“Worked every day, but no severance pay?” ... Companies on edge as day laborers take them to court

[Financial News] A legal battle is underway over whether “ultra-short-term gig workers (Gig Workers),” who confirm their attendance each morning through a smartphone app and head to work, are entitled to severance pay. Although they are contracted for “ultra-short-term work,” such as one-day shifts, there is no clear standard for determining whether they are in fact “continuously employed workers” entitled to severance pay after working at one place for several months to several years. Courts are divided on the issue.
According to legal sources on the 9th, the 27th Criminal Division of the Seoul Central District Court is scheduled to hold a final hearing on the 18th for the former and current heads of Coupang Fulfillment Services (CFS), who were indicted by a permanent special prosecutor on charges of violating the Employee Retirement Benefit Security Act.
The hearings so far have seen fierce legal disputes over whether day laborers’ work constitutes continuous employment. A day laborer who said they had been harmed testified, “I wasn’t free to work only on the days I wanted. If I refused encouragement to report to work, I faced disadvantages in subsequent assignments. In reality, I worked regularly under the company’s direction and supervision.”
CFS, for its part, is claiming innocence, emphasizing the flexible staffing practices of its logistics centers. It maintains that employers had no control over workers during gaps in attendance, as workers confirmed each day through an app whether they would report to work and also worked at other workplaces. In particular, the company argues that there is considerable room for legal debate, saying the case “had already received a non-prosecution disposition during the early stages of investigations by the employment and labor office and prosecutors.”
Depending on the courts’ decisions, companies could face “severance pay risks” ranging from several hundred million won immediately to tens of billions of won in the future. In the CFS case, the number of day laborers at logistics centers who could be affected by changes to the severance pay calculation rules is estimated to reach 10,000.
If all day laborers who work intermittently are recognized as continuously employed, logistics companies with operating profit margins of only around 3% would face pressure to pay out tens of billions of won in unpaid severance at a single company and to set aside provisions for severance liabilities.
Courts are also divided. Last February, the Suwon District Court acquitted the head of a logistics center subcontractor who had been indicted for failing to pay day laborers’ severance, ruling that “if the employment contracts ended after one day and there were gaps of several days when the workers did not report to work, their continuous employment was interrupted.” The case is now awaiting a final decision by the Supreme Court of Korea following an appeal by prosecutors.
By contrast, last April, the Incheon District Court ruled in favor of a former Coupang day laborer who had sued the company for severance pay, ordering it to pay, on the grounds that “even if the contracts were made on a daily basis, workers who worked for a long period without gaps were, in substance, regular employees.”
On the workers’ side, concerns have been raised that the benchmark under the 1953 Labor Standards Act—15 hours a week and one year of continuous employment—rooted in manufacturing factories, has failed to keep up with modern hiring structures.
According to the report “Blind Spots in Retirement Benefits and Policy Challenges,” published by the Korea Labor Institute (KLI), as of 2024, 21.3% of all wage workers in the country (4,714,000 people) were in a “retirement benefit blind spot.” In particular, 12.9% (2,861,000 people) were in a “substantive blind spot,” meaning they did not receive benefits despite meeting the legal requirements. In a survey conducted last year, “split contracts lasting less than one year” (13.1%) was one of the main reasons respondents gave for receiving no severance pay at all, while “adjustments to working hours shortly before retirement” (17.1%) was among the main reasons for receiving only part of it.
Son Ik-chan, a lawyer at Deoksu Law Firm, said, “Rulings recognizing actual working hours have been handed down at construction sites for a long time.” He argued, “The existing legal principles concerning retirement benefits are outdated, and workers need to assert their rights more often.”
[email protected] Lee Chang-hoon Reporter