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Riders who work under a service contract with a delivery agency or a delivery platform are commonly called freelancers. However, the fact that the contract says 'service contract' or 'freelancer' does not by itself mean that the rider is not an employee under the Labor Standards Act (근로기준법). Courts look at how the work was actually done, not at the name of the contract, and even for the same delivery work the conclusion differs depending on how it was performed.

This article sets out, in order, the standard courts use to decide whether someone is an employee, a case in which a delivery rider's employee status was denied and cases in which it was recognized on the basis of control by the platform, and the points you can check for yourself.

[Contents]

1. Courts Look at How the Work Was Done, Not the Contract's Name

2. A Rider Who Could Refuse Orders: Employee Status Denied

3. The Conclusion Changes Where the App Controls the Work

4. Six Points to Check in Your Own Case

5. What Changes With Employee Status, and What Remains Without It

Courts Look at How the Work Was Done, Not the Contract's Name

The Labor Standards Act defines an employee as 'a person, regardless of the kind of occupation, who offers labor to a business or workplace for the purpose of earning wages' (Article 2(1)1). The Supreme Court decides whether a person falls within this definition not by whether the form of the contract is an employment contract or a contract for work, but by whether, in substance, the person provided labor to the employer in a subordinate relationship for the purpose of earning wages (Supreme Court Decision 2004Da29736, December 7, 2006).

Whether the relationship is subordinate is determined by considering the following circumstances together.

• Whether the employer decides the content of the work, the worker is subject to rules of employment or service regulations, and the employer exercises substantial direction and supervision in the course of the work

• Whether the employer designates working hours and the place of work and the worker is bound by them

• Whether the person providing labor can run a business independently on his or her own account, for example by owning the work tools or hiring a third party to do the work on his or her behalf

• Whether the person bears the risk of generating profit and incurring loss

• Whether the remuneration is consideration for the labor itself

• Whether the relationship is continuous and the person works exclusively for the employer

On the other hand, whether a base or fixed salary has been set, whether earned income tax was withheld, and whether the person is recognized as an employee under the social security system are matters that an employer can largely decide at will by using its economically superior position. The Supreme Court therefore holds that employee status must not be readily denied merely because these points are not established. In the case decided in the above decision as well, private academy instructors signed contracts titled 'agreement for the provision of lecture services' and had business income tax withheld, yet they were recognized as employees.

This is why the fact that a freelance contract was signed, or that business income tax was withheld from the remuneration, does not settle the conclusion.

A Rider Who Could Refuse Orders: Employee Status Denied

In a case where a delivery worker belonging to a delivery agency was injured in an accident during a delivery, the Supreme Court found it difficult to regard that worker as an employee under the Labor Standards Act (Supreme Court Decision 2016Du49372, April 26, 2018). The circumstances cited in the decision were as follows.

• The delivery worker could decide whether to accept or refuse delivery requests received through the app, and there was no particular sanction from the agency for refusing

• The app had no Global Positioning System (GPS) function, so the agency could not monitor the delivery worker's current location or the status of deliveries

• The agency did not separately set working hours or a place of work

• The delivery worker could do delivery work for another company at other times, or have another person carry out deliveries on his behalf

• The delivery worker earned income from a fee per delivery and received no fixed salary or bonus from the agency

The view that employee status is often denied where the rider is free to refuse orders, working hours and place are not fixed, and other work is possible follows from this reasoning. However, this decision was premised on the way that particular agency operated; it did not declare that delivery riders as an occupation are not employees. In particular, it is worth noting that the circumstances cited in the decision included the fact that the agency could not monitor the delivery worker's location or the status of deliveries.

The Conclusion Changes Where the App Controls the Work

Recently, the issue has been operating models in which the app tracks the rider's location in real time and assigns orders by algorithm. The circumstances differ from those of the 2018 decision above.

In a case concerning drivers for a ride-hailing service, the Supreme Court stated that when deciding whether a platform worker who works through an online platform is an employee, the factors described above must be applied appropriately, taking into account the characteristics of labor management in which the platform's algorithm or multiple business participants are involved in allocating work and deciding how it is performed (Supreme Court Decision 2024Du32973, July 25, 2024).

The driver in that case had signed a freelance contract, had no base or fixed salary, and had no earned income tax withheld. However, the Supreme Court found that these circumstances were due to the nature of providing labor through an online platform and therefore could not be given much weight. On the other hand, it recognized employee status on grounds including that the training materials distributed by the company side functioned in effect as service regulations, that the company side ultimately decided working hours and the place of work, and that the driver could hardly be regarded as having been free to choose whether to accept calls, when to rest, or when to end work.

For delivery riders as well, lower court decisions have been recognizing employee status on grounds such as the app's algorithm and real-time monitoring, penalties for cancelling assigned orders, and the unilateral setting of the standard for calculating remuneration. The details of those decisions were introduced in our column on the employee status of delivery riders.

Even if, on the surface, the rider accepts deliveries one by one, the relationship may be assessed as an employment relationship if, in reality, the app was controlling the way the work was performed closely and in real time.

Six Points to Check in Your Own Case

The points raised in the video can be linked to the factors courts consider as follows.

• Refusing orders — whether you can freely refuse incoming delivery requests. This relates to who decides the content of the work.

• Working hours and place — whether the hours and place of work, such as log-in time slots or waiting zones, are fixed and must be followed

• Other work — whether you can also do deliveries for other companies or other work. This relates to exclusivity.

• Real-time control through the app — whether your location and delivery status are monitored, and whether the way you work, such as order assignment, is decided by the app or a manager

• Penalties for cancelling orders — whether a disadvantage follows when you cancel an accepted order or refuse a request

• Standard for calculating remuneration — who sets the standard for pay per delivery, and whether it can be changed unilaterally

No single point settles the conclusion; these circumstances are considered together. Even if the contract states that 'orders may be refused,' it may not be assessed as the contract says if in practice a disadvantage followed every refusal. Conversely, using a platform does not by itself make someone an employee.

What Changes With Employee Status, and What Remains Without It

If a rider is recognized as an employee under the Labor Standards Act, a termination of the contract unilaterally made by the employer is assessed as a dismissal. An employer may not dismiss an employee without just cause (Article 23(1) of the Labor Standards Act), and a dismissal takes effect only if the reason and the time of dismissal are notified in writing (Article 27). An application to the Labor Relations Commission for relief from unfair dismissal must be filed within three months from the date of the dismissal (Article 28(2)). Agreements that fix in advance a penalty or an amount of damages for non-performance of the employment contract are also prohibited (Article 20). Where the period of continuous service is one year or more and the contractual working hours average 15 hours or more per week over four weeks, severance pay also becomes an issue (Articles 4(1) and 8(1) of the Act on the Guarantee of Employees' Retirement Benefits (근로자퇴직급여 보장법)).

Even where employee status is not recognized, industrial accident compensation insurance has to be examined separately. Decision 2016Du49372 above also denied the delivery worker's employee status, yet reversed the lower court's judgment on the ground that further examination was needed as to whether he was a person in a special type of employment under the Industrial Accident Compensation Insurance Act (산업재해보상보험법) as it then stood.

The system referred to in the video as 'persons in special types of employment' is now provided for in the current Industrial Accident Compensation Insurance Act under the name 'labor providers (노무제공자).' The former provision (former Article 125) was deleted by a 2022 amendment, and the current Act defines a labor provider as a person who personally provides labor for another person's business and is paid for it, and who is engaged in an occupation prescribed by Presidential Decree. This includes cases where the request to provide labor is received through an online platform (Article 91-15). The requirement in the former provision that the labor be provided 'mainly to one business' is not found in the current definition. The Enforcement Decree lists, as one of those occupations, quick-delivery workers who are commissioned by the owner of a quick-service business to carry out deliveries (Article 83-5, item 6 of the Enforcement Decree). Whether you fall within this must be checked on the basis of how you actually work.

Even for the same delivery work, the conclusion differs depending on how much actual control there was. Those who operate a delivery agency or platform need to check how the app and operating policies actually work rather than the wording of the service contract, and riders are advised to keep materials that show how they worked, such as order assignment records, penalty notices and notices of the settlement standard.

Cheongchul Law Firm directly handles HR and labor disputes over the determination of employee status, contract termination and dismissal, and wages and severance pay. If you work under a service contract, or operate a contracted workforce, and employee status has become an issue, please contact us through our consultation booking page.

This post is intended to provide legal information and does not constitute legal advice on any specific matter. Conclusions may differ depending on the facts of each case, so please consult a professional.