[Defendant] Defendant
[Appellant] Prosecutor
[Judgment Below] Daejeon District Court Decision 2005No2353, decided January 12, 2006
[Order]
The judgment below is reversed, and the case is remanded to the Panel Division of the Daejeon District Court.
[Reasoning]
The grounds of appeal are examined.
1. Whether a person constitutes an "employee" (근로자) under the Labor Standards Act (근로기준법) must be determined not by the form of the contract—i.e., whether it is an employment contract or a service (independent contractor) contract—but by whether, in substance, the worker provided labor to the employer in a subordinate relationship for the purpose of receiving wages, within a business or workplace. Whether such a subordinate relationship exists must be determined by comprehensively considering various economic and social factors, including: whether the employer determines the content of the work, whether the worker is subject to rules of employment or service (personnel) regulations, and whether the employer exercises substantial direction and supervision over the performance of the work; whether the employer designates the working hours and place of work and the worker is bound by these; whether the person providing labor can independently operate a business on his or her own account, such as by owning equipment, raw materials, or work tools, or by hiring a third party to perform the work on his or her behalf; whether the person bears the risk of profit and loss arising from the provision of labor; matters concerning remuneration, such as whether the nature of the remuneration is compensation for the labor itself, whether a basic or fixed salary was set, and whether income tax was withheld at source; the continuity of the labor-provision relationship and the existence and degree of exclusivity to the employer; and whether the person is recognized as having employee status under laws and regulations concerning the social security system. However, since matters such as whether a basic or fixed salary was set, whether earned income tax was withheld at source, and whether the person is recognized as an employee under the social security system are matters that the employer, using its economically superior position, has considerable latitude to determine arbitrarily, the mere absence of such factors should not readily be used to deny employee status (see Supreme Court Decision 2004Da29736, decided December 7, 2006; Supreme Court Decision 2005Du13018, 13025, decided March 29, 2007, etc.).
2. According to the evidence adopted by the court below, the following facts are established.
A. The Defendant has operated a beauty academy (name omitted) in Cheonan City (address omitted) since around July 13, 2002, and the non-indicted person (hereinafter "the Non-Indicted Person") worked at the said academy as a skin-care instructor from around that date until February 4, 2005.
B. According to the instructor commission contracts (강사위촉계약서) prepared around 2002 and in 2003 (which merely deleted the word "employment" from the title of the instructor employment contract form and revised it to "commission"), the contracts provided as follows: "Party A (the Defendant, hereinafter the same) hires Party B (the said Non-Indicted Person, hereinafter the same) as an annual-salary contract worker, and concludes an employment contract accordingly (Article 1). The term of validity of this contract shall be from July 13, 2002 to June 12, 2003. Except where continued employment is impossible due to Party B's violation of the requirements demanded by Party A or breach of the work contract, the contract term set forth in the preceding paragraph shall not be changed (Article 4). The total remuneration for Party B's total labor during the contract period shall be 14,400,000 won (Article 5)." Separately, an employment (entry) contract (입사계약서) was also prepared, setting the instructor's fee per hour of lecture.
C. At the said academy, two hair instructors, one nail-art instructor, one skin-care instructor, and one make-up instructor each handled lectures in their respective fields, and the Defendant designated the lecture subjects, lecture hours, and lecture locations for all of them. The Non-Indicted Person, as the skin-care instructor, was exclusively in charge of the regularly opened courses. For the first year, she came to work every day from Monday to Friday and gave six hours of lectures per day; thereafter, she gave lectures three days a week (Monday, Wednesday, Friday), nine hours per day. Her clock-in time was set at 9:30 a.m. and clock-out time at 7:00 p.m. (see the entry contract at page 12 of the investigation record), but since the lectures actually ended at 9:30 p.m., she was additionally paid an overtime allowance of 50,000 won per month, and separately received a monthly position allowance of 50,000 won as the head instructor. The instructor's fee was calculated on the basis of one "unit" consisting of three lectures of three hours each per week per month, with the fee set at 400,000 won per unit (in the case of the Non-Indicted Person, this amounted to 1,200,000 won per month at the time of her retirement). Except in cases where a course was closed due to lack of enrolled students, this amount was paid regardless of how few students were enrolled, and no amount beyond this was paid no matter how many students enrolled.
D. Without any particular explanation to the Non-Indicted Person or other instructors, the Defendant began unilaterally and arbitrarily denying the instructors' employee status by withholding business income tax at source and not enrolling them as employees of the academy's workplace under health insurance, national pension, employment insurance, etc. For instructors hired later, the Defendant used a form of instructor commission contract that included the following clause: "Earned income tax shall not be withheld at source; instead, business income tax and 3.3% resident tax shall be paid to the competent tax office. This academy classifies [instructors] as freelance income earners, and there is no obligation to enroll them in the four major social insurances, nor shall retirement pay be separately provided (Article 3)." In 2004, the Defendant also had the Non-Indicted Person sign this same form of instructor commission contract.
E. Meanwhile, when hiring instructors, the Defendant required them to prepare and submit lecture schedules, and all of them submitted such schedules. The Defendant also had the instructors record their clock-in and clock-out times in an attendance register, or purchased an automatic time-check device to manage attendance. Although the Non-Indicted Person and some other instructors were sometimes careless in recording their attendance, a considerable number of instructors meticulously recorded their own clock-in and clock-out times by hand, and according to these records, most instructors came to work almost every morning and left in the evening (see the February and March 2004 attendance registers at pages 44 and 45 of the investigation record). The Non-Indicted Person likewise appears to have come to work almost every day, at least during the recorded period.
F. The Non-Indicted Person and the other instructors were not permitted to have someone else give lectures in their place, and there was in fact no instance of anyone substituting for them in giving lectures.
3. Considering the purport of each of the above instructor commission contracts and employment contracts; the Defendant's designation of lecture subjects, lecture hours, and lecture locations and management of clock-in and clock-out times; the Non-Indicted Person's clock-in and clock-out times and working hours; the restriction on the possibility of having a substitute perform the work; and, in addition, the fact that the Non-Indicted Person, as the head instructor in charge of the skin-care subject, exclusively handled the regularly opened courses and was paid remuneration calculated by multiplying a fixed hourly rate by the set number of lecture hours, such that the number of enrolled students and the resulting increase or decrease in the academy's revenue did not affect her remuneration—taken together, it is reasonable to conclude that the Non-Indicted Person is an employee who provided labor to the Defendant in a subordinate relationship for the purpose of receiving wages.
Furthermore, the circumstances cited by the court below as grounds for concluding that the Non-Indicted Person does not constitute an employee—namely, that the instructors' working hours changed according to the lecture schedule; that the "basic pay" was paid in proportion to the instructors' lecture hours and was not fixed, varying according to the subject taught and the number of lecture hours; that when there were no enrolled students, the relevant course was closed and no instructor's fee was paid; that the Non-Indicted Person and others paid business income tax, rather than earned income tax, on their instructor's fee income, and that the Defendant likewise did not withhold earned income tax at source from the instructor's fee income of the Non-Indicted Person and others but paid the remainder after deducting only business income tax and resident tax; that the Non-Indicted Person and others were not enrolled as employees of the academy's workplace under the so-called "four major social insurances" (health insurance, national pension, employment insurance, and industrial accident insurance); and that the Defendant had not established any rules of employment, service regulations, personnel regulations, or other regulations concerning service or disciplinary matters for the instructors—are, in fact, either phenomena that generally appear among part-time workers, who have recently been rapidly increasing in number, or merely matters that the Defendant, as the employer, effectively determined arbitrarily from a position of economic superiority. Moreover, the fact that the Non-Indicted Person and the other instructors did not receive specific and individualized direction and supervision from the Defendant regarding the content or method of their lectures is attributable merely to the nature of lecturing work, which is carried out through intellectual activity, and cannot be taken to mean that they were not employees. Therefore, these circumstances alone cannot negate the Non-Indicted Person's status as an employee.
Nevertheless, the court below concluded, based solely on the circumstances set forth in its judgment, that the Non-Indicted Person was not an employee under the Labor Standards Act. In so doing, the judgment below erred in its understanding of the legal concept of "employee" or violated the rules of evidence, thereby erroneously finding facts in a manner that affected the judgment. The ground of appeal pointing this out is well-founded.
4. Accordingly, the judgment below is reversed, and the case is remanded to the court below for further examination and adjudication, with all participating Justices concurring, as set forth in the Order.
Justice Park Si-hwan (Presiding Justice), Kim Yong-dam, Park Il-hwan, Kim Neung-hwan (Justice in Charge)