Weekly Contributions

Freelancer or Employee? Substance Matters More Than the Contract

Bongsoo Jung, Korean Labor Attorney / KangNam Labor Law Firm

I. Foreign Instructors Who Signed 'Freelance Agreements'

In early 2011, 17 foreign instructors working at a large C Academy in Korea visited the Gangnam Labor Office. They filed a complaint alleging that substantial amounts of severance pay and wages had not been paid. The academy's first response was clear: 'The instructors are not employees; they are freelancers.' The document they had signed was also titled a 'Lecture Service Agreement.'

The instructors, however, described a working arrangement that looked quite different from the title of the contract. The academy determined the place and time of classes, issued instructions concerning course content and operating policies, and required the instructors to appear at the academy at scheduled times and teach personally. Their compensation was also based on teaching hours. The instructors argued that although the contract called them freelancers, in practice they worked under the academy's control.

The issue could ultimately be reduced to a single question: 'If the contract says freelancer, is the person really a freelancer?' The labor authority's answer at the time was no. The instructors were recognized as workers who had provided labor for wages in a subordinate relationship, and their claims for severance pay and statutory allowances were therefore treated as issues arising from an employment relationship.

Fifteen years later, in 2026, the same question remains. What has changed is that working arrangements have become more complex. The Supreme Court continues to decide whether people who appear outwardly to be 'business operators' or 'freelancers' - such as water-purifier installation technicians, truck owner-drivers, employed physicians, platform drivers, and cooperative members - nevertheless qualify as workers under the Labor Standards Act.

 

II. A Freelancer Is Not a Separate Statutory Type of Contract

The essence of an employment contract is that a worker provides labor to an employer and the employer pays wages in return. Article 2(1)1 of the Labor Standards Act defines a worker as 'a person, regardless of occupation, who provides labor to a business or workplace for the purpose of earning wages.' This definition remains in effect as of September 2026.[1]

In practice, the expression 'freelance agreement' is commonly used, but the Korean Civil Act does not recognize a freelance agreement as a separate statutory type of contract. Depending on the nature of the work, the parties may use a mandate, a contract for work, a service agreement, or another form of contract. A mandate under Article 680 of the Civil Act involves entrusting the handling of affairs to another person, while a contract for work under Article 664 involves completing specified work in return for payment for the result.[2]

Accordingly, employee status is not determined merely because a contract is titled a 'Freelance Agreement,' 'Service Entrustment Agreement,' 'Service Agreement,' 'Contract for Work,' or 'Entrusted Medical Services Agreement.' The Supreme Court has consistently emphasized the substance of the working relationship rather than the form or title of the contract.

 

III. The Court's Central Question: Who Controlled the Work?

Since setting out the comprehensive criteria for determining worker status under the Labor Standards Act in a 2006 decision, the Supreme Court has repeatedly applied the same framework in later cases. Employee status is not determined by any single factor; rather, various economic and social circumstances are considered as a whole. In practice, the analysis becomes clearer by asking the following questions in sequence.[3]

 

 

One point requires particular caution. The absence of a base salary or fixed salary, the withholding of business income tax, or non-enrollment in the four major social insurance schemes may appear to weigh against employee status, but none of these factors is decisive. The Supreme Court has repeatedly held that such arrangements can often be determined by the employer from a superior bargaining position and therefore should not, by themselves, readily negate employee status.

Another development concerns the form that 'direction and supervision' may take. Direction and supervision do not require a supervisor to stand beside the worker in an office and give instructions every moment. Even where the nature of professional or field work means that few detailed instructions are given, a subordinate relationship may still be found if substantial control is exercised through working hours, work assignments, evaluations, reporting systems, or work manuals.

 

IV. Five Scenes from Recent Supreme Court Case Law

1. Water-Purifier Installation and After-Sales Service Engineers - A Consignment Contract Does Not Defeat Employee Status When the Relationship Is Subordinate

Installation and after-sales service engineers for a water-purifier company performed their work under service consignment agreements with the company. Outwardly, they appeared to be independent contractors. However, considering the manner in which work was assigned and performed, the company's management and control, the compensation structure, and the continuity of the relationship, they could be regarded as having provided labor in a subordinate relationship to the company. The Supreme Court held that the substance of the working relationship, rather than the title or form of the contract, was controlling and recognized them as workers under the Labor Standards Act.[4]

2. A Physician Under an 'Entrusted Medical Services Agreement' - A Professional Can Also Be an Employee

A medical institution entered into an 'Entrusted Medical Services Agreement' with an employed physician. The agreement even contained language indicating that the physician was not an employee. In practice, however, the physician treated patients at a designated clinic for most weekdays and Saturdays, received a fixed monthly payment, and reported treatment status and performance. The Supreme Court noted that the physician's receipt of relatively few specific or individualized instructions could be explained by the professional nature of medical work. The substance of the working hours, workplace, compensation, and reporting relationship was more important than the form of the contract.[5]

3. A Truck Owner-Driver Who Owned His Own Vehicle - Ownership of Equipment Does Not Rule Out Employee Status

The truck owner-driver effectively owned his own vehicle and bore part of the maintenance and operating costs. On the surface, this looked like a typical self-employed arrangement. Nevertheless, the Supreme Court held that vehicle ownership could not be viewed in isolation and that the entire relationship had to be examined, including actual work assignments, the manner of performing the work, compensation, and the allocation of business risk. The Court therefore found that the driver could be regarded as a worker who provided labor for wages in a subordinate relationship and remanded the case to the lower court.[6]

4. A 'Freelance Driver' Working Through an App - An Algorithm Can Function as a Labor-Management Tool

In the platform economy, instructions may be delivered not by a supervisor's voice but through an app screen. In 2024, the Supreme Court recognized the employee status of a driver who worked under a 'Driver Freelance Agreement' for a vehicle-rental and driver service. Although the driver had some degree of choice, in practice work could be performed only after receiving assignments, the garage and work schedule were fixed, and the app allocated customers and jobs while controlling how the work was performed. Training and sanctions were also contemplated for refusing assignments.

The significance of this decision is that traditional employee-status factors should not be applied mechanically to platform work. The Supreme Court expressly stated that the analysis must take into account the distinctive labor-management features of platform work, including algorithms and multiple business participants that influence the allocation of work and the manner in which it is performed.[7]

5. A Taxi Driver Who Was Also a Cooperative Member - A Separate Legal Status Does Not Rule Out Employee Status

In 2026, the issue arose whether people who were both members of a taxi cooperative and taxi drivers qualified as workers under the Labor Standards Act. The lower court placed considerable weight on their relatively flexible commuting arrangements and on their rights as cooperative members, such as voting rights and the possibility of receiving dividends. The Supreme Court, however, held that the legal status of cooperative member did not automatically exclude the possibility of an employment relationship.

The Supreme Court held that, when the terms of the use agreement, required rules of conduct and work discipline, required standard payments, and the method of calculating compensation were considered together, the relationship might not be fundamentally different from that of ordinary taxi drivers. The Court therefore remanded the case. In other words, even a person who also has another legal status - such as shareholder, officer, cooperative member, or individual business operator - may separately be recognized as an employee if, in substance, that person works for wages in a subordinate relationship.[8]

 

V. Characteristics of Freelancers, Legal Protections, and Checklist Items

1. What Does a 'True' Independent Freelancer Look Like?

By contrast, an independent freelancer normally shows clear signs of operating his or her own business. The freelancer negotiates prices with clients, serves multiple clients, decides whether to accept assignments, and determines the schedule, place, and method of performing the work. The freelancer bears the cost of his or her own equipment and expenses, may use assistants or substitutes when necessary, and enjoys increased profit when the business performs well while personally bearing the risk of loss when it does not.

The important point is that one element of freedom is not enough. Flexible commuting hours, use of personal equipment, or performance-based compensation does not by itself make someone an independent business operator. Conversely, a fixed salary alone does not automatically make someone an employee. The relationship must be viewed as a whole to determine who organizes the business, who controls the work, and who bears the economic risk.

2. Labor-Law Protection Does Not Necessarily Disappear When a Person Is Not a Worker Under the Labor Standards Act

A common misunderstanding in practice is that a person who is not a worker under the Labor Standards Act is excluded from all labor-law protection. That is not necessarily the case. Different statutes define and protect 'workers' or 'labor service providers' according to different legislative purposes and scopes.

For example, the Supreme Court held that home-study tutors were not workers under the Labor Standards Act, but recognized them as workers under the Trade Union and Labor Relations Adjustment Act in light of the need to protect the three constitutional labor rights. Accordingly, the test for worker status under the Labor Standards Act is not identical to the test under the Trade Union Act.[9]

The Industrial Accident Compensation Insurance Act also separately regulates certain categories of 'labor service providers' and permits persons who receive requests for labor through online platforms to fall within that framework. The Employment Insurance Act likewise contains separate provisions for specified categories of service providers who are not employees but personally provide labor for another person's business in return for compensation. Thus, even when a person is not recognized as a worker under the Labor Standards Act, industrial accident compensation insurance or employment insurance may still apply depending on the occupation and statutory requirements.[10]

3. What Companies Should Check Before Using Freelancer Agreements

The riskiest approach for a company using a freelancer agreement is to write, 'This agreement is not an employment contract,' in the first line and assume that the issue is settled. Such language is only one piece of evidence showing the parties' stated intent. If the actual working arrangement is an employment relationship, the wording alone is unlikely to change the conclusion.

? Does the company prescribe the methods and procedures for performing the work in detail?

? Does the company effectively require fixed starting and finishing times, workdays, and workplaces?

? Are there disadvantages or sanctions for refusing assignments, taking time off, or working for others?

? Are evaluation, training, disciplinary, and reporting systems operated in a manner similar to those for regular employees?

? Does the freelancer actually determine and bear responsibility for pricing, costs, clients, personnel, and business risk?

? Has the company examined whether termination of the agreement has, in substance, the same effect as dismissal?

If the actual operation is closer to an employment relationship, formally restructuring the relationship as employment may reduce dispute costs rather than artificially maintaining a freelancer arrangement. If employee status is recognized later, multiple issues can arise at once, depending on the facts and statutory requirements, including severance pay, unpaid wages and statutory allowances, weekly paid holidays and annual paid leave, the procedures and justifiability of dismissal, and social-insurance adjustments.

 

VI. Conclusion

In the 2011 C Academy case, the foreign instructors' document was titled a 'Lecture Service Agreement.' In 2024, the platform driver's document was titled a 'Driver Freelance Agreement.' In 2026, the taxi drivers were also 'members' of a cooperative. Yet what the courts ultimately examined was not the label, but the way the work was actually performed.

The boundary between employee and freelancer status is not determined by the name of the occupation. The key question is whether the person independently operated his or her own business or, instead, was integrated into another business's organization and provided labor in the manner determined by that business. Before asking, 'Did this person sign a freelance agreement?' the more important question is: 'Whose business was this person actually working for, under whose control, and at whose risk?'