Distributors involved in dispatching, subcontracting, and franchises… Yellow Envelope Law Risks by Business Type

Risks vary depending on employment structure, such as e-commerce, franchise, catering, and manufacturing.
Expert: “It is possible to form a union if there are two or more people… preemptive contract inspection is necessary.”

After the implementation of the Yellow Envelope Act, the labor community's attention is focused on the distribution industry's employment structure that extensively utilizes multi-level subcontractors. In the field, there are voices saying that it is difficult to determine at what point usability issues will arise because the contract type and work instruction method are different for each logistics, service, and manufacturing industry. Experts advise that subcontractors should be checked for signs of substantive control before a request for negotiation is made.

According to the distribution industry on the 17th, potential issues with the Yellow Bag Act are appearing differently depending on the employment structure and actual work control method of each industry, including e-commerce, department stores, franchises, hypermarkets, and food and beverage manufacturing. Initially, the industry judged that mid-to-high-end sectors such as manufacturing and construction would be affected first, but the distribution industry, which is involved with outsourced manpower, is also trending towards the risk that cannot be ignored.

In the distribution industry, the first to request negotiations were the logistics sector, including the courier union and cargo union. Accordingly, online and offline channel industries such as e-commerce platforms are directly affected. In distribution channels, the logistics subcontract structure and the ratio of outsourced manpower utilization have increased due to competition in delivery speed. The key issue is the usability issue for special workers such as delivery drivers. Platform companies control the work of delivery drivers through algorithms and applications, but classify the contract type as individual business. If the actual control of the main contractor, the platform headquarters, is proven, there will be an obligation to negotiate with the subcontractor's union, and if it breaks down, the logistics network may be paralyzed.

In the department store, outlet, and duty-free industries, there is a dispatch risk resulting from a specific purchase structure. The majority of store sales staff are affiliated with the store brand, not the distribution channel. If a distribution channel has a practice of directly controlling business operations, such as compliance with business hours and customer service manuals, this may be considered an exercise of actual control and may raise usability issues. Once evidence of direct work instructions from the primary contractor is secured, financial pressure is likely to occur.

In the franchise and convenience store industry, joint usability issues between franchisors and franchise owners are emerging. The franchise headquarters applies logistics, store management, and service manuals to franchise owners for brand unity. The store owner hires part-time workers, but working conditions and work intensity are subordinate to the headquarters manual. The possibility has opened up for workers at franchise stores to request direct negotiations with headquarters.

Large supermarkets and the restaurant industry also face structural risks. Large supermarkets avoided the risk of direct employment by transferring parking, cleaning, and security positions to subsidiaries, but the wage gap between employees directly managed by headquarters and employees of subsidiaries remained an issue. The practice of sending supplier employees to store management is also an issue. Group catering companies entrust the cooking and distribution staff. If the main contractor, the catering company, directly dictates the cooking time and hygiene standards, there is a possibility of user recognition. The food and beverage manufacturing industry requires more detailed attention as it has a complex subcontracting structure, including in-house subcontracting of production lines, outsourcing of logistics, and dispatch of promotional personnel.
 

Urgent inspection of subcontract contract actual control signs

There is a possibility that issues raised before the law was implemented will be rekindled with the implementation of the Yellow Bag Act. If the same situation is repeated, as was the case in 2019 when Lotte Mart dispatched 906 employees from a supplier company without a separate written agreement and received sanctions for illegal dispatch from the Fair Trade Commission, legal liability may expand. At Hite Jinro, the issue of whether the main contractor is responsible for direct negotiations has emerged as an issue in relation to the demand for an increase in transportation rates by drivers belonging to its logistics subsidiaries during the 2022 cargo union strike.

The distribution industry is expressing dismay at the unexpected risk exposure. An industry official said, “Contrary to the expectations of the industry before the implementation of the Yellow Bag Act, the distribution industry appears to be exposed to risks first,” and expressed concern, “As distribution is a field directly related to people’s livelihoods, if the labor-management conflict continues, it may also affect living prices.”

Experts advise that it is necessary to review subcontracts in advance before a request for negotiation is made. Attorney Bang In-tae of Daeryun Law Firm said, “We have no choice but to bring up the standards for judging usability from past illegal dispatch lawsuits,” and added, “If the business hours, dress code, and work process are given in detail by focusing on the work itself rather than a contract that focuses on the outcome, or if the service fee is calculated based on the number of people and wages, you may be exposed to risks regardless of the business type.”

Attorney Bang continued, "For example, if a safety issue arises because the franchise headquarters imposes a dress code or enforces the use of a specific machine, franchise workers can request negotiation with the headquarters. If a department store calculates the service price in detail based on the number of people and wages when contracting with a cleaning subcontractor, the target of wage negotiation for subcontracted workers becomes the main contractor, not the subcontractor's president." He added, “It is a miscalculation to be confident that subcontractors do not have a union,” and added, “Under the Trade Union Act, it is possible to establish a union and request negotiations with just two people, so management must be aware that the obligation to negotiate can arise at any time even without a large-scale nationwide organization.”
 

Reporter Hwang Jeong-won (garden@sidae.com)

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Distribution price intertwined with dispatch, subcontracting, and franchise... Yellow Envelope Law Risks by Business Type (Shortcut)