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Case Study: Crackdown on illegal use of indirect emplyment

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Since there are no legal regulations or protections pertaining to in-house subcontracted workers, automobile and other large-scale manufacturers in Korea sometimes use indirect work or dispatched labor contracts to avoid regulations and responsibilities regarding the hiring of full-time regular employees or those contracted from temp agencies under the Employment Security Act or the Act on the Protection of Dispatched Workers (or "Dispatch Act"), respectively. Last year, Korea's Ministry of Employment and Labor (MOEL) conducted on-site inspections at 67 locations, among them Paris Baguette headquarters, the domestic bakery chain’s partner firms and franchise stores. The MOEL issued a corrective order that Paris Baguette officially hire over 5,000 bakers presently working at its franchise stores indirectly, and the MOEL indicated its intention to impose an administrative fine if Paris Baguette failed to comply with the corrective order.

 

These bakers worked under service and employment agreements arranged between the partner firms and Paris Baguette’s franchise store owners. According to the MOEL, it was ultimately Paris Baguette who was deciding on and implementing matters pertaining to the bakers, such as hiring, performance evaluations, wages, and promotions. In addition, Paris Baguette supervised the bakers by managing their attendance and instructed them through Paris Baguette’s quality control managers. Dispatched workers can be employed by user companies indirectly through temp service providers legally for up to a maximum of two years provided they come from such fields as secretaries, clerks, telemarketers and 29 others. Professions specific to the bakery industry are not among that approved list, however.

 

Under an agreement worked out between Paris Baguette headquarters, its partner firms, franchise stores and labor representatives the salary and benefits offered to all the previously dispatched bakers are to rise to the same comparable levels (based on seniority and rank) as those employed directly by the firm at most within 3 years, with some raises coming immediately.

 

The MOEL ordered two other companies Asahi Glass Fine Techno Korea and  Mando-Hella Electronics Corp. to directly hire its subcontracted workers after finding their similar dispatch arrangements unlawful. The Dispatch Act further stipulates that companies that violate mandated direct employment requirement may be subject to an administrative fine of up to KRW 30 million per illegally hired employee. The subcontractors may be fined a maximum of  KRW 30 million in total.
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