[Law Talk] Unexposed risks of the Serious Accidents Punishment Act: Business owners facing liability beyond the workplace

Amid recurring industrial accidents such as the 2018 Taean Power Plant tragedy, the 2020 Icheon fire incident, and the death of a worker at Pyeongtaek Port in April, social interest regarding the need for health and safety in outsourcing arrangements has been steadily growing.

Meanwhile, with the increase in outsourcing of work across all industries, the vague division of roles and responsibilities between companies and contractors, and the lack of authority of contractors/subcontractors that actually perform the contracted work to control or manage inherent risks with respect to using equipment, facilities, and places of business has raised concerns over the likelihood of industrial accidents.

To address these issues, the Occupational Safety and Health Act (the OSHA), Korea’s fundamental workplace health and safety legislation, was wholly amended in 2019 to include the following: (i) expansion of the scope of an employer’s duty to ensure the safety and health of contractor’s/subcontractor’s workers at not only all business sites of the employer but also hazardous workplaces which are designated/provided by, and under the control/management of the employer.

Further, (ii) imposition of the duty on business owners to select contractors/subcontractors that are capable of taking preventive measures against industrial accidents. Moreover, the newly enacted Act on Punishment for Serious Accidents (the Act), which is to be enforced from Jan. 27, 2022, has resulted in further changes with respect to health and safety management to prevent serious industrial accidents in outsourcing arrangements. The key points of the Act are summarized below.

First, the Act mandates business owners or responsible executives to introduce overall measures to ensure the health and safety of “workers” at the business or workplace which is “actually controlled, operated and managed” by such business owner, corporation or organization. In this regard, the Ministry of Employment and Labor has recently issued guidance that “actual control, operation, and management,” refers to “the business owner’s ability to recognize hazardous and risk factors and manage, improve and control such factors.”

Meanwhile, a “worker,” whom the Act seeks to protect, includes employees of the business owner and extends to all persons who provide work to perform tasks for the business owner irrespective of the contractual form, i.e., subcontracting, outsourcing and consignment (including multitier subcontracts).

With such recent changes in the law, companies will be required to pay attention to measures that ensure safety and health which have previously only been owed to its own employees but now extend to third party outsourcing arrangements.

Second, the draft Enforcement Decree of the Act which was released in July prescribes a business owner’s obligations to develop criteria and procedures for assessment of (i) the contractor’s capabilities and skills for the prevention of accidents and (ii) adequate expenses and period for health and safety management. The business owner is also required to monitor the implementation thereof.

Although some of these obligations are already reflected in Article 61 of the OSHA, no regulatory sanctions are currently in place to ensure selection of a qualified contractor under the OSHA. Companies are advised to exercise caution as a responsible executive may be subject to criminal punishment in cases where a causal relationship in relation to the occurrence of a serious industrial accident is established with respect to obligations stipulated in the draft Enforcement Decree.

The introduction of the Act has provoked criticism in relation to the rapid changes to health and safety management in outsourcing arrangements. In particular, the use of vague legal concepts like “actual control, operation, and management” or “adequate expenses and period” may raise issues on whether such concepts contravene the principle of clarity that is required under the penal code. Further, a business owner’s performance of its obligation to ensure the health and safety of the contractor’s/subcontractor’s workers may potentially result in such outsourcing arrangement to be misconceived as an illegal dispatch.

Despite such concerns, in view of heightening social interest regarding health and safety management, the directional shift toward increasing the business owner’s responsibilities is highly likely to remain unchanged. Therefore, it is of growing importance for businesses to focus efforts toward developing measures to ensure correct health and safety measures as required by the new legislation through close cooperation with experts.

By Park Chan-keun and David Park

Park Chan-keun is a partner at Yoon & Yang, with an expertise in labor and employment. David Park is an Australia (New South Wales)/New Zealand-qualified attorney at Yoon & Yang, with an expertise in the areas of corporate law, dispute resolution and employment and labor law. -- Ed.

By Korea Herald (koreaherald@heraldcorp.com)