'Violation of Obligation to Provide Written Documents, Unfair Special Contract Provisions, and Unjust Demand for Economic Benefits' Subject to Corrective Orders
[Sejong=Asia Economy Reporter Joo Sang-don] Yeongdong Construction, which imposed additional construction costs arising from night work and fines due to violations of environmental regulations on subcontractors, has been sanctioned by the Fair Trade Commission.
On the 7th, the Fair Trade Commission announced that it decided to issue corrective orders regarding Yeongdong Construction’s unfair subcontracting transaction practices.
According to the Fair Trade Commission, Yeongdong Construction set contract terms such as "a clause that imposes all additional construction costs arising from night work, etc., on the subcontractor" and "a clause that imposes all responsibility on the subcontractor in case of damages caused by violations of environmental laws."
The Fair Trade Commission judged that these contract terms impose costs on the subcontractor even for reasons not attributable to the subcontractor, and also impose all costs related to environmental management, which is the obligation of the primary contractor, on the subcontractor. Therefore, these contract terms constitute unfair restrictions or infringements on the subcontractor’s interests.
In fact, Yeongdong Construction imposed the entire fine of approximately 2 million KRW, which was imposed on itself in December 2017 for violating the Air Environment Conservation Act, on the subcontractor citing the existence of special contract provisions in the contract. Such conduct violates Article 12-2 (Prohibition of Unjust Demand for Economic Benefits) of the Subcontracting Act, which prohibits requiring subcontractors to provide economic benefits without justifiable reasons.
Additionally, when a large amount of groundwater occurred at the construction site during earthworks, from December 2017 to May 2018, Yeongdong Construction had the subcontractor perform additional work supporting other cooperating companies. At that time, Yeongdong Construction promised to issue a new contract (amended contract) reflecting the additional work in the existing contract but violated this by not issuing the amended contract. Furthermore, Yeongdong Construction did not reflect the details of the work actually performed by the subcontractor before the initial contract was concluded in the contract. These actions violate Article 3, Paragraph 1 (Issuance of Written Documents and Preservation of Documents) of the Subcontracting Act, which requires the primary contractor to issue written documents for additional work and to provide complete written documents containing all legally required items.
A Fair Trade Commission official stated, "This measure was taken by detecting and sanctioning representative types of legal violations frequently occurring in the construction industry, and it is expected to contribute to improving unfair practices that have become customary in the industry." He added, "The Fair Trade Commission will continue strict law enforcement against unfair subcontracting transaction practices to ensure subcontractors do not suffer unjust disadvantages."
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