, as well as wage and severance pay claims and litigation to confirm the invalidity of disciplinary action and dismissal. A point of particular note is the labor inspector's strong investigative authority stipulated in Paragraph 2 of Article 104-2 of the amendment. Employers cannot refuse a request to submit data without a justifiable reason, and if this is violated, all-round pressure is expected, including administrative sanctions, including a fine of up to 5 million won pursuant to Article 116 of the same Act.

In response to these risks, the top priority that companies must immediately implement is a complete disconnection of the business command and supervision system. This is because the most important criterion that the Supreme Court considers when determining employee status is ‘substantial command and supervision.’ In practice, freelancers and partner company personnel must be thoroughly separated in company messengers or group chat rooms, and the practice of enforcing commuting times or work locations must be immediately abolished. Furthermore, it is essential to completely remodel the communication method in the form of consultation on contract results rather than work instructions to completely block any room for dependency.

Additionally, in order for a company to fulfill its responsibility to disprove in court, it must preemptively prepare objective signs to prove that the other party is an ‘independent business operator.’ A representative defense method is to explicitly allow 'substitutability' in the contract, which allows the principal to hire a third party to perform the work instead of performing the work himself. In addition, specific data to prove actual business viability must be accumulated at all times, such as stipulating that major equipment, tools, vehicles, etc. required for work be used as personal property rather than company property, and keeping proof of this.

Under the worker presumption system, 'companies that cannot prove' cannot avoid legal defeat, which can lead to huge management losses and a decline in corporate reputation. Now, labor management has gone beyond simple personnel administration and has become a high-level compliance area that requires legal redesign of the entire labor management process to meet the strengthened burden of proof. Establishing a preemptive and detailed legal safety device will be the only way to preemptively protect against unsettled labor risks and ensure the survival of the company.
 

Reporter Lee Dong-oh (canon35@mt.co.kr)

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