Hagwon lawsuit calls time on independent contractors

By Korea Herald
  • Published : Jun 17, 2015 - 19:54
  • Updated : Jun 18, 2015 - 09:15

A group of teachers at Chungdahm International, a nationwide chain of English academies or hagwon, has won recognition as employees in a case taken to the Supreme Court.

The case entitles the teachers to compensation for unpaid severance pay and other benefits.

Chungdahm, which refused to comment on the case, had been treating the teachers as independent contractors, under which those benefits are not provided by the place of work. Chungdahm appealed twice, but the courts consistently ruled that the teachers should be treated as employees.

The independent contractor system allowed hagwon to save costs by not paying severance contributions to pension or health insurance. It also provided more flexibility in employment, allowing hagwon to adjust staff levels to meet demand more easily.

The hagwon could incentivize teachers to accept the scheme by passing on some of the economic benefits through higher wages to teachers, who also paid lower rates of tax than regular employees.

But as the use of the system spread, teachers’ salaries and conditions became strained by external economic factors. Teachers at various hagwon have complained that they are not given the option of employee status and many say they do not receive higher-than-normal pay.

Nonetheless, the system at Chungdahm had its supporters.

Former Chungdahm teacher Heather Lynne Kwon said she appreciated the flexibility of the system and overall higher pay. While she does not plan to work for CDI again, she was sad to hear that other teachers like her would not have the same options.

“The whole experience also gave me a greater sense of freedom and belonging in Korea as well as a more rich experience here. I had more responsibilities, namely finding my own housing, so I could choose the housing I wanted, and filing my own taxes, which is done by the employer if you are a salaried worker,” she said.

Stephan Hardeman said when he worked for Chungdahm between 2010 and 2012, the independent contractor rate was so much higher that almost everyone he knew took it.

“It seems to me that the system that was in place allowed both the institute and instructors more flexibility. None of my colleagues ever had a complaint, though this was the institute’s heyday and all instructors at my location, though technically part-time through the contractor legalese, were guaranteed the hours they needed to live comfortably,” he said.

“I know that not all instructors were lucky enough to work at a location that was run by diligent management, and this is probably what led to the lawsuit. But when I compare the experience I had at CDI with what I had at other hagwons … I can make no complaints.”

Other expat teachers feel that the system’s downsides outweigh its benefits.

“Being an independent contractor on an E-2 (teacher) visa is pointless because the whole point of an independent contractor is that you can work multiple jobs, set your own conditions, and leave a job at any point. E-2 people cannot do this, making the practice exploitive as even a much higher-paying independent contractor job generally pays out lower in the long run than a salaried position,” said feelance teacher Adam de la Cruz

The courts have ruled that the system did not comply with the Labor Standards Act, which takes precedence over contractual agreements.

The act applies to employees, defined as workers whose work rules, place and hours of employment are decided by the employer. Some of the teachers involved in the suit were on E-2 visas, which require employers to determine these things.

As such, hagwon are not allowed to hire E-2 visa holders or teachers in similar working conditions as independent contractors, and must enroll them in national pension and health coverage schemes, as well as paying severance pay equivalent to a month’s salary for every year worked.

The ruling should establish these conditions as a general rule for all hagwon, but some were skeptical about Korea’s ability to stamp the practice out.

“It’s only going to matter if labor board, pension office, tax office and health insurance office enforce the ruling. Completely pointless if they don’t,” local expat Dylan Doig said.

By Paul Kerry (