Corporate trends / Performance record
‘Employer Standing (Transfer Between Contracting and Subcontracting Companies)’ Unfair Dismissal Decision (Unfair Dismissal 314)
- Date2026/03/25 04:04
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[Case Information]
This case is a decision in which the employer prevailed (application dismissed) on the issue of “employer standing (transfer between contracting and subcontracting companies).”
Decision body: Seoul Regional Labor Relations Commission 2025Buhae9610 ○ ○ ○ Application for Remedy for Unfair Dismissal
2026.01.09 · Case outcome: Dismissed
Summary of key issues: (i) After resigning from the employer company, the employees entered into employment contracts with the subcontracting company, which conducted its own personnel recruitment and other labor management, was financially and accounting-wise independent, and had its own office space; (ii) the employer entered into a service (outsourcing) contract with the subcontracting company, and the subcontracting company performed various tasks under that contract; (iii) after submitting resignation letters to the employer and receiving severance incentives, the employees, by their own free choice, …
1. Legal Implications
Ⅰ. Case Overview
In this unfair dismissal case, after resigning from the principal (original) company, the employees entered into new employment contracts with a subcontracting company that had concluded a service (outsourcing) contract with the principal company, and then filed applications with the Labor Relations Commission for remedies for unfair dismissal. The Seoul Regional Labor Relations Commission focused its review on whether the principal company held the status of employer vis‑à‑vis these employees, that is, whether it had standing as the respondent party in the unfair dismissal case.
Although, in form, the employees submitted resignation letters, received severance incentives, and then transferred to the subcontracting company, it is understood that they argued this was in substance a forced transfer or an indirect employment structure imposed in the course of the principal company’s restructuring/redundancy process.
Ⅱ. Issues
The issue in this case was whether, in a situation where employees who resigned from the principal company transferred to a subcontracting company in a service‑contract relationship, the principal company still had employer status and party standing as the respondent in the unfair dismissal remedy proceedings.
In other words, the core issue was whether there remained a substantive relationship of subordination in employment between the employees and the principal company such that the principal company could be named as respondent in the Labor Relations Commission’s unfair dismissal remedy procedure, or whether only the subcontracting company qualified as the employer.
Ⅲ. Summary of the Labor Relations Commission’s Reasoning
The panel in this case found that: the employees submitted resignation letters and received severance incentives from the employer, and thereafter entered into separate employment contracts with the subcontracting company and worked there; the subcontracting company independently recruited personnel, managed labor affairs, was financially and accounting‑wise independent, and had its own office space; the employees transferred to the subcontracting company by their own free choice, and it was difficult to find that any specific disadvantage had been predetermined in the event they refused to transfer; and although there were some indications that the principal company was involved in the establishment of the subcontracting company and that the subcontracting company had no significant sales other than those arising from the service contract with the principal company, such circumstances alone were insufficient to conclude that the principal company, as a de facto employer, directed and supervised the employees.
On this basis, the Commission held that it was difficult to regard the principal company as having employer status vis‑à‑vis the employees.
Ultimately, the unfair dismissal disposition in this case was dismissed on the ground that the principal company lacked party standing as respondent to the unfair dismissal remedy application. The decision can be summarized as one in which the Labor Relations Commission strictly examined employer standing on the premise that there must be a substantive employment‑service relationship.
Ⅳ. Practical Points (From the Employee’s Perspective)
From the employee’s perspective, where resignation from the principal company and transfer to a subcontracting company are merely formal procedures and, in reality, the principal company continues to direct and supervise work, it is essential to secure as much concrete evidence as possible on that point (who issues work instructions, who conducts performance evaluations, who exercises personnel authority, how wages are funded, etc.). Mere indications such as “the principal company appears to have been involved in establishing the subcontracting company” or “we only exchange work with the principal company” will generally not suffice to establish employer standing. Substantive evidence consistent with the Supreme Court’s criteria for determining the existence of a relationship of employment subordination (who determines the content of work, who directs and supervises, who designates working hours and place of work, the structure of remuneration payments, independence in accounting and personnel, etc.) should be prepared.
In addition, where, in the context of restructuring or redundancies, an employee is asked to submit a resignation letter, receives a severance incentive, and is then offered re‑employment under a service/entrustment structure, it is important—keeping potential future disputes in mind—to record the consultation process at that time, whether there was any coercion, and what disadvantages, if any, were explained, by means such as emails, recordings, or written notes.
Ⅴ. Practical Points (From the Employer/Company’s Perspective)
From the employer’s perspective, when utilizing a service/entrustment structure or establishing/using a separate subcontracting company, it is not sufficient merely to label the arrangement as “service contract” in the written agreement. The structure and operation of personnel and labor management, finance and accounting, office space, and lines of work instruction must in fact be designed and operated independently. If the principal company directly intervenes in the recruitment, evaluation, discipline, or dismissal of the subcontracting company’s employees, or if it exercises substantive direction and supervision over them, the Labor Relations Commission and the courts may look beyond form and deem the principal company to be the de facto employer.
Furthermore, when, in the course of restructuring, the employer encourages employees to resign and proposes transfer to a subcontracting company, it is necessary, in order to reduce later disputes over unfair dismissal and employer standing, to clearly guarantee freedom of choice and to explain and record transparently that no specific disadvantages will arise if the employee refuses to transfer.
By obtaining advice from a specialized labor law firm such as Labor Law Firm Law&, and reflecting from the design stage of the service/subcontracting structure the statutory criteria under the Labor Standards Act for determining employee and employer status, as well as the Labor Relations Commission’s practical approach, companies can, in the long term, reduce the costs of disputes.
2. Matters Decided
A. Case Overview and Procedural History
Taking into account: (i) after resigning from the employer company, the employees entered into employment contracts with the subcontracting company, which conducted its own personnel recruitment and other labor management, was financially and accounting‑wise independent, and had its own office space; (ii) the employer entered into a service (outsourcing) contract with the subcontracting company, and the subcontracting company performed various tasks under that contract; (iii) after submitting resignation letters to the employer and receiving severance incentives, the employees transferred to the subcontracting company by their own free choice, and there were no foreseeable disadvantages even if they chose not to transfer; and (iv) although there were some circumstances giving rise to suspicion that the employer might in fact hold employer status vis‑à‑vis the employees—such as the employer’s involvement in the establishment of the subcontracting company and the absence of significant sales by the subcontracting company other than those under the service contract—such evidence was insufficient, on its own, to recognize employer standing; the Commission concluded that it was difficult to regard the employer as having employer status vis‑à‑vis the employees and therefore found that the employer lacked party standing.
3. Summary of the Decision
A. Summary of the Labor Relations Commission’s Reasoning
Taking into account: (i) after resigning from the employer company, the employees entered into employment contracts with the subcontracting company, which conducted its own personnel recruitment and other labor management, was financially and accounting‑wise independent, and had its own office space; (ii) the employer entered into a service (outsourcing) contract with the subcontracting company, and the subcontracting company performed various tasks under that contract; (iii) after submitting resignation letters to the employer and receiving severance incentives, the employees transferred to the subcontracting company by their own free choice, and there were no foreseeable disadvantages even if they chose not to transfer; and (iv) although there were some circumstances giving rise to suspicion that the employer might in fact hold employer status vis‑à‑vis the employees—such as the employer’s involvement in the establishment of the subcontracting company and the absence of significant sales by the subcontracting company other than those under the service contract—such evidence was insufficient, on its own, to recognize employer standing; the Commission concluded that it was difficult to regard the employer as having employer status vis‑à‑vis the employees and therefore found that the employer lacked party standing. /
[See More Related Decisions]
- “‘Non‑Formation of Hiring Commitment (Absence of Offer Letter)’ Unfair Dismissal Decision” – Date of decision: – Case outcome: First‑instance decision upheld
- “‘Failure to Satisfy Requirements for Redundancy Dismissal (Workout Company)’ Unfair Dismissal Decision”
- “‘Expression of Intent to Resign (Resignation Remark in Telephone Call)’ Unfair Dismissal Decision”
[Tags]
Unfair dismissal, employer standing (transfer between contracting and subcontracting companies), others, Labor Law Firm Law&, large labor law firm, Samseong‑dong labor law firm, Samseong Station labor law firm, Gangnam labor law firm
※ This article is part of Labor Law Firm Law&’s “Unfair Dismissal Decisions” series.
※ You can view the previous article, “‘Probationary Employee Status (Insufficient Training of Probationary Staff)’ Unfair Dismissal Decision,” in a new window.
※ A list of decisions related to employer standing (transfer between contracting and subcontracting companies) can be viewed under “List of Decisions Related to Employer Standing (Transfer Between Contracting and Subcontracting Companies).”
※ Korean version of this case: Korean article
This case is a decision in which the employer prevailed (application dismissed) on the issue of “employer standing (transfer between contracting and subcontracting companies).”
Decision body: Seoul Regional Labor Relations Commission 2025Buhae9610 ○ ○ ○ Application for Remedy for Unfair Dismissal
2026.01.09 · Case outcome: Dismissed
Summary of key issues: (i) After resigning from the employer company, the employees entered into employment contracts with the subcontracting company, which conducted its own personnel recruitment and other labor management, was financially and accounting-wise independent, and had its own office space; (ii) the employer entered into a service (outsourcing) contract with the subcontracting company, and the subcontracting company performed various tasks under that contract; (iii) after submitting resignation letters to the employer and receiving severance incentives, the employees, by their own free choice, …
1. Legal Implications
Ⅰ. Case Overview
In this unfair dismissal case, after resigning from the principal (original) company, the employees entered into new employment contracts with a subcontracting company that had concluded a service (outsourcing) contract with the principal company, and then filed applications with the Labor Relations Commission for remedies for unfair dismissal. The Seoul Regional Labor Relations Commission focused its review on whether the principal company held the status of employer vis‑à‑vis these employees, that is, whether it had standing as the respondent party in the unfair dismissal case.
Although, in form, the employees submitted resignation letters, received severance incentives, and then transferred to the subcontracting company, it is understood that they argued this was in substance a forced transfer or an indirect employment structure imposed in the course of the principal company’s restructuring/redundancy process.
Ⅱ. Issues
The issue in this case was whether, in a situation where employees who resigned from the principal company transferred to a subcontracting company in a service‑contract relationship, the principal company still had employer status and party standing as the respondent in the unfair dismissal remedy proceedings.
In other words, the core issue was whether there remained a substantive relationship of subordination in employment between the employees and the principal company such that the principal company could be named as respondent in the Labor Relations Commission’s unfair dismissal remedy procedure, or whether only the subcontracting company qualified as the employer.
Ⅲ. Summary of the Labor Relations Commission’s Reasoning
The panel in this case found that: the employees submitted resignation letters and received severance incentives from the employer, and thereafter entered into separate employment contracts with the subcontracting company and worked there; the subcontracting company independently recruited personnel, managed labor affairs, was financially and accounting‑wise independent, and had its own office space; the employees transferred to the subcontracting company by their own free choice, and it was difficult to find that any specific disadvantage had been predetermined in the event they refused to transfer; and although there were some indications that the principal company was involved in the establishment of the subcontracting company and that the subcontracting company had no significant sales other than those arising from the service contract with the principal company, such circumstances alone were insufficient to conclude that the principal company, as a de facto employer, directed and supervised the employees.
On this basis, the Commission held that it was difficult to regard the principal company as having employer status vis‑à‑vis the employees.
Ultimately, the unfair dismissal disposition in this case was dismissed on the ground that the principal company lacked party standing as respondent to the unfair dismissal remedy application. The decision can be summarized as one in which the Labor Relations Commission strictly examined employer standing on the premise that there must be a substantive employment‑service relationship.
Ⅳ. Practical Points (From the Employee’s Perspective)
From the employee’s perspective, where resignation from the principal company and transfer to a subcontracting company are merely formal procedures and, in reality, the principal company continues to direct and supervise work, it is essential to secure as much concrete evidence as possible on that point (who issues work instructions, who conducts performance evaluations, who exercises personnel authority, how wages are funded, etc.). Mere indications such as “the principal company appears to have been involved in establishing the subcontracting company” or “we only exchange work with the principal company” will generally not suffice to establish employer standing. Substantive evidence consistent with the Supreme Court’s criteria for determining the existence of a relationship of employment subordination (who determines the content of work, who directs and supervises, who designates working hours and place of work, the structure of remuneration payments, independence in accounting and personnel, etc.) should be prepared.
In addition, where, in the context of restructuring or redundancies, an employee is asked to submit a resignation letter, receives a severance incentive, and is then offered re‑employment under a service/entrustment structure, it is important—keeping potential future disputes in mind—to record the consultation process at that time, whether there was any coercion, and what disadvantages, if any, were explained, by means such as emails, recordings, or written notes.
Ⅴ. Practical Points (From the Employer/Company’s Perspective)
From the employer’s perspective, when utilizing a service/entrustment structure or establishing/using a separate subcontracting company, it is not sufficient merely to label the arrangement as “service contract” in the written agreement. The structure and operation of personnel and labor management, finance and accounting, office space, and lines of work instruction must in fact be designed and operated independently. If the principal company directly intervenes in the recruitment, evaluation, discipline, or dismissal of the subcontracting company’s employees, or if it exercises substantive direction and supervision over them, the Labor Relations Commission and the courts may look beyond form and deem the principal company to be the de facto employer.
Furthermore, when, in the course of restructuring, the employer encourages employees to resign and proposes transfer to a subcontracting company, it is necessary, in order to reduce later disputes over unfair dismissal and employer standing, to clearly guarantee freedom of choice and to explain and record transparently that no specific disadvantages will arise if the employee refuses to transfer.
By obtaining advice from a specialized labor law firm such as Labor Law Firm Law&, and reflecting from the design stage of the service/subcontracting structure the statutory criteria under the Labor Standards Act for determining employee and employer status, as well as the Labor Relations Commission’s practical approach, companies can, in the long term, reduce the costs of disputes.
2. Matters Decided
A. Case Overview and Procedural History
Taking into account: (i) after resigning from the employer company, the employees entered into employment contracts with the subcontracting company, which conducted its own personnel recruitment and other labor management, was financially and accounting‑wise independent, and had its own office space; (ii) the employer entered into a service (outsourcing) contract with the subcontracting company, and the subcontracting company performed various tasks under that contract; (iii) after submitting resignation letters to the employer and receiving severance incentives, the employees transferred to the subcontracting company by their own free choice, and there were no foreseeable disadvantages even if they chose not to transfer; and (iv) although there were some circumstances giving rise to suspicion that the employer might in fact hold employer status vis‑à‑vis the employees—such as the employer’s involvement in the establishment of the subcontracting company and the absence of significant sales by the subcontracting company other than those under the service contract—such evidence was insufficient, on its own, to recognize employer standing; the Commission concluded that it was difficult to regard the employer as having employer status vis‑à‑vis the employees and therefore found that the employer lacked party standing.
3. Summary of the Decision
A. Summary of the Labor Relations Commission’s Reasoning
Taking into account: (i) after resigning from the employer company, the employees entered into employment contracts with the subcontracting company, which conducted its own personnel recruitment and other labor management, was financially and accounting‑wise independent, and had its own office space; (ii) the employer entered into a service (outsourcing) contract with the subcontracting company, and the subcontracting company performed various tasks under that contract; (iii) after submitting resignation letters to the employer and receiving severance incentives, the employees transferred to the subcontracting company by their own free choice, and there were no foreseeable disadvantages even if they chose not to transfer; and (iv) although there were some circumstances giving rise to suspicion that the employer might in fact hold employer status vis‑à‑vis the employees—such as the employer’s involvement in the establishment of the subcontracting company and the absence of significant sales by the subcontracting company other than those under the service contract—such evidence was insufficient, on its own, to recognize employer standing; the Commission concluded that it was difficult to regard the employer as having employer status vis‑à‑vis the employees and therefore found that the employer lacked party standing. /
[See More Related Decisions]
- “‘Non‑Formation of Hiring Commitment (Absence of Offer Letter)’ Unfair Dismissal Decision” – Date of decision: – Case outcome: First‑instance decision upheld
- “‘Failure to Satisfy Requirements for Redundancy Dismissal (Workout Company)’ Unfair Dismissal Decision”
- “‘Expression of Intent to Resign (Resignation Remark in Telephone Call)’ Unfair Dismissal Decision”
[Tags]
Unfair dismissal, employer standing (transfer between contracting and subcontracting companies), others, Labor Law Firm Law&, large labor law firm, Samseong‑dong labor law firm, Samseong Station labor law firm, Gangnam labor law firm
※ This article is part of Labor Law Firm Law&’s “Unfair Dismissal Decisions” series.
※ You can view the previous article, “‘Probationary Employee Status (Insufficient Training of Probationary Staff)’ Unfair Dismissal Decision,” in a new window.
※ A list of decisions related to employer standing (transfer between contracting and subcontracting companies) can be viewed under “List of Decisions Related to Employer Standing (Transfer Between Contracting and Subcontracting Companies).”
※ Korean version of this case: Korean article
