Framework Act on the Construction Industry | Judgment Finding Insufficient Grounds for a Disposition Restricting Subcontracting Participation

The following examines the arguments of the plaintiff and the defendant regarding the lawfulness of the disposition under the Framework Act on the Construction Industry.

■The Plaintiff's Argument

The plaintiff argued that the disposition restricting subcontracting participation was an unlawful disposition not grounded in the facts or the statutes.

▶Industrial Accident Rate of 0%
The plaintiff's industrial accident rate for 2020 was 0%, so it did not meet the statutory requirement of being “at or above the average for the type of business.”

▶Absence of Grounds for the Disposition
Issuing the disposition despite the failure to satisfy the statutory requirements constituted an unlawful administrative disposition for which no grounds existed.

▶Distrust of the Published Data
The defendant issued the disposition unilaterally, relying on the data published by the Ministry of Employment and Labor without any further substantive review of the data or any procedure to hear the party's opinion.

■The Defendant's Argument

The defendant argued that the disposition at issue could not be the subject of appeal litigation.

▶Argument That It Was a Mere Notice
The measure at issue merely notified the plaintiff of the fact that it fell within the criteria for restricting subcontracting participation; it was not an administrative disposition producing legal effects and therefore could not be the subject of a lawsuit.

The court determined that the measure at issue was not a mere notice but an act that produces legal effects directly affecting the plaintiff's legal rights (the opportunity to participate in subcontracting for public works).

The court determined that, because the disposition at issue actually deprived the plaintiff of its eligibility to participate in subcontracting, it constituted an administrative disposition subject to appeal litigation.

Under Article 29-3(1)4(b) of the Framework Act on the Construction Industry, for a disposition restricting subcontracting participation to be issued, all three of the following requirements must be satisfied.

The court determined that the evidence and materials submitted by the defendant did not, on their own, prove the second requirement above, namely that the “industrial accident rate was at or above the average.”

▶Content of the Ministry of Employment and Labor's Reply

The Ministry of Employment and Labor attached a note to the published data stating that “the reliability and accuracy of the data have limitations,” and there were in fact instances in which the accident rate exceeded 100%.

Nevertheless, the court determined that the defendant, without any further review of the data or verification of the facts, did not guarantee the plaintiff an opportunity to submit its opinion and appears to have decided on the disposition at issue.

▶Problems With the Statistical Calculation Method

The figures stated in the public notice at issue were calculated by applying only the number of workers and the number of accident victims at the single construction site where the accident at issue occurred, among the construction sites where the plaintiff performed work.

However, the court determined that, even examining the relevant provisions such as the Framework Act on the Construction Industry, it is difficult to conclude that the accident rate must be calculated by treating only the construction site at which the serious accident occurred as the workplace.

▶Conflicting Official Statistics

During the proceedings in this case, the defendant requested from the Minister of Employment and Labor data on “the annual average industrial accident rate, among the workplaces in which the plaintiff participated as a prime contractor or subcontractor in 2020, of those workplaces at which an accident victim occurred.”

In response, the Minister of Employment and Labor replied that “the plaintiff's accident rate for 2020 was 0.00%.”

The court determined that, where such conflicting data exist, it is difficult to find that the grounds for the disposition were proven on the basis of the content of the public notice at issue alone.

▶Absence of a Relationship With Criminal Punishment

Although the plaintiff received a fine by summary order on account of the accident, the court determined that this was punishment only for its responsibility as a joint contractor and had no direct legal connection with the present restriction on subcontracting participation.

Ultimately, the court found that no grounds for the disposition existed and that procedural safeguards, such as hearing opinions before the disposition, were also lacking, and accordingly held that the disposition at issue was unlawful.