Whose Business Does a Person Working at the Principal Contractor's Site Belong To? The Determination of Worker Dispatch, the Scope of the Ban on Industrial Action in the Defence Industry, and the Third Party in Industrial Accident Insurance Recourse

Question

Under contracts bearing different names, such as service contracts, in-house subcontracts or equipment leases, it is common for people employed by another company to work alongside others at one company's site. Which business such a person legally belongs to is not fixed once and for all; it may be determined differently depending on which provision of which statute is applied.

This brief looks at three settings side by side. First, whether a worker employed by an outsourcing company who performed the principal contractor's work stands in a worker-dispatch relationship with the principal contractor, and if so, what the principal contractor must do. Second, whether the ban on industrial action in Article 41(2) of the Trade Union and Labor Relations Adjustment Act (the Trade Union Act) extends to workers of an in-house subcontractor of a company designated as a major defence industry company who performed work producing defence materials. Third, where a person operating construction machinery leased by the original contractor at a construction site injured a worker of the original contractor, whether the Korea Workers' Compensation and Welfare Service, having paid insurance benefits, may treat that person as a third party under Article 87(1) of the Industrial Accident Compensation Insurance Act (the IACI Act) and be subrogated to the claim against that person.

The question common to the three settings is by what criteria it is determined whether labour belonging to another company has been substantially integrated into the business at the site, and how far that determination is widened or narrowed in light of the purpose of each statute. Provisions protecting workers, provisions restricting fundamental rights through criminal punishment, and provisions allocating the ultimate burden of insurance benefits may call for different principles of interpretation even on the same facts at the same site.

This brief sets out the materials to be checked and the divergent interpretations within the scope of what the Issues, the Summary of Judgment and the operative part of three judgments delivered in 2017, 2020 and 2026 state; it does not determine the nature of any particular employment relationship, the illegality of any particular industrial action, or the merits of any particular recourse claim. Articles 2, 5, 6-2 and 21 of the current Act on the Protection, etc. of Dispatched Workers (the Dispatched Workers Act) bear the notation of a complete amendment on 30 April 2019, Article 2 of the Trade Union Act bears amendment notations dated 5 January 2021 and 9 September 2025, and Article 87 of the IACI Act bears an amendment notation dated 26 May 2020; each case must therefore be read on the basis of the statutes in force at the time of the conduct.

Material to check

First, the definitions and the provisions on permitted work in the Dispatched Workers Act can be checked. Subparagraph 1 of Article 2 defines worker dispatch as a dispatching employer, after employing a worker and while maintaining that employment relationship, having the worker engage in work for a user employer under the direction and orders of the user employer in accordance with the terms of a worker dispatch contract, and subparagraph 7 defines discriminatory treatment as unfavourable treatment without reasonable grounds in wages, regular bonuses, performance pay based on business results, other working conditions, welfare benefits and the like. Article 5(1) makes work prescribed by Presidential Decree, excluding direct production process work in manufacturing, eligible for worker dispatch, and Article 5(3) prohibits, among others, work performed at construction sites.

Second, the provisions on the duty of direct employment and the prohibition of discrimination. Article 6-2(1) of the Dispatched Workers Act requires the user employer to directly employ the dispatched worker in cases including where it has used the dispatched worker in work not eligible for dispatch (subparagraph 1) and where it has received services from a person conducting a worker dispatch business without permission in violation of Article 7(3) (subparagraph 5), and Article 6-2(2) disapplies this where the dispatched worker expressly objects or there are justifiable grounds prescribed by Presidential Decree. Article 21(1) prohibits dispatching employers and user employers from giving discriminatory treatment to dispatched workers, on the ground that they are dispatched workers, compared with workers performing the same or similar work, and Article 21(2) provides for an application for corrective measures to the Labour Relations Commission. Articles 390 and 750 of the Civil Act are the provisions to which 2016Da239024 referred in respect of damages for non-performance of the duty of direct employment and for wage discrimination.

Third, the basis for the ban on industrial action in the defence industry. Article 33(1) of the Constitution guarantees workers' rights to organise, to bargain collectively and to take collective action; Article 33(3) provides that the right to collective action of workers employed in major defence industry companies as prescribed by statute may be restricted or denied by statute; and Article 37(2) sets the limits on restricting fundamental rights. Article 41(2) of the Trade Union Act prohibits industrial action by those workers employed in major defence industry companies designated under the Defense Acquisition Program Act who are engaged in work relating to electricity, water supply or mainly the production of defence materials, and Article 88 punishes a violation by imprisonment with labour for not more than five years or a fine not exceeding KRW 50 million. Article 20 of the Enforcement Decree of the same Act defines the scope as persons engaged in work such as manufacturing, processing, assembly, maintenance, regeneration, improvement, performance testing, heat treatment, painting and gas handling necessary for the completion of defence materials.

Fourth, the provisions on designation and on the concept of employer. Article 35(1) and (2) of the current Defense Acquisition Program Act require a person intending to produce defence materials to obtain designation as a defence contractor from the Minister of Industry and Trade and provide for designation that distinguishes major defence contractors from general defence contractors, which confirms that designation is made on a company-by-company basis. The judgment described the designating authority at the time as the Minister of Commerce, Industry and Energy. The current subparagraph 2 of Article 2 of the Trade Union Act defines an employer as the business owner, the person in charge of managing the business and the like, and the latter part of that subparagraph treats as an employer, to that extent, a person who, even if not a party to the employment contract, is in a position to control and determine the working conditions of workers substantially and concretely.

Fifth, the provisions on recourse in industrial accident insurance. The main text of Article 87(1) of the IACI Act provides that where the Korea Workers' Compensation and Welfare Service has paid insurance benefits for an accident caused by the act of a third party, it is subrogated, up to the amount of those benefits, to the recipient's claim for damages against the third party; the proviso excludes cases where two or more business owners who are policyholders each carry out parts of a single business divided among them at the same place and the accident is caused by the act of a worker of a different business owner among them. Subparagraph 1 of Article 91-15 defines labour providers, and Article 9(1) of the Act on the Collection, etc. of Premiums for Employment Insurance and Industrial Accident Compensation Insurance (the Premium Collection Act) treats the original contractor as the business owner where construction or similar business is carried out through multiple tiers of contracting.

Sixth, the factual materials. For the determination of dispatch, what is needed are the name and purpose of the contract, whether the scope of work was limited, records showing that the principal contractor set or directed the volume, method, sequence and hours of work and the like, the composition of work groups with the principal contractor's own workers, the records of the outsourcing company's decisions on selection, training, attendance and leave, and the outsourcing company's organisation and equipment. For the defence case, the legal entity designated as a defence contractor, the parties to the subcontract, and the counterparty to the worker's employment contract and the work performed must be matched against each other. For the industrial accident recourse, the construction machinery lease and the contract for the provision of operating labour, the person who directed the work at the time of the accident, and the injured worker's business owner and insurance relationship can be aligned in chronological order.

Possible readings

On the determination of worker dispatch, a form-focused reading gives weight to the name of the contracting or service contract concluded by the parties and to the fact that the original employer formally hires and pays the workers. A substance-focused reading holds that the matter must be determined according to the substance of the working relationship, taking together binding work instructions from the principal contractor, substantial integration into the principal contractor's business, the original employer's independent decision-making authority, the limited and specialised nature of the work, and the original employer's independent corporate organisation and equipment. Since 2016Da239024 adopted the latter, the dispute shifts to which of the five factors appears more weighty on the facts of the case.

What 2016Da239024 held on the effects of the duty of direct employment has not been confirmed, as the judgment text could not be accessed.

On the ban on industrial action in the defence industry, a broad reading holds that, because Article 20 of the Enforcement Decree defines the scope of the ban by type of work, anyone who provided labour in work producing defence materials at the workplace of a major defence industry company is employed in that company regardless of whom the person belongs to. A narrow reading holds that, in light of the principles of least restrictive means and proportionality under Article 37(2) of the Constitution and the principle of strict construction of penal provisions, the ban is limited to workers belonging to a company designated as a major defence industry company, and that workers of an independent, undesignated subcontracting company are not included merely because they performed the same work at the same place. 2016Do3185 adopted the narrow reading.

Placing the two judgments side by side reveals a difference in interpretive principle. In the dispatch determination, the substance of integration at the site served as the basis for widening the principal contractor's obligations, whereas in the defence case the scope of the criminal ban was narrowed by reference to whom the worker belonged to, even where there were circumstances of integration at the site. One reading may see this as the natural consequence of the different nature of protective provisions and penal provisions; another may see it as reducing the parties' predictability, since the same facts at the same site are grouped differently under different statutes. Whether the widening of the scope of employer by reference to a position of substantial control and determination in the latter part of the current subparagraph 2 of Article 2 of the Trade Union Act affects the interpretation of "employed in" under Article 41(2) is a question not addressed in the Summary of Judgment.

On the third party in industrial accident insurance recourse, the previous reading treated whether a person is a third party as a matter of the burden of industrial accident insurance premiums: a person having a direct or indirect industrial accident insurance relationship with the injured worker through a business owner bearing premiums, such as a worker of the original contractor or a subcontractor, was not a third party, while a lessor of construction machinery or the like, lacking such a relationship, was a third party. The majority opinion in 2022Da214040 held that the scope of the right of subrogation must be determined not by the premium-burden relationship but by whether the persons form a common risk relationship regarding occupational accidents in the same business or workplace, and held that a person who provided construction machinery operating labour under the direction and orders of the original contractor or the like, and that person's lessor, are not third parties. Here a reading that emphasises the insurance fund and the scope of the Service's subrogation diverges from a reading that emphasises the risk community at the site.

All three judgments take direction and orders and integration into the business as the central facts, but the legal effects those facts produce run in different directions. In the dispatch case, the user employer's duty of direct employment and liability for damages arise; in the defence case, the worker falls outside the scope of the ban; and in the industrial accident case, the person drops out of the range of those against whom the Service may exercise subrogation. Which reading to adopt is for the reader to decide after matching the contracts, the records of work instructions, and the materials on affiliation and designation.

What the decisions held

Supreme Court Judgment 2016Da239024 delivered 14 May 2020 held that where an original employer has a worker perform work for a third party, whether this constitutes worker dispatch under the Dispatched Workers Act "must be determined according to the substance of the working relationship," "without being bound by the name or form of the contract given by the parties," on the basis of considerable direction and orders such as binding instructions from the third party, substantial integration into the third party's business, the original employer's independent decision-making authority, the limited scope and the specialised and technical nature of the work, the original employer's independent corporate organisation and equipment, and the like. It upheld the lower court's finding that safety patrol officers employed by outsourcing companies that had concluded service contracts for expressway safety patrol work and the like stood in a worker-dispatch relationship with the principal contractor.

The parts of Judgment 2016Da239024 concerning the duty of direct employment, resignation and objection, and damages for wage discrimination, as well as its operative part, are not described, as they could not be confirmed because the judgment text could not be accessed.

Supreme Court Judgment 2016Do3185 delivered 18 July 2017 held that, in light of the principles of least restrictive means and proportionality under Article 37(2) of the Constitution and the principle of strict construction of penal provisions, "the scope of workers whose fundamental rights are seriously restricted by the prohibition of industrial action under Article 41(2) of the Trade Union Act must be interpreted strictly and restrictively," and that "where a company designated as a major defence industry company entrusts part of its business to another company by way of in-house subcontracting to produce defence materials, the workers belonging to the subcontracting company cannot be regarded as 'workers employed in a major defence industry company' whose industrial action is prohibited by Article 41(2) of the Trade Union Act." It held to be correct the lower court's acquittal, which found that the provision did not apply to a strike by the defendant, who had been engaged in painting work on special-purpose vessels at an in-house partner company belonging to the special-purpose vessel division of a major defence industry company, and dismissed the appeal.

The majority opinion in Supreme Court en banc Judgment 2022Da214040 delivered 22 January 2026 held that "the scope for exercising the right of subrogation under the main text of Article 87(1) of the Industrial Accident Compensation Insurance Act is not determined by the premium-burden relationship, but must be decided by whether workers or labour providers form a common risk relationship regarding occupational accidents in the same business or workplace," and that, even if the person causing the injury did not conclude an employment contract with the injured worker's business owner, the risk may be regarded as shared if the accident occurred while that person was performing the work under the direction and orders of the same business owner. Accordingly, it held that "a driver who provided construction machinery operating labour at a construction site under the direction and orders of the original contractor or the like may also be regarded as having shared the risk with the injured worker, and therefore the lessor of the construction machinery or the like likewise does not fall within a third party," and it specified the extent to which earlier Supreme Court judgments to a different effect conflict with the view taken in this judgment. In its operative part, the Court reversed the part of the judgment below against the defendants and rendered judgment itself, including dismissing the plaintiff's claim in that part.

Practical checklist

This section is not advice but a set of questions that may be asked when checking the records. First, one may ask about traces of direction and orders. It can be checked whether there are documents and electronic records showing that the principal contractor set or directed the volume, method, sequence, pace, place and hours of work, whether the workers worked as a single work group with the principal contractor's own workers, and whether they performed work not covered by the contract on the principal contractor's instructions.

Second, one may ask about the independence of the original employer. It can be compared whether the outsourcing company independently decided on the selection and number of workers to be deployed, their education and training, attendance checks and leave, whether the outsourcing company had the organisation and equipment to achieve the purpose of the contract, and whether the work was limited in scope and specialised.

Third, one may ask about affiliation and designation. Which legal entity was designated as a defence contractor, whether the counterparty to the employment contract of the defendant or the worker was that entity or a subcontracting company, and which work under Article 20 of the Enforcement Decree the work performed falls under, can be checked separately against the designation certificate, the subcontract and the employment contract.

Fourth, one may ask about the structure of the work at the time of the accident. Under what contract the construction machinery lease and the provision of operating labour were combined, who directed the work in which the accident occurred, whether the driver worked under the direction and orders of the original contractor or the like, and who the injured worker's business owner was and how the insurance relationship arose, can be aligned against the materials. This is only a list of materials to be checked; the conclusion is for the reader to draw.

Glossary

Worker dispatch is defined in subparagraph 1 of Article 2 of the Dispatched Workers Act and means a dispatching employer, while maintaining the employment relationship, having a worker engage in work for a user employer under the user employer's direction and orders. A contract named as a contracting or service contract may also be found to be worker dispatch according to its substance.

The duty of direct employment is the duty of the user employer to directly employ a dispatched worker where a ground under Article 6-2(1) of the Dispatched Workers Act exists. 2016Da239024 recognised, for non-performance of that duty, a private-law right to seek a judgment in lieu of a declaration of intent to employ.

Major defence industry company is the term used in Article 41(2) of the Trade Union Act and refers to a company designated under the Defense Acquisition Program Act. The current Article 35 of the Defense Acquisition Program Act describes it as a major defence contractor and provides for its designation separately from general defence contractors.

Subrogation against a third party means that the Korea Workers' Compensation and Welfare Service, up to the amount of insurance benefits paid, takes over the injured worker's claim for damages and exercises it against the person who caused the injury. 2022Da214040 held that a person who shared the risk with the injured worker does not fall within this third party.

Sources and limitations

The sources for the provisions are the current texts on the Korean Law Information Center: the Act on the Protection, etc. of Dispatched Workers, Act No. 21701 [Enforcement Date 26 May 2026]; the Trade Union and Labor Relations Adjustment Act, Act No. 21045 [Enforcement Date 10 March 2026]; the Enforcement Decree of the same Act, Presidential Decree No. 36159 [Enforcement Date 10 March 2026]; the Defense Acquisition Program Act, Act No. 21857 [Enforcement Date 2 October 2026]; the Industrial Accident Compensation Insurance Act, Act No. 21375 [Enforcement Date 1 July 2026]; the Act on the Collection, etc. of Premiums for Employment Insurance and Industrial Accident Compensation Insurance, Act No. 21532 [Enforcement Date 8 October 2026]; the Civil Act, Act No. 21454 [Enforcement Date 17 March 2026]; and the Constitution of the Republic of Korea as wholly amended on 29 October 1987. The date of checking is 16 October 2026.

The sources for the judgments are the Issues, the Summary of Judgment and the operative part of the judgments published on the Korean Law Information Center. For Judgment 2016Da239024, the judgment text could not be accessed, so the content stated in this brief could not be checked against it. The passages of the Summary of Judgment quoted from Judgments 2016Do3185 and 2022Da214040 reproduce the original wording, and company names, the number of workers, details of the number of strikes, wage differentials and recourse amounts are not stated beyond what appears in the Summary of Judgment.

The texts of the Dispatched Workers Act, the Trade Union Act and the IACI Act as in force at the time of each case, the full reasoning of the judgments, and the lower court judgments were not checked in this brief. The latter part of the Summary of Judgment of 2016Da239024 concerning the method of determining reasonable grounds for discrimination and the scope of damages, and the end of the sentence in 2022Da214040 dealing with earlier judgments as well as any other opinions, are not fully contained in the materials checked for this brief and remain to be re-checked against the original texts.

Points left open

Which of the five factors for determining worker dispatch is decisive may be read differently from case to case. Where the principal contractor's instructions are given indirectly through computer systems or work manuals, or where the principal contractor's regular work is intermingled with outsourced work, how the same criteria apply cannot be determined from the summary of the judgment alone.

Now that the latter part of Article 2, subparagraph 2 of the current Trade Union and Labor Relations Adjustment Act treats a person in a position to substantially and specifically control and determine working conditions as an employer to that extent, it remains an open question whether the interpretation of being "engaged in" under Article 41(2) changes when industrial action by workers of a subcontractor is directed at the principal contractor. Whether this latter part existed in the legislation on which 2016Do3185 was based is a matter to be verified against the original text in force at that time.

The outer limits of the risk-sharing criterion for subrogation claims under industrial accident compensation insurance are also a continuing issue. How the matter will be resolved where direction and command are indirect or several employers are intermingled at a single site, where a labour provider under Article 91-15 of the Industrial Accident Compensation Insurance Act is the tortfeasor or the victim, and how the proviso to Article 87(1) relates to the new criterion, are points to be confirmed by subsequent judgments.

Because the three determinations rely on the same fact of direction and command, there also remains the question of what weight facts found in one proceeding carry in another. Whether the findings of fact in a judgment recognising a dispatch relationship can be used as they stand in a subrogation case under industrial accident compensation insurance or in a criminal case is a matter to be considered together with the fact that the standard of proof and the principles of interpretation differ from one proceeding to another.

When to reconsider

This report will be rewritten if the definition of worker dispatch and the duty of direct employment under the Act on the Protection, etc. of Temporary Agency Workers, the definition of employer and the prohibition of industrial action in the defence industry under the Trade Union and Labor Relations Adjustment Act, or the third-party subrogation provisions of the Industrial Accident Compensation Insurance Act are amended, or if the Supreme Court issues a new ruling on the interpretation of these provisions.

In that event, on the basis of the law in force at the time of the conduct, the question of to whose business on-site labour is attributed will be set out again, within the scope of what the holdings and summaries of the three judgments and of the new judgment state.

Statutes referred to

• 파견근로자 보호 등에 관한 법률 제2조, 제5조, 제6조의2, 제7조, 제21조
• 노동조합 및 노동관계조정법 제2조, 제41조, 제88조
• 노동조합 및 노동관계조정법 시행령 제20조
• 방위사업법 제35조
• 산업재해보상보험법 제87조, 제91조의15
• 고용보험 및 산업재해보상보험의 보험료징수 등에 관한 법률 제9조
• 대한민국헌법 제33조, 제37조
• 민법 제390조, 제750조

Decisions referred to

• 대법원 2020. 5. 14. 선고 2016다239024 판결 · Decision ledger
• 대법원 2017. 7. 18. 선고 2016도3185 판결 · Decision ledger
• 대법원 2026. 1. 22. 선고 2022다214040 전원합의체 판결 · Decision ledger

Verification status

The cited provisions (Articles 2, 5, 6-2, 7 and 21 of the Act on the Protection, etc. of Dispatched Workers; Articles 2, 41 and 88 of the Trade Union and Labor Relations Adjustment Act and Article 20 of the Enforcement Decree of the same Act; Article 35 of the Defense Acquisition Program Act; Articles 87 and 91-15 of the Industrial Accident Compensation Insurance Act; Article 9 of the Act on the Collection, etc. of Premiums for Employment Insurance and Industrial Accident Compensation Insurance; Articles 33 and 37 of the Constitution of the Republic of Korea; and Articles 390 and 750 of the Civil Act) were checked against the current texts on the Korean Law Information Center on 16 October 2026. The cited judgments (Supreme Court Judgment 2016Da239024 delivered 14 May 2020, Supreme Court Judgment 2016Do3185 delivered 18 July 2017, and Supreme Court en banc Judgment 2022Da214040 delivered 22 January 2026) were checked against the Issues, the Summary of Judgment and the operative part of the judgment texts on the Korean Law Information Center. The texts of the statutes as in force at the time of each case, the full reasoning of the judgments, and whether 2022Da214040 contains any separate or dissenting opinion were not checked.