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[Article] Liability of Construction Project Owner under Occupational Safety and Health Act

2020.09.21

1. Recent series of accidents highlighting the issue of liabilities of construction project owner 
 
A major fire occurred in April 2020 at a warehouse in Icheon, Gyeonggi-do, resulting in death of 38 people and major injury of 10 people. The police found as a result of the investigation that the fire started from welding in installation of the refrigeration system in the basement floor of the refrigerated warehouse. The prosecution initially applied for issuance of arrest warrants to take into its custody certain personnel related to the contractor, construction management supervisor, subcontractor contracted for the installation of the refrigeration system, subcontractor of the foregoing subcontractor and related personnel of the owner of the construction project. The court issued arrest warrants to all such personnel but denied application for issuance of arrest warrants to the personnel of the owner. The prosecution has since filed criminal charges against the eight persons taken into the prosecution’s custody and the other persons not being detained by the prosecution, and currently, the court trials are ongoing for those persons. 
 
Following the fire in Icheon, there was another fire at a warehouse in Yongin, Gyeoggi-do, which resulted in the death of five people. Such a series of major accidents drew attention to the prevention of industrial accidents at construction project and work sites. In particular, the scope of the duties and liabilities of the construction project owner may become an issue when there is a contractor overseeing and coordinating the construction on the site and also a separate construction supervisor managing and supervising all stages throughout the construction project. This article will first examine the scope of the duties and criminal liabilities of the construction project owner under the Occupational Safety and Health Act and then explain the liabilities of the construction project owner in case of the industrial accidents as described above. 
 
 
2. Classification of construction project owner under the Occupational Safety and Health Act 
 
A. Legal status of construction project owner under the law prior to amendment 
 
The Occupational Safety and Health Act which was in effect until January 15, 2020 (the “OSHA”) did not separately classify the construction project owner in addressing the liabilities of a business owner who contracts out a certain work. Article 2(3) of the OSHA provided that the term "business owner" referred to “a person who operates a business by employing employees.” Article 29(1) of the OSHA further provided that in cases (i) where the business owner undertakes to contract out a portion of any given construction project or (ii) where the construction project work being undertaken by the business owner is comprised of portions that are specialized in each relevant area, the business owner who contracts out the entire work covering specialized portions would assume the duty to take the measures to prevent industrial accidents which may arise where the employees of the business owner and the employees of the contractor worked on the same site. 
 
The Supreme Court held as to the business owner with the duties to take the measures to prevent industrial accidents for the employees of the contractor under the OSHA as follows: Whether the business owner is (i) the construction project owner having contracted out a portion of the project or (ii) the contractor having been contracted to carry out the entire project and having retained a subcontractor to undertake a portion of the contracted work, such business owner has the duty to take the measures to prevent industrial accidents, so long as the business owner has the ability or duty to oversee and coordinate the entire process of the project.1 In other works, if the business owner has the ability or duty to oversee and coordinate the entire process of the construction project, the business owner will have the duty to take the safety and health measures as to the employees of the contractor whether the business owner is the project owner having initially contracted the project or the original contractor having been contracted to do the project from the construction project owner. 
 
B. Difference between contractor and construction project owner under the amended law 
 
The OSHA which was amended as of January 15, 2019 and went into effect on January 16, 2020 provides for different definitions for the contractor and the construction project owner. The amended OSHA provides that the contractor refers to “a business owner who, regardless of titles, provides manufacturing, construction, and repair of goods, or other services, or otherwise contracts other works” and does not include construction project owners under Article 2 Clause 7. The construction project owner referred to “a person who contracts out construction works (i.e., construction works under the Framework Act on the Construction Industry, including electric works, information and communications works, fire-fighting system installation works, and cultural heritage maintenance works pursuant to the relevant laws) and is not the person, except for a person who contracts out any contracted works, who leads in overseeing or managing construction works” under Article 2 Clause 10 of the amended OSHA. That is, the amended OSHA provides for the legal status and liabilities of the construction project owner as separate from the contractor in case the construction project owner delegated the responsibility for performing certain works to the contractor (i.e., the original contractor) under the superimposed system of construction contracting, comprising of the construction project owner, original contractor, subcontractor, and sub-subcontractor, without directly overseeing or managing the construction works. 
 
C. Main duties and responsibilities of contractor and construction project owner 
 
i. Contractor 
 
Under the amended OSHA, the contractor, not including the construction project owner, shall have the duty to take safety and health measures required for preventing industrial accidents of the employees of the contractor and the employees of the related contractors if the employees of the related contractors work on the contractor’s place of business.2 If the contractor is in violation of the duty which results in death of an employee, the contractor may be punishable by imprisonment of not more than seven years or fine not exceeding 100 million Korean Won.3  Any other violations of the duty may subject the contractor to be punishable by imprisonment of not more than three years or fine not exceeding 30 million Korean Won.4 Additionally, the contractor assumes the liabilities of appointing a safety and health manager,5 organizing and operating a safety and health committee, taking measures to prevent industrial accidents,6 and providing safety and health information as to the contractor.7  
 
ii. Construction project owner 
 
Under the amended OSHA, the construction project owner does not directly assume any duties to take health and safety measures as to the employees of the related contractors. Instead, the construction project owner assumes the duties to take measures to prevent industrial accidents, such as keeping the basic safety and health record at the planning stage for the construction project and keeping and verifying the design safety and health record and the construction safety and health record in accordance with the basic safety and health record at the design and construction stage.8 In the event there are two or more construction works at the same site, the construction project owner assumes the duties to place health and safety coordinator,9 to prohibit any reduction of construction period or change in construction method without justifiable reason,10 to extend the construction period upon request from the contractor for prevention of industrial accidents,11 to change design in the event there are concerns of industrial accidents,12 and to add the occupational safety and health management cost in the contract amount at the time of entering into the agreement.13  
 
 
3. Relationship with the crime of occupational or gross negligence 
 
Article 268 of the Criminal Code provides that any person who causes the death or injury of another by occupational or gross negligence, shall be punished by imprisonment for not more than five years or by a fine not exceeding 20 million Korean Won. 
 
The duties to take safety and health measures and industrial accident prevention measures as provided under the OSHA are deemed occupational duties of care connected to the criminal liabilities arising from death or injury by occupational or gross negligence. Therefore, any failure to implement or any neglect in implementing these measures resulting in death or injury of any employees may constitute the crime of occupational or gross negligence causing death or injury under the Criminal Code even if the penalty as provided under the OSHA is minor. In practice, there are some cases in which the prosecution files charges for the aforesaid crime, which provides for heavier penalties, while the cases entail violations of the duty to take the measures required under the OSHA. 
 
 
4. Construction project owner having delegated construction works to contractor or construction project manager 
 
The amended OSHA clearly provides that the construction project owner, having delegated the responsibilities for the construction works to the contractor or construction supervisor and not having to oversee or manage the construction works, does not assume the duty of the contractor to take safety and health measures as to the employees of the relevant contractor. 
 
As to whether there is a duty of care to take safety measures as required for prevention of accidents in such a case of not managing and supervising the construction works or providing specific instructions, the Supreme Court held that where the contractor without specialized knowledge about the home repair works entered into the contract with the specialized contractor, delegating specific instructions and supervisory activities to the specialized home repair contractor, the contractor does not have the duty of care to take the safety measures as required for the works.14  
 
In particular, there were cases in which where construction supervisors were appointed to manage and supervise the entire process for the construction, including the safety management, the industrial accident occurs, and the related personnel of the construction project owner was not charged.15 In a rare case where the construction project owner was charged, the related personnel of the contrcution project owner were found not guilty. For example, the court ruled in favor of the employees of the company, which was the construction project owner involved in the welding fire at the basement of the bus terminal in May 2014 resulting in death of eight and injury of 61, for lack of causation between the breach of the duty of care, if any, and the damage from the accident.16 In another case where a flood of water from the river caused death of seven during the repair work at the construction site of the water reservoir in July 2013, the manager of the construction project owner who visited the site once a week was found not guilty on the ground that the court did not find any specific and practical duty of care.17  
 
In contrast to the cases discussed above, the court found guilty of the crime of committing occupational or gross negligence causing death or injury as to the representative, regardless of whether the representative director or the acting representative, of the contractor and the related companies responsible for contracting, construction, design and supervision of the works in connection with the fire occurred at the refrigerated warehouse in Icheon, Gyeonggi-do, in January 2008 resulting in death of 40 and injury of 10.18  
 
So, in situations where the construction project owner delegated to the contractor or the construction supervisor the construction works and did not directly oversee or manage the works, there are a number of cases where the court did not find that the construction project owner had the direct duty to take safety and health measures under the OSHA as to the employees of the related contractors, and also that there were no criminal liabilities on the construction project owner associated with death or injury by occupational or gross negligence. However, even in these cases, any violations of the regulations under the OSHA, such as a demand by the construction project owner to reduce the construction period or change to an improper construction method, the fact of the violation alone may constitute a crime under the OSHA and the breach of due care relevant to occupational or gross negligence causing death or injury under the Criminal Code.

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1) See Supreme Court decision 2010Do2615 dated June 24, 2010 and Supreme Court decision 2015Do8621 dated March 24, 2016.

2) See Article 63 of the amended OSHA.

3) See Article 167(1) of the amended OSHA.

4) See Article 169(1) of the amended OSHA.

5) See Article 62 of the amended OSHA.

6) See Article 64 of the amended OSHA.

7) See Article Article 65 of the amended OSHA.

8) See Article 67 of the amended OSHA. This provision applies in cases of entering into agreements relating to design of construction projects by construction project owner after the amended Act became effective pursuant to Article 3 of the Appendix (Law No. 16272, January 15, 2019).

9) See Article 68 of the amended OSHA.

10)See Article 69 of the amended OSHA.

11) See Article 70 of the amended OSHA.

12) See Article 71 of the amended OSHA.

13) See Article 72 of the amended OSHA. The Ministry of Labor and Employment explains in detail the contractor’s duties for safety and health from the Contractor’s Safety and Health Manual for Securing Employees’ Safety and Health which was issued in April 2019.

14) See Supreme Court decision 2000Do3295 dated April 12, 2002.

15) See Supreme Court decision 2018Do13315 dated December 28, 2018 and Busan District Court decision 2018No3104 dated January 11, 2019.

16) See Supreme Court decision 2016Do3749 dated July 22, 2016.

17) See Seoul High Court decision 2014No433 dated July 4, 2014.

18) See Suwon District Court decision 2008No3449 dated December 17, 2008.
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