Subcontracting labor brings about double subordination. One is the subordination of subcontractor to principal contractor, the other is the subordination of employee to employer. One of the most important problems in subcontracting labor relation is w...
Subcontracting labor brings about double subordination. One is the subordination of subcontractor to principal contractor, the other is the subordination of employee to employer. One of the most important problems in subcontracting labor relation is who is the real employer of the subcontracting employees. Principal contractor is apt to be relieved of employer’s responsibility to subcontracting employee through certain kinds of contract, for example, outside order, outsourcing contract, contract with subsidiary company, in-house subcontract, and etc.
Subcontracting labor relation is the chain of the legal relation which is composed of contract and labor in fact. Labor law on the assumption of direct employment relation between labor receiver and laborer is difficult to be applied on labor relation in subcontracting chain. Principal contractor is free from responsibility as a employer in labor law through subcontracting chain. But principal contractor’s exemption from the responsibility is circumscribed by the fact of working under his direction.
The Supreme Court’ judicial precedents on subcontracting labor relation give decisions that the person who directs and pays workers substantially is the employer. The Supreme Court decided that if a person employed by a subcontractor but engaged in the business of principal contractor, and working at the business place of principal contractor, to be seen as an employee of principal contractor, the subcontractor must be lacking in its identity or independence as a business owner to the extent of it being regarded as a labor agency for principal contractor and its existence nothing more than a formality. In this case, the Supreme Court concluded that the employee in question must be in a subordinate relationship to the principal contractor and receive wages from him in exchange for providing labor to him, thus clearly establishing an implicit labor contract between such employee and the principal contractor. The Supreme Court’s conclusion is to seek the substantial employer under the veil of subcontracting chain and to burden him with liability as a employer.