Supreme Court Decision 2011Da44276 Decided June 27, 2013 about Severance Pay, etc.

Main Issues and Holdings

[1] Criterion to recognize worker status under the Labor Standards Act

[2] Where post office’s insurance managers Gap resigned from the position and claimed for a severance pay, a case affirming the judgment below that they are not workers under the Labor Standards Act

Summary of Decision

[1] A worker status under the Labor Standards Act shall be determined based on whether s/he offers work to an employer at a business or workplace for the purpose of earning wages in a subordinate relation regardless of whether the contract is an employment contract or a contract for work. The subordinate relation here is determined by considering the totality of economic and social factors such as: whether the employer determines the contents of the work; whether the worker is subject to employment rules or work (personnel) rules; whether the employer gives a considerable direction and supervision in the work performance process; whether the employer designates work hours and place: whether the work provider does business as an independent contractor by owning equipment, raw materials or tool, or by hiring a third party to perform the work, etc.; whether risk is taken, such as making a profit or incurring losses through work; whether the pay is intended for work itself; whether there is a fixed base pay or regular pay; pay-related matters like withholding of earned income tax; continuance of the work relation; whether and how much the worker belongs to the employer; and the recognition of worker status under the Act and subordinate statutes governing the social security system. However, since the employer is highly likely to take advantage of ones superior position and determines, as one pleases, the base pay or regular pay, the earned income tax withholding, and/or the worker status in the social security system, etc., the worker status should not be denied merely because the above factors are not met.

[2] Where post office’s insurance managers Gap resigned and claimed for severance pay, the case affirmed the judgment below that they are not workers under the Labor Standards Act on the ground that, although insurance managers formed an entrustment contract with the post office and, as brokers for post office’s insurance contract formation, maintained contract with customer management, conducted insurance premium collection, performed other work, and received reward and allowance pursuant to post office insurance manager manual, etc. it is hard to recognize them as working for the purpose of earning wages based on a subordinate relation with post office.

Reference Provisions [1] Article 2(1)1 of the Labor Standards Act / [2] Article 2(1)1 of the Labor Standards Act, Article 61 of the Enforcement Rule of the Postal Savings and Insurance Act

Article 2 of the Labor Standards Act (Definitions) (1) The definitions of terms used in this Act shall be as follows: 1. The term “worker” means a person, regardless of being engaged in whatever occupation, who offers work to a business or workplace for the purpose of earning wages.

Reference Cases [1] Supreme Court Decision 2004Da29736 decided Dec. 7, 2006 (Gong2007Sang, 104), Supreme Court Decision 2009Da99396 decided Apr. 15, 2010 (Gong2010Sang, 890), Supreme Court Decision 2010Da50601 decided Jan. 12, 2012 (Gong2012Sang, 245)

Plaintiff-Appellant Same as listed in the attachment (Law Firm KCL, Attorneys Choi Jong-gil, et al., Counsel for plaintiff-appellant)

Defendant-Appellee The Republic of Korea (Attorneys Joo Han-il, et al., Counsel for plaintiff-appellee)

Judgment of the court below Busan High Court Decision 2010Na3094 decided May 4, 2011

Disposition All of the appeals are dismissed. The costs of appeal are assessed against Plaintiffs.

Reasoning The grounds of appeal (if the supplemental appellate brief was not timely filed, to the extent of supplementation) are examined as follows.

1. A worker status under the Labor Standards Act shall be determined based on whether s/he offers work to an employer at a business or workplace for the purpose of earning wages in a subordinate relation regardless of whether the contract is an employment contract or a contract for work. The subordinate relation here is determined by considering the totality of economic and social factors such as: whether the employer determines the contents of the work; whether the worker is subject to employment rules or work (personnel) rules; whether the employer gives a considerable direction and supervision in the work performance process; whether the employer designates work hours and place: whether the work provider does business as an independent contractor by owning equipment, raw materials or tool, or by hiring a third party to perform the work, etc.; whether risk is taken, such as making a profit or incurring losses through work; whether the pay is intended for work itself; whether there is fixed base pay or regular pay; pay-related matters like withholding of earned income tax; continuance of work relation; whether and how much the worker belongs to the employer; and the recognition of worker status under the Act and subordinate statutes governing the social security system. However, since the employer is highly likely to take advantage of one’s superior position and determines, as one pleases, the base pay or regular pay, the earned income tax withholding, and/or the worker status in the social security system, etc., the worker status should not be denied merely because the above factors are not met (see Supreme Court Decision 2004Da29736, Dec. 7 of 2006, etc.).

2. The court below acknowledged as follows. Under the entrustment contract with each post office (“post office”) of Defendant’s postal service headquarters, Plaintiffs (insurance managers) as brokers for post office’s insurance contract formation maintained contract with customer management, conducted insurance premium collection, and performed other work. They received rewards and allowance from Defendant pursuant to post office insurance manager manual, etc. The court below held that it was hard to recognize the work is offered for the purpose of earning wages based on a subordinate relation with post office, and rejected the claim for severance pay of this case which had been premised on Plaintiffs’ alleged worker status under the Labor Standards Act.

In light of the aforementioned legal principle and the records, we find the judgment below just, and there is no error in the misapprehension of legal principle as to the recognition of worker under the Labor Standards Act, against the law of logic and experience in excess of the limit of free evaluation of evidence, as otherwise asserted in the ground of appeal. Plaintiffs’ remaining grounds of appeal related to the court below’s fact-finding merely assign errors in evidence admission and fact-finding which exclusively belongs to the court below. Thus, they do not constitute legitimate grounds of appeal.

3. Therefore, all of the appeals are dismissed. The costs of appeal are assessed against the losing party. It is decided as per Disposition by all participating Justices’ assent.

[Attachment] list of plaintiffs: omitted

Justices

Yang Chang-soo (Presiding Justice)

Park Byoung-dae

Ko Young-han (Justice in charge)

Kim Chang-suk