Labor Standards Act | Analysis of a Judgment Holding That Where a Single Person Actually Manages the Business, Separate Corporations Must Be Treated as One Workplace

A: the employee

B: an advertising planning and production company that entered into an employment contract with A

C: a polling consultancy firm that entered into various service contracts with Company B and received fees

D: the representative director of Company C

The court determined that it was reasonable to regard Companies B and C as a "single workplace" within the meaning of the Labor Standards Act.

Although the two companies outwardly took the form of independent corporations, on examination they were ultimately one company.

The court stated that D gave specific and unilateral work instructions to Company B's employees, and that such instructions were given on a regular basis.

It further explained that D should be regarded as having, in substance, overseen the operations as a whole from the position of manager.

The court added that, because the dismissal of A was unilaterally communicated by telephone and the detailed grounds and timing were not notified in writing, the "unfair dismissal" was recognized.

Article 11 of the Labor Standards Act (Scope of Application)

(1) This Act shall apply to all businesses or workplaces that ordinarily employ five or more employees. Provided, that this Act shall not apply to a business or workplace that employs only relatives living together, or to domestic workers.

(2) With respect to a business or workplace that ordinarily employs four or fewer employees, some provisions of this Act may apply as prescribed by Presidential Decree.

Provisions of the Act That Do Not Apply to Workplaces with Four or Fewer Employees

Restrictions on dismissal and requests for remedy against unfair dismissal (Article 23(1), Article 28), working hours (Article 50), allowances for extended, nighttime, and holiday work (Article 56), annual paid leave (Article 60), and prohibition of workplace harassment (Article 76-2)

Through this judgment, the court made clear that even where companies are "formally" separated, if they were "substantively" managed together, they must be treated as a single workplace.

This judgment is significant for employees and for employers alike.

In particular, employers who operate several workplaces each with fewer than five employees may need to thoroughly reexamine the way they run their companies.

As a partner to both businesses and employees, Daeryun Law Firm LLP provides legal services drawing on a wide range of practical experience accumulated over many years.

In addition, the firm works closely as one team with experts across various fields, including not only labor attorneys but also accountants, tax accountants, and patent attorneys.

If you need related consultation or advice, you are welcome to reach out to Daeryun Law Firm LLP at any time.