[1] Standard for determining whether an employee is a worker under the Labor Standards Act

[2] In a case where the issue is whether Eul et al., who entered into a sales service contract with Gap corporation and dispatched to department stores and worked as sales clerks, constitutes workers under the Labor Standards Act, the case holding that the judgment below erred by misapprehending the legal principles, etc. on the ground that it is highly probable to view Eul et al. as workers under the Labor Standards Act who provided labor to Gap corporation

[1] Article 2 (1) 1 of the Labor Standards Act / [2] Article 2 (1) 1 of the Labor Standards Act

[1] Supreme Court Decision 2004Da29736 Decided December 7, 2006 (Gong2007Sang, 104) Supreme Court Decision 201Da44276 Decided June 27, 2013 (Gong2013Ha, 1291) Supreme Court Decision 2013Da77805 Decided November 13, 2014 (Gong2014Ha, 2339)

Arenl Co., Ltd. (Law Firm Barun, Attorneys Noh Man-Gyeong et al., Counsel for the defendant-appellant)

Defendant 1 and two others (Law Firm Global, Attorney Gong Sung-soo, Counsel for the defendant-appellant)

Seoul Central District Court Decision 2014Na18413 Decided December 24, 2015

The judgment of the court below is reversed, and the case is remanded to the Seoul Central District Court Panel Division.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. Determination as to whether a labor provider is a worker under the Labor Standards Act ought to be based on whether a labor provider provided labor in a subordinate relationship with an employer for the purpose of wages at a business or workplace, rather than whether a contract is an employment contract or a contract for work. Determination as to whether a labor provider is a subordinate relationship ought to be based on whether the employer determines the details of work and is subject to the rules of employment or service regulations, and the employer is subject to considerable direction and supervision during the performance of work, whether the employer is bound by the employer, whether the labor provider is capable of operating his/her business on its own account, such as possessing equipment, raw materials, work tools, etc. or having a third party employ a third party, and whether the risks such as the creation of profit and loss through the provision of labor have occurred, whether the nature of remuneration is the object of work, whether the basic salary or fixed wage was determined, whether the continuousness and degree of the provision of labor, whether the status of an employee was exclusive to the employer, and whether the social security system is recognized as an employee, etc.

2. Review of the reasoning of the lower judgment and the record reveals the following circumstances.

A. The Plaintiff is a company engaged in the business of manufacturing and selling KONEX, Moble disease bank, lubM bank, etc., and established and operated a sales store selling the Plaintiff’s specific brand products within the department store by concluding a “a special contract for purchase and sale of department stores” with the company operating the department store to purchase on credit products manufactured by the Plaintiff and sell them, and pay the remainder after deducting the commission from the sales revenue to the Plaintiff.

B. Around August 2005, the Plaintiff initially employed the sales clerks engaged in sales in the Plaintiff’s stores in each department store as full-time employees belonging to each department store, and subsequently, received a written resignation from the existing sales clerks en bloc (the retirement pay was settled and paid accordingly) on September 1, 2005, and entered into a sales service agreement with the sales clerks on September 1, 2005 with the content that they would pay the sales commission under the name of the commission that would be linked to the sales revenue of each store, and thereafter filled the sales clerks by entering into a sales service agreement, instead of an employment contract. However, it did not change the duties performed by the sales clerks before and after the introduction of the sales services

C. The sales clerks worked for each store within the scope of two or five persons determined by the Plaintiff. In the event of a vacancy that occurs due to the retirement of the sales clerks at a specific store, the Plaintiff recruited new sales clerks by receiving recommendation from the sales clerks or making direct job placement advertisements. The sales clerks have been dispatched and set up on a fixed basis in accordance with the business hours of department stores (from 10:30 to 20:00). The sales clerks sent out to the relevant store. The Plaintiff’s specific brand products can only be sold at the prices determined by the Plaintiff and are not allowed to arbitrarily adjust the sales price of other products. These events are conducted according to the department store or the Plaintiff’s plan.

D. The Plaintiff, based on a sales service agreement, calculated monthly commission fees by multiplying the sales revenue of the relevant store by the “sales commission rate” and “personal fee rate”. The “individual fee rate” was set differently depending on the position of the salesperson, i.e., manager (first), manager (second), and manager (third). However, in the year 2005, the Plaintiff introduced the sales service agreement method, determined an amount raised by approximately 24.45% compared to the existing annual salary of individual salespersons as the standard annual salary, and paid commission fees within the scope of 85% or 120% of the standard annual salary. In concluding a sales service agreement again as of September 1, 2006 and September 1, 2007, the Plaintiff changed the standard to pay commission fees within the scope of 85% or 130% of the standard annual salary. Accordingly, the salesperson was entitled to receive at least 85% of the standard annual salary in the month when the sales revenue of his/her employee was low.

From the middle half of 2008, the Plaintiff began to pay monthly fixed remuneration to all salespersons, such as prior to the introduction of the sales services contract method. From this point of time, the Plaintiff entered into a sales services contract with the previous salespersons by promising them to pay fixed wage without setting a fee rate. In addition, since the beginning of 2012, the method of paying fees that is linked to the sales of each store was gradually increased. The Plaintiff did not obtain the consent of the previous salespersons while revising and implementing the remuneration system for the salespersons several times, and the salespersons were deemed to have received the fixed remuneration according to the Plaintiff’s policies without any particular objection.

On the other hand, the Plaintiff paid 200,000 won or 400,000 won to all salespersons every year as “the value of rice culture,” and paid 100,000 won to workers’ day.

E. The Plaintiff sold approximately one or three stores opened in approximately 75 stores that all of which are scattered across the country with the brand products, thereby raising sales. The Plaintiff: (a) identified the current status of sales and inventory of each store through the computer network connected to each store in real time; (b) checked the current status of sales and inventory of each store; (c) checked the current status of sales and sales, etc. of each store’s sales and identified the status of sales and service by visiting each store’s own store at approximately one week at intervals of approximately 1 week; and (d) identified the status of each store’s sales and service. The Plaintiff also terminated the sales and service contract with each sales and sales and terminated the sales and service contract with the sales and sales and with those who committed embezzlement of merchandise coupons, etc. on the ground that the sales and sales of a specific store was poor.

F. Even after introducing the method of a sales and service contract, the Plaintiff also delivered various official announcements related to the work to the salespersons located in each store via the business-based computer network at any time. Specifically, there were ① the attendance time of each individual accurately and to register the “city” (referring to the hours of non-placeing) on a part-time basis; ② the announcement to promptly submit the work status table; ② the announcement to promptly submit the repair status table; ③ the announcement to the repair room; ④ the announcement to return goods; ④ the announcement to the repair room; ⑤ the announcement to the inventory room; ⑤ the announcement to the inventory room; ⑤ the announcement to the head of the inventory office; ⑤ the announcement to the sales room; and ④ the announcement to the number of goods dP volume survey. The Plaintiff does not appear to have taken a temporary measure to manage the work status of the salespersons and deliver instructions related to the work.

G. Although the salespersons did not prepare and submit a “temporary leave program” differently from the employees of the headquarters when they did not work at the store on the grounds of leave, sick leave, etc., they seem to have worked at least after the Plaintiff’s headquarters by preparing and submitting a monthly work status list, etc. The salespersons continued to work at the store on the business day of the department store except for a break-out in the summer season of July, August, 200, and the usual holiday was limited to the extent that they worked on the store on the business day of the department store. Accordingly, it was difficult for the salespersons to raise additional income by performing other duties.

In a case where female salespersons are unable to work for a long time due to childbirth, childcare, etc., they could employ part-time workers and have them act on behalf of them. However, there is no special reason to deem that the salespersons could have arbitrarily performed their duties by utilizing part-time workers, etc.

H. The Plaintiff, at the head office, held two times a year’s presentation on goods to explain new products to the salespersons or provide instructions for sales, etc., and did not conduct special job training other than design education, etc. as necessary. On the other hand, each department store with stores provided preliminary education to the salespersons. The same applies even before the Plaintiff introduced the sales service contract method.

I. The Plaintiff shared all expenses incurred in the operation of each store by providing equipment, subsidiary materials, etc. free of charge. The Plaintiff sent a person in charge of interior the headquarters interior to each store as necessary, or changed the state of goods display. Meanwhile, the Plaintiff paid a certain amount out of the monthly sales commission to the salespersons in preparation for the loss, damage, theft, or loss of goods arising from the reason attributable to the salesperson’s responsibility. In short, the Plaintiff accumulated the amount equivalent to 5% of the base monthly salary as the sales deposit by removing the amount from the monthly sales commission to the sales commission.

In the event of shortage of daily loss due to holding a discount event, etc., the sales clerks employed part-time employees and used them as personnel assisting sales. Each salesman’s low-ranking position reported monthly to the Plaintiff on the recruitment of part-time employees and the current status of their work. The Plaintiff paid the benefits for part-time employees to the lower-ranking position each month or transferred the benefits for part-time employees directly to the part-time employees.

(j) Sales clerks seem to have worked for a relatively long period, except in cases where they were unable to adapt to the early stage of employment and retire. Defendant 1 continued to work for approximately four years from October 2002 to July 200, Defendant 2, Defendant 3 from September 2006 to September 2006, respectively, and about nine years and ten months from September 2006.

(k) After adopting the method of sales services contract, the Plaintiff did not apply personnel regulations or rules of employment to the sales clerks, unlike the head office employees. The Plaintiff withheld business income tax instead of wage and salary income tax, and did not purchase so-called four insurance for the sales clerks.

3. We examine these circumstances in light of the legal principles as seen earlier.

A. Since the size of the Plaintiff’s sales and profit depends on the size of sales at each store, the Plaintiff’s sales duties are key and important parts of the Plaintiff’s business. Moreover, the Plaintiff’s attitude of directly responding to customers at the Plaintiff’s store may affect sales, and may have a significant impact on the Plaintiff’s external image. As such, the Plaintiff is highly induced to directly direct and supervise the salesperson’s business to ensure the proper performance of duties. In fact, the Plaintiff had the employees of the headquarters visit the store periodically to check the status of the salesperson’s work, check the status of the salesperson’s work, and check the status of the salesperson’s work, report the status of the salesperson’s work, or register daily attendance hours on the business computer network. There are many circumstances to view that the Plaintiff had given considerable direction and supervision over the salesperson through the business affairs computer network. This is different from the Plaintiff’s exercise of authority to take disciplinary action, such as cancelling sales service contracts with the Plaintiff, or cancelling sales services contracts with the low sales supervisor or cancelling sales contracts with the low sales supervisor.

B. After entering into a sales services contract, salespersons received fees that are linked to the sales of each store, but the upper limit of fees is set and thus attracting customers by their own efforts cannot increase the scale of revenues more than a certain level. On the other hand, even if the sales of a store are low, the sales have received remuneration at a certain level or more, and the Plaintiff has borne all the costs necessary for the store operation, such as the part-time fee, and thus, the sales clerks did not incur losses due to the store operation. In light of these circumstances, even if the sales clerks receive fees that are linked to the sales of each store, it is difficult to view that the sales clerks have the nature of business that creates profits and bears risks by independently running their business on their own account.

C. Even if the salesperson received fees that are linked to the sales of each sales outlet, it seems to be merely a form of receiving the basic salary equivalent to the lower limit of the commission, and receiving the payment of the bonus for performance of each month. Moreover, the period during which the Plaintiff changed such remuneration system and paid monthly fixed fees to all the salespersons is considerably long to not less than three years. As long as the salesperson provided labor for at least a certain amount of time every day according to the hours of operation of the department store at the Plaintiff’s specific store and received a certain amount of remuneration as remuneration, it may be reasonable to deem that the salesperson has the nature of the salesperson’s remuneration for labor. Furthermore, even if the Plaintiff unilaterally changed the remuneration system to the salesperson in the middle of the sales outlet, the circumstances therefrom show that the salesperson was subordinate to the

D. Sales clerks are bound to look at most of the daily hours due to the characteristics of the sales center in the department store, and they could not engage in any business other than selling the Plaintiff’s products, and thus, they were in the position of providing exclusively labor to the Plaintiff. The sales clerks seem to have not been able to have engaged in such business by utilizing part-time employees, except in special circumstances such as childbirth and childcare. Furthermore, the Defendants continued to work as sales clerks of a specific store for a relatively long time. Furthermore, the Defendants continued to work as sales clerks of a specific store over a relatively long-term period of time. The circumstances that the exclusive nature of

E. The Plaintiff’s circumstance that the Plaintiff did not apply personnel regulations, etc., but withheld business income tax instead of wage and salary income tax, and did not subscribe to the so-called fourth-class insurance is highly likely to be arbitrarily determined in a superior position, and it is difficult to deem the Plaintiff as an element to deny the nature of workers. The same holds true when the Plaintiff removed and accumulated money from sales commission of each

F. Comprehensively taking account of these circumstances, sales clerks, including the Defendants, are the forms of sales services contracts concluded with the Plaintiff as delegation contracts, but there is considerable room to regard them as workers under the Labor Standards Act who provide labor in subordinate relationship with the Plaintiff for the purpose of wages.

4. Nevertheless, based on its stated reasoning, the lower court determined to the effect that the Defendants were not workers because it is difficult to deem that they provided labor in a subordinate relationship with the Plaintiff for the purpose of wages. In so determining, the lower court erred by misapprehending the legal doctrine on workers under the Labor Standards Act, thereby failing to exhaust all necessary deliberations, thereby adversely affecting the conclusion of the judgment.

5. Therefore, without examining the remaining grounds of appeal, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Jo Hee-de (Presiding Justice)