Labor Case: Is a Telemarketer an Employee?
Bongsoo Jung, Korean labor attorney at KangNam Labor Law Firm

I. Introduction
“Specially hired service providers” refer to those who provide labor service on a regular basis in a specific workplace, but who are not yet recognized as employees. Typical jobs include golf-club caddies, home-study teachers, cement truck drivers, and telemarketers. They are not generally recognized as employees because they are not in a subordinate relationship with the employer due to their job characteristics, and also do not provide exclusive services to the employer. However, in recent judicial rulings, if a person is exclusively attached to one workplace, and if there is a considerable subordinate relationship with the employer, such a person can be considered an employee. Previous judgment criteria depended on whether the base pay was given, whether the four social security insurances were subscribed to, and whether income tax was paid, but these things can be determined arbitrarily by the employer, given his or her economically superior position, and so determining whether someone is an employee must now be through determining whether an actual subordinate relationship to the employer has existed or not.
Whether a telemarketer who is a “specially hired service provider” is an employee or not is decided by how much of a subordinate relationship exists between the employer and the at-home telemarketer at the place of work. Telemarketers are usually engaged in business such as selling insurance, selling targeted real estate, distance sales, etc. Unlike a person working at a call-center, his/her main earnings are determined by their individual sales performance, so it is not entirely accurate to call such a person an employee. I would like to look into the employee characteristics of an at-home telemarketer and some typical related labor cases.

II. Criteria for Determining “Employee” Status
1. The Ministry of Labor guidelines and judicial rulings use the same criteria for determining “employee status” for a telemarketer. That is, whether or not someone is an employee shall be estimated by whether a subordinate relationship with the employer exists for the person providing the labor service. Some difference is that the administrative guidelines are inclined to consider related factors (refer to the 9 categories of judicial rulings) with equal weight, while the judicial rulings tend to focus on the actual subordinate relationship in work details rather than related factors, in light of the employer’s economically superior status.
2. Judicial rulings on the criteria to determine employee status is based upon the following judgment principle. “Whether a person is considered an employee under the Labor Standards Act shall be decided by whether that person offers work to the employer as a subordinate of the employer in a business or workplace to earn wages in actual practice, regardless of whether the type of contract is an employment contract or service agreement under Civil Law. Whether a subordinate relationship with the employer exists or not shall be determined by collectively considering: 1) whether the Rules of Employment or service regulations apply to a person whose duties are decided by the employer, and whether the person has been supervised or directed during his/her work performance specifically and individually by the employer; 2) whether his/her working hours and workplaces were designated and restricted by the employer; 3) who owns the equipment, raw material, or working tools; 4) whether the person can hire a third party to replace him/her and operate his/her own business independently, 5) whether the person is willing to take the opportunity and risk to earn money or lose it; 6) whether payment is remuneration for work and 7) whether basic wage or fixed wage is determined in advance; 8) whether the person pays income tax or not (including subscription to the four social security insurances) and 9) whether work provision is continuous and exclusive to the employer. However, whether basic wage or fixed wage is determined in advance, whether income tax is withheld, and whether the person is recognized as an employee eligible for social security insurance are factors that could be determined arbitrarily by the employer’s superior economic status. Therefore, just because those mentioned factors were rejected, it is hard to deny that employee characteristics exist.”

III. A Case Where “Employee Status” was Determined to Exist (Dismissal of a Distance Sale Telemarketer)
1. Summary
(1) A Social Welfare Corporation (hereinafter referred to as “the company”) employed 30 people and used them as telemarketers for distance sale operations. Since November 11, 2003, the applicant had worked as a telemarketer. The company had proposed a new ‘commission agreement’ to the applicant, and when she refused to sign the agreement, the company terminated her employment on October 19, 2006. The applicant then applied for remedy from the Labor Commission, but it was rejected after she was determined not to be an employee, and therefore ineligible. Her appeal with the National Labor Commission was also rejected. The applicant then appealed to the Administrative Court.

2. Job Description
(1) The telemarketers the applicant worked with had sold, over the phone, a monthly magazine published by the company. (2) The applicant worked from 10 am to 5 pm during the workweek at a partitioned booth in the company’s telemarketing room, and received 22% of each total sale as commission, in addition to an “attendance allowance” of 10,000 won per day, plus 100,000 won per month if they were never absent during each month. This was in lieu of a monthly wage. (3) The company provided a desk, telephone, and other office items necessary to do business, supervised the telemarketers and decided in advance the contents of the letters to be sent to sponsors. (4) The company proposed a minimum requirement of 1000 phone calls per month and urged telemarketers to reach that goal, but did not discipline those who did not. (5) The company had all telemarketers report in writing the details of their consultations with potential subscribers and their contact information before leaving the office every day. (6) The company gave the telemarketers new instructions and other necessary information at regular monthly meetings, as well as irregular meetings presided over by the operational manager. (7) The company kept attendance records, and treated two instances of leaving the office early as one day’s absence.

3. Administrative Court Judgment
(1) The company stipulated most of the working methods by providing personal information regarding potential sponsors, defining working methods, and supervising and controlling the content of the letters, but did not make concrete calling targets or dictate the content of the calls. (2) The working conditions defined in the Rules of Employment did not apply to the applicant, but application of the company’s Rules of Employment can be determined arbitrarily and entirely at the employer’s discretion, from a position of superior status. (3) The company informed the applicant of work-related directions and information and provided training on working methods through frequent meetings, and received concrete work performance results from the applicant. (4) The company determined the applicant’s working hours and workplace, and monitored total working hours by keeping attendance and giving allowances for that attendance. (5) The company provided the applicant basic office items necessary for work, including payment of the telephone bills. (6) As the company always paid 400,000 won in attendance allowances every month, this reflects the characteristics of a basic salary. (7) The applicant did not pay personal income tax, but did pay corporate tax, and was not subscribed to the social security insurances, something unilaterally determined by the company from its superior status. (8) As the employee had worked for three years as a telemarketer for the company, this provision of work by the applicant can be considered as provision of continuous and exclusive labor service for the company. (9) Accordingly, the applicant falls under the status of “employee” according to the Labor Standards Act, and termination of this employment shall be considered a unilateral cancellation of employment by the employer.

IV. Cases Where“Employee”Status was Determined to Not Exist
1. Telemarketer Selling Insurance
(1) Job description
① The telemarketer’s job was to call and sell the company’s insurance products to customers, and received training from the company manager on the products, selling techniques, and other matters necessary to sell successfully. ② The company’s Rules of Employment did not apply to the telemarketer, but the company’s service regulations related to sales had to be followed. ③ In the mornings, the telemarketer went to the office provided by the company, and every day carried out the assigned work according to the hours scheduled by the company, leaving the office after completing the assigned working hours in the afternoon. ④ There was no restriction on the telemarketer getting another job, but it was in reality impossible to carry out other business. ⑤ For the purposes of work, the telemarketer received a workspace, desk, computer, telephone, etc. ⑥ The company paid an activity allowance characteristic of a basic salary, and an incentive bonus in accordance with individual sales performance. ⑦The telemarketer just paid corporate tax due to being considered self-employed, and so did not pay income tax or premiums for the four social security insurances.
(2) Judgment of the Ministry of Labor
The matters considered not to be characteristics of an employee were: ① The contract that the company made with the telemarketer was not an employment contract, but a “commission contract” under Article 689 of the Civil Act. ② Even though the telemarketer used the communication equipment provided by the company in carrying out commissioned work for insurance sales, the telemarketer sold insurance simply at his own discretion and according to his capabilities. ③ There was no allowance without generation of business, and even the activity allowance (600,000 won per month) claimed as a basic salary by the telemarketer was only paid in cases where the telemarketer sold at least 10 insurance contracts per month. All insurances and incentive bonuses were paid according to individual performance. ④ Company regulations such as the Rules of Employment were not applicable, and no disciplinary action (such as reducing allowances) was taken for arriving late, leaving early, or being absent. ⑤ The telemarketer does not have to call the list of customers provided by the company, and no disciplinary action is taken if they are not called. In consideration of the above-mentioned items, this insurance sales telemarketer cannot be considered an employee.

2. Targeted Real Estate Telemarketer
(1) Job description
① The job is to sell real estate for the company to random people over the phone or after consultation at the designated workplace.
②The monthly fixed income that the telemarketer received from the company was 800,000 to 1.2 million won, with 50,000 won deducted for each day of absence. ③ The telemarketer was responsible for consulting with potential customers, carrying out on-site surveys, and concluding contracts. A commission of 8 to 10% of the sale was given. ④The telemarketer worked five days per week and 8 hours per day at a specified location.
(2) Judgment of the Ministry of Labor
The telemarketer for the targeted real estate company sold land over the phone or through consultations. ① Even though the workplace and working hours were stipulated, this was designed to promote effective sales in accordance with different requirements of telemarketing. ② The telemarketer dealt with people at his own discretion, from attracting potential buyers to completing the contract, and did not receive any concrete or individual supervision or control by the company. ③ What the telemarketer received as a fixed allowance is a kind of sales activity allowance. ④ Income tax was reported. ⑤ The main income was the very high commission received in return for selling the real estate. It is therefore estimated that the telemarketer cannot be regarded as an employee providing labor service under an employer’s supervision and direction.

IV. Conclusion
According to the changing business structures, companies use telemarketers for various fields. In the beginning, telemarketers were handled as outsourced or commissioned labor, and no real problems existed. However, companies have gradually been using telemarketers to directly increase operational profit. In this process the company comes to supervise the telemarketer directly, which affects the telemarketer’s status as a commissioned service provider under the Civil Act to that more like an employee to which the labor laws apply. As the telemarketer’s status changes this way, employers need to handle dismissals carefully, deal with severance pay, annual leave, social security insurances, and other protections granted by Korean Labor Law. Accordingly, employers need to recognize that telemarketers’ status can change from commissioned service provider (under the Civil Law) to an employee (under Labor Law) according to the degree of employer involvement in the telemarketer’s work. When using telemarketers, it is necessary to consider in advance whether the telemarketer shall be considered self-employed or an employee exclusively supervised and directed.