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Changes in the Criteria for Determining Employee Status and Protection of Platform Workers

Bongsoo Jung (Labor Attorney, KangNam Labor Law Firm)

I. Introduction

Article 10 of the Constitution provides that all citizens have dignity and worth as human beings and have the right to pursue happiness. Article 32 further provides that standards for working conditions shall be prescribed by law so as to guarantee human dignity, and the Labor Standards Act was enacted on that constitutional basis. As industry has developed, new occupations have emerged, and the scope of persons protected by the Labor Standards Act has gradually expanded.

Occupational structures in Korea have changed in three stages along with industrial development. The first stage, before 2000, was characterized by a relatively simple structure centered on production and office work. The second stage, beginning in the 2000s, saw the emergence of diverse occupations as society shifted toward a complex service economy. Workers in these new occupational groups provide labor in new forms and with new content, including sales, membership recruitment and management, collection services, transportation, lectures, and other knowledge-based services. The third stage, beginning in the 2020s, has been marked by rapid growth in internet-based platform businesses and the emergence of various platform-based occupations. Representative examples include delivery riders, parcel-delivery drivers, designated drivers, and field service technicians.

Platform workers do not perform their work under the traditional form of direct direction and supervision by an employer. Instead, they receive work assignments through a platform application and perform the work accordingly. In practical terms, the platform, rather than an individual supervisor, performs the role of directing and supervising the work. Platform workers generally perform their duties in accordance with manuals established by the platform, and digital technology may be used to monitor the work process in real time. The results of their work are also often evaluated not by the employer directly, but by customers. Although the number of platform workers is increasing rapidly, many are still treated as self-employed persons and are therefore excluded from protection under the Labor Standards Act.

If the Labor Standards Act applies to platform workers, they are entitled to statutory protections as employees, including guarantees concerning working conditions and job security. If, however, a platform worker is not recognized as an employee under the Labor Standards Act, the worker may instead be classified as a worker in a special type of employment and receive only limited social protection, such as coverage under workers’ compensation insurance.

Recent court decisions show a gradual expansion in the criteria used to determine employee status, thereby extending greater legal protection to platform workers. In the July 2024 Tada platform-driver case (Supreme Court Decision 2024Du32973) and the July 2026 delivery-rider dismissal case (Seoul High Court Decision 2024Na2037832), the respective platform workers were recognized as employees under the Labor Standards Act, resulting in findings that the dismissals were invalid or unfair. The relevant legal developments are reviewed below.

II. Changes in Case Law on the Expansion of Employee Status

1. Pre-2000 Precedent: Employee Status of a Part-time Academy Instructor[1]

Article 2 of the Labor Standards Act defines an “employee” as a person who provides labor to a business or workplace for the purpose of earning wages, regardless of the type of occupation. Based on this statutory concept, the Supreme Court, in a 1994 decision, systematically presented the factors for determining whether a person is in a relationship of subordination for purposes of employee status under the Labor Standards Act. In other words, the determination is made by considering the totality of relevant circumstances to determine whether, in substance rather than merely in contractual form, the person provided labor to an employer for wages in a subordinate relationship.

2. Post-2000 Precedent: Employee Status of a Full-time Academy Instructor[2]

Leading precedent on the criteria for employee status: Whether a person is an employee under the Labor Standards Act must be determined not by whether the contract is formally labeled an employment contract or a service contract, but by whether, in substance, the person provided labor to an employer for the purpose of earning wages in a subordinate relationship. Whether such a subordinate relationship exists must be determined comprehensively by considering economic and social circumstances, including: ① whether the employer determines the content of the work; ② whether the worker is subject to rules of employment or service/personnel regulations; ③ whether the employer exercises substantial direction and supervision during the performance of the work; ④ whether the employer designates the working hours and workplace and the worker is bound by them; ⑤ whether the service provider independently operates a business on his or her own account, such as by owning equipment, raw materials, or work tools, or by hiring a third party to perform the work; ⑥ whether the service provider bears the risk of generating profits or incurring losses through the provision of services, and whether the remuneration is compensation for the labor itself; ⑦ whether a base salary or fixed salary has been established; ⑧ whether wage and salary income tax is withheld; ⑨ the continuity of the service relationship and the existence and degree of exclusivity to the employer; and ⑩ whether the person is recognized as an employee under social-security legislation. However, factors such as whether a base or fixed salary is established, whether wage and salary income tax is withheld, and whether the person is treated as an employee under social-security systems can often be determined unilaterally by the employer because of its economically superior position. Therefore, employee status should not be readily denied merely because such factors are absent.

The Supreme Court’s 2006 decision maintained the existing framework for determining a relationship of subordination while refining and relaxing the criteria for employee status in three respects to reflect changing forms of labor provision. First, the 1994 precedent listed the relevant factors and required that they be considered comprehensively, but did not distinguish their relative importance. By contrast, the 2006 decision expressly held that employee status should not be readily denied merely because certain factors are absent when those factors can be unilaterally determined by an employer in an economically superior position, such as the existence of a base or fixed salary, the withholding of wage and salary income tax, or treatment as an employee for social-insurance purposes.

Second, the standard concerning the degree of direction and supervision was relaxed. Earlier precedent regarded “specific and direct direction and supervision” as an important indicator, whereas the 2006 decision used the expression “substantial direction and supervision.” This means that even where a person, such as a professional or a worker in a special form of employment, has a certain degree of discretion in performing the work, employee status may still be recognized if the employer exercises comprehensive or indirect control over the content of the work and the manner in which it is performed.

Third, earlier precedent described the independent-business-operator factors only briefly. It referred, for example, to whether the worker could maintain substitutability by hiring a third party to perform the work and to ownership of equipment, raw materials, and work tools, but did not explain these matters in detail. As a result, relatively little weight could be placed on whether the service provider had the characteristics of an independent business operator. The revised criteria, however, specifically ask whether the service provider can independently conduct a business on his or her own account, such as by owning equipment, raw materials, or work tools or hiring a third party to perform the work, and whether the service provider personally bears the risk of generating profits or incurring losses through the provision of services. This is a significant change because it explains in concrete terms characteristics associated with self-employment that were not clearly articulated in earlier precedent.

3. Post-2020 Precedent: Employee Status of Tada Platform Drivers[3]

The 2006 Supreme Court precedent remains the basic framework for determining the employee status of platform workers. However, the distinctive characteristics of platform work must also be taken into account. Platform companies often do not have the outward appearance of a traditional employer exercising personal subordination within a conventional employment relationship and, for that reason, have frequently been excluded from the formal status of employer. In the recent Tada platform-driver decision, however, the court assessed employee status by taking the characteristics of platform work into account as described below. This approach has also served as a basis for the recent recognition of employee status for a delivery rider.[4]

When determining whether a platform worker who provides labor through an online platform (meaning an electronic information-processing system that enables interaction between two or more users in connection with the provision of labor) is an employee, the foregoing factors must be applied appropriately in light of the business structure and labor-management characteristics of platform work. Relevant characteristics include the reduced need for the service provider and service user to enter into a direct individual employment contract because they are connected through an online platform, as well as the involvement of platform algorithms or multiple business participants in allocating work and determining how the work is performed.

III. Recent Cases Recognizing Employee Status of Platform Workers

1. Dismissal Case Involving a Delivery Rider

(1) Facts

The plaintiff entered into a “Delivery Agency Service Consignment Agreement” with the company operating a food-delivery platform and worked as a delivery rider for approximately six months. The company operated its service by receiving delivery orders from affiliated restaurants through a mobile platform and assigning those orders to riders. The riders performed delivery work by logging into a dedicated application provided by the company. The company operated regional branches and support centers and assigned managers, including branch managers and deputy branch managers, while riders were organized into teams by branch. Delivery fees were calculated according to a fee structure and algorithm established by the company, and riders received settlement payments through the company’s system. The company later terminated the service-consignment agreement and required the plaintiff to return items such as the delivery vest and motorcycle. The plaintiff brought an action seeking confirmation that the termination was invalid as a dismissal and payment of wages for the dismissal period, arguing that he was, in substance, an employee under the Labor Standards Act and that the dismissal was invalid because neither the reason nor the procedure for dismissal was lawful.

The court of first instance denied employee status under the Labor Standards Act, taking into account the form of the service-consignment agreement and the characteristics of delivery work. On appeal, however, the court reexamined the relationship of subordination by focusing on the substance of the actual service relationship rather than the title of the contract. It recognized the plaintiff as an employee under the Labor Standards Act and held that the company’s termination of the contract constituted an invalid dismissal. The appellate court was particularly significant in that, while applying the existing criteria for employee status, it also comprehensively examined the allocation and management of work through the platform’s application and algorithm in light of the distinctive characteristics of platform labor.

(2) Court’s Criteria (Seoul High Court Decision 2024Na2037832, July 3, 2026)

The appellate court held, for the following reasons, that the delivery rider was an employee under the Labor Standards Act who provided delivery services for the platform company’s service in a subordinate relationship, for the purpose of earning wages and under the platform company’s direction and orders:

① The substance of the platform company’s business was the provision of “goods delivery services,” and the delivery rider performed the delivery work that constituted an essential part of that service. The rider could perform delivery work only through the application provided by the company.

② The basic method of performing the delivery work, as well as the criteria for calculating compensation and the method of payment, were all determined in advance according to standards and structures established by the company. The delivery rider had no discretion to participate in setting those standards or to determine them differently.

③ Although the delivery rider accepted individual delivery requests and then performed the deliveries, the rider did not exercise complete decision-making authority. Rather, dispatches were effectively made in accordance with company policy through the application’s algorithm or through specific instructions, control, and sanctions imposed by managers. Accordingly, the company exercised substantial direction and supervision over the rider’s work process.

④ Because the company’s service could operate smoothly only if a certain number of riders were working at all times, compliance with work hours predetermined by riders was compelled to a meaningful degree through sanctions or incentives provided by the company.

⑤ No significant indicators supported treating the delivery rider as an independent business operator in terms of the method of generating profits, ownership of work tools, or the possibility of substitution by a third party. The compensation received by the rider had the character of payment for the delivery labor itself.

⑥ While logged into the application and working, the delivery rider could exclusively perform only the company’s delivery work. The fact that the company did not apply rules of employment to the rider, did not withhold wage and salary income tax from the settlement payments, and treated the rider as a worker in a special form of employment rather than as an employee under the Labor Standards Act for purposes of social-security systems such as employment insurance were circumstances that could be determined unilaterally by the company in its economically superior position.

⑦ It was true that the delivery rider provided labor only while voluntarily logged into the application without prescribed working hours, that obtaining or relinquishing rider status was relatively easy, and that the rider could engage in other work outside working hours. In that sense, the rider provided labor in a substantially more flexible form than the typical employee traditionally contemplated by the Labor Standards Act, who provides subordinate labor for an employer at a fixed workplace and during fixed hours. Nevertheless, once it is determined that, while logged into the application and working, the delivery rider provided labor for remuneration in a subordinate relationship under the company’s direction and supervision, the rider must also be regarded as an employee under the Labor Standards Act.

2. Dismissal Case Involving Tada Platform Drivers

(1) Facts

The employer was Socar Co., Ltd., which operated the rental-car-based mobility service “Tada.” Its subsidiary, VC&C, was responsible for the practical operation of the service by using a mobile application to provide customers with rental vehicles and drivers. The service provider entered into a freelance contract with Herald HR, a partner company, and performed driving work in response to calls from app users within a multi-layer contractual structure consisting of Socar, the subsidiary, the partner company, and the service provider. The partner company later notified the service provider of a workforce reduction, and the service provider filed an unfair-dismissal petition with the Labor Relations Commission. The initial petition named the partner company and the subsidiary as respondents, but the service provider later applied to amend the parties by adding Socar as a respondent. The Seoul Regional Labor Relations Commission dismissed the petition on the ground that the service provider was not an employee under the Labor Standards Act. On review, however, the National Labor Relations Commission found that the service provider had in substance been subject to Socar’s direction and supervision, recognized the service provider as an employee, and also found Socar to be the actual employer. It further held that the workforce-reduction notice, which in substance amounted to termination of the contractual relationship, constituted an unfair dismissal because it violated the written-notice requirement under Article 27 of the Labor Standards Act. The amendment adding Socar as a respondent was therefore accepted as to Socar. Socar subsequently filed an administrative lawsuit alleging that the National Labor Relations Commission’s decision was unlawful.

(2) Court’s Criteria (Supreme Court Decision 2024Du32973, July 25, 2024)

The Court held that the drivers performed Tada vehicle-driving work for the company’s Tada service under the company’s direction and orders and therefore provided labor to the company in a subordinate relationship. The principal grounds were as follows:

① The company could determine the content of the driving work and obtain driving records through the application. Although there were no separate rules of employment or service regulations, the application informed drivers of the procedures and methods for performing driving work and of sanctions for violations.

② The drivers had some choice concerning dispatch assignments, but the company made the final decision regarding operations. Drivers were required to operate in accordance with dispatch times determined by the company. Failure to accept assignments during company-designated dispatch times could lead to sanctions and could be reflected adversely in personnel evaluations.

③ The drivers could not have a third party substitute for them in performing the work. While performing work through the Tada application, they could not simultaneously perform other work and could not carry passengers other than users designated by the Tada application, which prevented them from generating additional profit. Tada vehicles and equipment were owned by the company, and the company bore fuel and car-wash expenses. The drivers did not receive a base salary or fixed salary, and wage and salary income tax was not withheld.

IV. Implications and Conclusion

As industrial structures and methods of providing labor have changed, the criteria for determining employee status have also moved away from a model premised on direct supervision in a traditional factory or office and have evolved to address new forms of employment. In platform work in particular, even where a manager does not directly issue work instructions to a worker, the platform’s application and algorithm may allocate work, manage performance, and impose evaluations and sanctions. Accordingly, algorithmic labor management should be treated as an important factor in determining employee status because it can, in substance, perform the employer’s function of direction and supervision.

The 2024 Tada driver case and the 2026 delivery-rider case clearly illustrate this development in the case law. In both cases, the platform workers had a certain degree of freedom to choose work, but the platform companies substantially determined the work-allocation structure, compensation system, methods of performing the work, and systems of evaluation and sanctions. The courts also gave significant weight to the fact that the workers had limited practical ability to operate their own independent businesses. These decisions are particularly meaningful because they establish that a relationship of subordination is not automatically negated merely because a worker can choose his or her own working hours or accept or reject individual assignments.

These decisions do not, however, mean that all platform workers are uniformly recognized as employees under the Labor Standards Act. The degree of freedom to select work, the right to determine prices, the extent of sanctions, exclusivity, the possibility of substitution, and the ability to generate independent profit vary depending on the type of platform and how it is operated. Employee status must therefore continue to be determined individually and comprehensively based on the concrete substance of each service relationship. Platform work should not be denied employee status merely because labor is provided through a platform; conversely, the use of a platform to provide labor does not automatically establish employee status.