🚨 Second-Tier Subcontract Worker Status

Today Korean Social News for Beginners | 2026.01.05

0️⃣ Hyundai's 10-Year Lawsuit and Worker Status Recognition Issues

📌 Re-Appeal Filed in Hyundai's Second-Tier Subcontract Worker Status Case, Raising Concerns About Prolonged Legal Battle

💬 A retrial court issued a partial victory ruling for first and second-tier in-house subcontract workers at Hyundai Motor's Ulsan plant who filed a lawsuit to confirm their worker status. The court ruled that second-tier subcontract workers should also be recognized as employees if the main company exercised actual control and command. However, Hyundai filed a re-appeal, extending the lawsuit that began in 2016 to nearly 10 years. This ruling reflects the Supreme Court's position that illegal dispatch should be judged without distinguishing between first and second-tier subcontracts. However, repeated appeals by companies are delaying legal judgments, raising concerns about the effectiveness of protecting workers' rights.

💡 Summary

• The ruling states that second-tier subcontract workers should be recognized as employees if the main company exercises actual control and command over them.
• The lawsuit that started in 2016 has continued for 10 years due to re-appeals, highlighting the problem of prolonged legal battles.
• There is a growing trend to judge worker status based on actual working conditions rather than contract forms.

1️⃣ Definition

Second-tier subcontract worker status refers to the concept of determining whether workers employed by subcontractors without direct employment contracts with the main company can be legally recognized as employees if they actually work under the main company's control and command. The judgment is based on actual working conditions, not contract forms.

If worker status is recognized, the main company must bear employer responsibilities under labor law, including wages, working conditions, and dismissal restrictions, which can affect the entire non-regular worker structure. While second-tier subcontracts (re-contracted with subcontractors) are generally considered more indirect in their legal relationship with the main company compared to first-tier subcontracts (direct contracts with the main company), recent court rulings have shifted toward emphasizing actual control relationships regardless of subcontract levels.

💡 Why is this important?

• Second-tier subcontract workers are the group facing the most serious employment instability and urgently need legal protection.
• Clarifying the scope of the main company's employer responsibility can prevent abuse of subcontract structures.
• This serves as an important standard for protecting non-regular workers' rights and ensuring employment stability.
• The problem of delayed rights relief due to prolonged lawsuits reveals the need for judicial system improvements.

2️⃣ Current Status and Problems

📕 Background and Progress of the Case

• The lawsuit began in 2016 and has been ongoing for 10 years. The main progress is as follows:

  • First and second-tier in-house subcontract workers at Hyundai Motor's Ulsan plant filed a lawsuit to confirm their worker status.
  • After the first and second trials, the Supreme Court issued a remand ruling.
  • In the retrial, a partial victory ruling was issued recognizing second-tier subcontract workers' status.
  • Hyundai filed a re-appeal, continuing the lawsuit.

• The Supreme Court ordered judgment of illegal dispatch without distinguishing subcontract levels. The main intent is as follows:

  • The court ruled that first and second-tier subcontracts should not be distinguished, and actual relationships should be examined.
  • If the main company actually exercised control and command, it must bear employer responsibility regardless of contract form.
  • This aims to prevent companies from avoiding responsibility by creating complex subcontract structures.
  • Worker status judgment should be based on actual workplace conditions, not contracts.

📕 Key Issues and Controversies

• Recognition of second-tier subcontract workers' status is the core issue. The main points are:

  • The key question is whether workers can be recognized as employees even without a direct contract with the main company.
  • Courts comprehensively judge actual control relationships, including work instructions, working time management, and personnel involvement.
  • If it's formally a contract or service agreement but the main company actually manages directly, it may constitute illegal dispatch.
  • If worker status is recognized, the main company must take responsibility for regular employment conversion, wage compensation, and improved working conditions.

• Repeated appeals by companies are prolonging the lawsuit. The main problems are:

  • The lawsuit that started in 2016 has continued for 10 years, delaying workers' rights relief.
  • Repeated appeals and re-appeals keep workers in financial insecurity and legal cost burdens.
  • There's a structural problem where rulings are not implemented and are appealed to higher courts again.
  • There are calls for faster judicial judgments and effective relief procedures.

📕 Problems with In-House Subcontract Structure

• Main companies use subcontract structures to reduce costs. The reality is:

  • In-house subcontracting is a structure where workers employed by subcontractors work together inside the main company's workplace.
  • While formally separate companies, in reality, the main company's management and instructions operate strongly.
  • Main companies prefer this structure because they can reduce labor costs and avoid employment responsibilities.
  • Subcontract workers receive lower wages and worse treatment than regular employees for doing the same work.

• Protecting workers becomes more difficult as subcontract levels deepen. The main problems are:

  • As levels deepen from first-tier to second and third-tier subcontracts, responsibility becomes unclear.
  • Main companies can easily deny responsibility by claiming no direct employment relationship.
  • Subcontractors are small and lack the ability to pay wages, take industrial accident responsibility, or improve working conditions.
  • Workers are confused about whom they should assert their rights against.

💡 Key Issues in Second-Tier Subcontract Worker Status Confirmation Lawsuit

1. Worker Status Recognition: Must recognize second-tier workers as employees if the main company has actual control
2. Illegal Dispatch Judgment: Judge based on actual command relationships, not contract forms
3. Prolonged Lawsuits: Continues for 10 years due to repeated appeals, delaying rights relief
4. In-House Subcontract Structure: Problem of being abused as a means for main companies to avoid responsibility
5. Effectiveness Issues: Structure where rulings are not implemented and are appealed again

3️⃣ Improvement Plans and Future Tasks

✅ Clarifying Worker Status Judgment Criteria

• Judgment should focus on actual control relationships. Main directions are:

  • Actual workplace relationships should be prioritized over contract names or forms.
  • Comprehensive evaluation should include work instruction methods, working time management, disciplinary actions, and personnel involvement.
  • Employer responsibility should be imposed if the main company has actual control, regardless of subcontract level.
  • Consistent standards should be established through Supreme Court precedents to reduce confusion in lower courts.

• The scope of illegal dispatch recognition should be expanded. Main tasks are:

  • Even if it's a contract or service agreement, it should be viewed as illegal dispatch if it's actually dispatch.
  • Control relationships should be recognized if the main company was involved in work instructions, evaluations, and discipline.
  • Exceptions to the Dispatch Act should be reduced to prevent abuse of illegal dispatch.
  • The system of immediately considering it direct employment when illegal dispatch is recognized should be strengthened.

✅ Improving Judicial Procedures

• Lawsuits should be shortened and quick relief provided. Main measures are:

  • A priority hearing system for worker status confirmation lawsuits should be introduced.
  • Appeal grounds should be limited to prevent indiscriminate re-appeals.
  • Provisional disposition systems should be utilized to provide temporary relief even before rulings are finalized.
  • The Labor Relations Commission's authority should be strengthened to resolve disputes before court litigation.

• Effective sanctions are needed for non-compliance with rulings. Main directions are:

  • Forced execution procedures should be strengthened to ensure immediate implementation once rulings are finalized.
  • Fines and enforcement fines should be increased for companies that don't comply with rulings.
  • Labor inspectors' inspection authority should be strengthened to monitor ruling compliance.
  • Non-compliance facts should be disclosed to apply social pressure.

✅ Improving Subcontract Structure

• Main companies' employer responsibility should be legislated. Main tasks are:

  • Industries and scope where in-house subcontracting is allowed should be clearly limited.
  • Direct employment should be the principle for regular and continuous work, with subcontracting as an exception.
  • Laws should be amended so main companies automatically bear employer responsibility when exercising actual control.
  • Main companies' negotiation obligations should be strengthened through systems like the Yellow Envelope Act.

• Treatment of subcontract workers should be improved. Main directions are:

  • The principle of equal pay for equal work should be thoroughly applied to reduce wage gaps.
  • Subcontract workers should receive the same benefits, leave, and education opportunities as regular employees.
  • Main companies' responsibility should be strengthened in industrial accident prevention and safety management.
  • Regular employment conversion opportunities should be expanded to increase employment stability.

4️⃣ Related Terms Explained

🔎 Illegal Dispatch

• Illegal dispatch refers to assigning workers to work not allowed for dispatch or when the main company actually exercises control and command.
  • Illegal dispatch means worker dispatch that violates requirements set in the Dispatch Act. A typical case is when the form is a contract or service agreement, but the main company actually exercises direct control and command. Courts make comprehensive judgments based on who gives work instructions, control of workplace and working hours, and exercise of disciplinary authority.
  • If illegal dispatch is recognized, the worker can be considered as belonging to the main company under Article 6-2 of the Dispatch Act. This means the main company bears direct employment responsibility, including all employer obligations under labor law such as wages, working conditions, and dismissal restrictions. Past unpaid wages and benefit differences can also be claimed.
  • This becomes a standard that clarifies the legal limits of subcontract structures. While companies use subcontract structures for cost reduction and employment flexibility, they often actually manage directly. The illegal dispatch concept is a key system to regulate such evasive practices and protect workers' rights. However, since the burden of proof lies with workers, there are limitations in actual application.

🔎 Worker Status Judgment Criteria

• Worker status is judged based on whether someone worked in a subordinate relationship for wages.
  • Worker status is the concept of judging whether someone qualifies as a "worker" under the Labor Standards Act. It's judged based on actual working methods, not simply contract names. Work instruction methods, personnel management involvement, work substitutability, and economic independence are comprehensively considered.
  • Judgment factors include: first, whether the employer determines work content and methods. Second, whether the employer controls working hours and location. Third, whether compensation is paid as consideration for work. Fourth, who provides tools and equipment needed for work. Fifth, whether the employer exercises disciplinary or personnel authority.
  • Recent precedents increasingly emphasize actual labor provision relationships over contract names. As various forms of work such as freelancers, special employment workers, and platform workers increase, the importance of worker status judgment is growing. The trend is changing toward not excluding worker status if there's an actual subordinate relationship, even if subcontract levels are deep.

🔎 In-House Subcontract Structure

• In-house subcontracting is an employment structure where workers employed by subcontractors work together inside the main company's workplace.
  • In-house subcontracting refers to a structure where the main company outsources specific work to subcontractors within its own workplace, and workers employed by subcontractors work at the main company's site. While formally separate companies, in the actual work process, the main company's management often operates strongly.
  • This structure has greatly expanded since the 1990s as a cost-reduction measure for companies. First, it can reduce the burden of regular employment. Second, it can cut wage and benefit costs. Third, it ensures employment flexibility to respond to economic fluctuations. Fourth, it can transfer labor law responsibilities to subcontractors.
  • However, there are serious problems. First, subcontract workers receive lower wages than regular employees for doing the same work. Second, employment is unstable and they can be dismissed at any time. Third, industrial accident risks are high but safety management is neglected. Fourth, union activities are difficult and discrimination is common. Due to this, in-house subcontracting has been the subject of ongoing social controversy, and systems are changing toward strengthening main companies' employer responsibilities.

🔎 Prolonged Lawsuit Problem

• Worker status confirmation lawsuits tend to be prolonged because the entire employment relationship changes depending on the outcome.
  • The prolonged lawsuit problem refers to the phenomenon where labor cases like worker status confirmation or unfair dismissal continue as legal disputes for several years or more. Since the outcome is critical for both companies and workers, appeals are repeated and lawsuits become lengthy.
  • Causes of prolonged lawsuits include: first, companies fight to the end because losing means enormous cost burdens. Second, legal issues are complex and judgments at different court levels can differ. Third, appeal and re-appeal procedures are repeated, taking a long time. Fourth, temporary relief systems like provisional dispositions are not sufficiently utilized.
  • Prolonged lawsuits are pointed out as factors delaying workers' livelihood stability and rights recovery. During litigation, wages aren't received and life becomes difficult. Legal costs continue to accumulate. Psychological stress and health deterioration are also problems. Even if victorious, several years have passed and the actual relief effect is reduced. Accordingly, discussions continue on system improvements such as faster judicial judgments, strengthening the Labor Relations Commission's role, expanding provisional disposition system use, and limiting appeal grounds.

5️⃣ Frequently Asked Questions (FAQ)

Q: Can second-tier subcontract workers become regular employees of the main company?

A: If illegal dispatch is recognized, they can be considered employees of the main company.

• Even second-tier subcontract workers may constitute illegal dispatch if they worked under the main company's actual control and command. If the court judges it as illegal dispatch, the worker is considered to belong to the main company under the Dispatch Act, and the main company bears direct employment responsibility. In this case, regular employment conversion, unpaid wage compensation, and welfare benefits can be provided.
• However, to actually become regular employees requires going through legal disputes, and if companies repeat appeals, it can take several years. As in the Hyundai case, lawsuits that started in 2016 have continued for 10 years. Also, since the burden of proving illegal dispatch lies with workers, evidence collection and legal cost burdens are heavy. Therefore, it's common to proceed with lawsuits with union help or through public interest lawyers. Once the court's final ruling is confirmed, the main company must implement it, but actual implementation may take additional time.

Q: What's the difference between subcontract workers and regular employees?

A: There are big differences in employment stability, wage levels, and welfare benefits.

• Subcontract workers are employees who have employment contracts with subcontractors, not the main company. The biggest difference is employment stability. Regular employees aren't dismissed without legitimate reasons, but subcontract workers can lose their jobs when subcontract agreements end. Also, contract periods are fixed and renewal is often uncertain.
• There are also big differences in wages and benefits. Even for the same work, subcontract workers receive 30-50% lower wages on average than regular employees. Benefits like bonuses, welfare points, and holiday pay are minimal or nonexistent. Education and training opportunities are lacking, making career development difficult. Industrial accident risks are high but safety management is neglected. Union activities are restricted, making it hard to assert rights. Policies are being promoted to reduce these gaps, including applying the principle of equal pay for equal work, expanding regular employment conversion, and strengthening main companies' employer responsibilities.

Q: When lawsuits take 10 years, how do people solve livelihood issues?

A: Provisional disposition applications, union support, and unemployment benefits are used, but difficulties remain.

• Livelihood problems during lawsuit periods are very serious. First, workers can apply to courts for provisional dispositions to temporarily receive wages before rulings are finalized. If provisional dispositions are granted, certain amounts can be received during lawsuits, but approval rates aren't high and amounts are limited. Second, labor unions may support living expenses through union fees or fundraising. Third, unemployment benefits can be received, but periods and amounts are limited.
• However, such support is often insufficient. Legal costs continue to accumulate, and it's even more difficult with family support responsibilities. Some must find other jobs, but time and psychological burdens are heavy during lawsuits, making it difficult. As a result, many workers give up lawsuits or accept unfavorable settlements. To solve prolonged lawsuit problems, it's necessary to speed up judicial procedures, expand provisional disposition systems, and strengthen livelihood support systems during lawsuits. Faster Labor Relations Commission rulings and strengthening forced execution authority are also important tasks.

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