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Employment Status of Platform Workers

2024.09.02

<div>As the number of platform workers —those who operate via mobile applications and digital platforms—continues to rise, so too does the debate surrounding their employment status under the Labor Standards Act (the “LSA”). On the one hand, these workers are often viewed as independent contractors, not employees subject to the protections afforded under the LSA. On the other hand, some argue for a broader interpretation of the LSA to recognize platform workers as employees entitled to the protections of the LSA, reflecting the growing social need to protect platform workers under the evolving nature of platform businesses. In this article, we will examine how the courts have addressed the employment status of platform workers in two recently adjudicated cases. 
 
 
1. Delivery Drivers Providing Food Delivery Services 
 
On July 12, 2024, the Seoul Central District Court ruled that, under the LSA, a platform worker (“Delivery Driver J”), a delivery driver who provided food delivery services through a mobile application, is not an employee of the platform company (“Platform Company O”) which operated the mobile application1. Here, Platform Company O, which operated the food delivery application of user restaurants, had entered into a service agreement with Delivery Driver J, who leased a motorcycle from an affiliate of Company O to carry out the food delivery services. Delivery Driver J claimed that he was an employee of Platform Company O because he provided labor in a subordinate relationship with Platform Company O for the purpose of earning wages.2 
 
According to the Supreme Court’s precedents3, in determining whether a person provided labor in a subordinate relationship for the purpose of earning wages, courts should consider certain economic and social conditions, including: (i) whether the employer determines the services of the person and exercises significant direction and supervision over the services of the person; (ii) whether the employer determines the service hours and locations; (iii) whether the person can conduct services independently at its own expense by owning equipment, raw materials, or tools or by hiring a third party to carry out the services; and (iv) whether the person bears the risks of profit generation and loss via the services. Strictly adhering to the Supreme Court’s precedents and applying the aforementioned elements, the Seoul Central District Court rejected Delivery Driver J’s claim. 
 
Here, the Seoul Central District Court ruled that Delivery Driver J did not provide labor in a subordinate relationship with Platform Company O for the purpose of earning wages, and, therefore, Delivery Driver J is not an employee of Platform Company O. The Court provided the following rationale: (i) Delivery Driver J had the autonomy to decide whether to accept delivery requests based on his location and possible delivery routes; (ii) Delivery Driver J was not required to comply with specific employment rules, personnel regulations, or mandatory dress code enforced by Platform Company O; (iii) Platform Company O’s general instructions to the delivery drivers did not amount to direct and significant supervision and control over the services of Delivery Driver J and other delivery drivers; and (v) Delivery Driver J bore the costs associated with his delivery services, such as rental fees for the motorcycle, insurance, repair costs, and traffic fines. Furthermore, the Court noted in dicta that recognizing Delivery Driver J as an employee of Platform Company O under a more flexible interpretation of the LSA, solely based on the increasing social needs to protect platform workers, would conflict with the legislative intent of the LSA, which aims to protect workers in a subordinate relationship with the employer. The Court concluded that the growing need for protection of platform workers should be addressed through legislative actions, such as enacting new laws or amending the LSA, rather than by the judiciary’s arbitrary expansion of the interpretation of the LSA. 
 
 
2. Drivers Providing Driving Services via Ride-Hailing Platform Service 
 
On July 25, 2024, approximately two weeks after the Seoul Central District Court ruling, the Supreme Court ruled that, under the LSA, a platform worker (“Driver B”), who was a driver providing driving services through the ride-hailing platform service called Tada, is an employee of the platform company called Socar, which operated Tada through its wholly owned subsidiary called VCNC4. Here, Socar operated Tada and provided rental car services to its users and supplied drivers, who were separately sourced from Socar’s subcontractor (“Subcontractor E”). The platform worker, Driver B, had no contractual relationship with Socar nor VCNC, except that Driver B entered into a service agreement with Subcontractor E, under which Driver B was compensated at a rate of 10,000 KRW per hour for his services. 
 
The Supreme Court held that, in determining whether a platform worker qualifies as an employee under the LSA, the traditional elements in determining whether a person provided labor in a subordinate relationship for the purpose of earning wages should be applied in more flexible terms. Specifically, in applying the traditional elements to determine whether a person provided labor in a subordinate relationship for the purpose of earning wages, the Supreme Court considered certain unique characteristics of the platform business, including: (i) the structurally low need for direct and individual employment agreements; and (ii) the typical involvement of platform algorithms and multiple business participants in the determination of distribution and execution of services within the platform business. 
 
Here, the Supreme Court ruled that Driver B is an employee of Socar because: (i) in consideration of the low need for direct and individual employment agreements in the platform business, despite the absence of a direct contractual relationship between Driver B and either Socar or its subsidiary VCNC, Socar essentially determined Driver B’s wages and job responsibilities, supervised Driver B’s attendance, and, therefore, exercised significant control over Driver B’s services through VCNC; (ii) in consideration of the typical involvement of platform algorithms and multiple business participants in the determination of distribution and execution of services within the platform business, Driver B lacked final decision-making authority over his service hours and locations; (iii) Driver B could not delegate his services to others, and did not bear the risk of financial loss or profit in connection with his services; and (iv) Subcontractor E, with which Driver B signed the service agreement, did not possess the independent equipment or facilities necessary to support Driver B’s driving duties and lacked independent decision-making authority over Driver B’s services. 
 
 
3. Key Takeaway 
 
Despite varying opinions on the employment status of platform workers under the LSA, both cases underscore the following critical issues in future disputes regarding the employment status of platform workers: (i) whether the platform workers have significant autonomy in their services; and (ii) whether the platform company exercises significant control and supervision over the services provided by the platform workers. 
 
The aforementioned Seoul Central District Court’s decision is currently pending appeal, and it will be interesting to see whether and how the higher court will apply the criteria newly enunciated by the Supreme Court in the recent Tada decision. In determining the employment status of platform workers under the LSA, courts should now apply the traditional elements in determining whether a person provided labor in a subordinate relationship for the purpose of earning wages while also considering the unique characteristics of the platform business. 
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<div style="line-height: 110%;">1 Seoul Central District Court Decision 2022Gahap534381, July 12, 2024. 
2 Whether a person qualifies as an employee under the LSA should be determined based on the substance of the relationship, specifically whether the person provided labor to a business or workplace in a subordinate relationship with the purpose of earning wages (Supreme Court Decision 2004Da29736, December 7, 2006). 
3 Supreme Court Decision 2004Da20736, December 7, 2006; Supreme Court Decision 2010Da5441, May 10, 2012; Supreme Court Decision 2016Du49372, April 26, 2018. 
4 Supreme Court Decision 2024Du32973, July 25, 2024.</div>

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