Directly Operated Store Run Without Notification... Supreme Court Rules "Legal Responsibility Lies with Headquarters"

[Asia Economy Reporter Baek Kyunghwan] The Supreme Court has ruled that if a nail shop was operated without reporting to the competent authorities, the legal responsibility lies with the head office.

On the 17th, the Supreme Court's 2nd Division (Presiding Justice Min Yusook) announced that it upheld the lower court's ruling sentencing Mr. A, who was indicted for violating the Public Hygiene Management Act, to 8 months in prison with a 2-year probation.

Mr. A, the representative of a nail shop chain, was accused of operating two stores without reporting to the head of the local government, thereby generating profits.

Mr. A was found guilty in both the first and second trials. The first trial sentenced him to a suspended prison term, considering his multiple prior offenses of the same nature.

Mr. A argued that the subjects of the unreported business operations were the franchise owners who performed nail beauty treatments at each store, but the court did not accept this. The second trial court also rejected Mr. A's defense based on testimonies that the practitioners were under the company's work-related direction and supervision.

In particular, the second trial court judged that although the individuals performing the nail treatments appeared to have received commissions based on sales performance rather than fixed salaries under a 'Pro Specialist' contract, which is a type of freelance contract with the company, the working hours, work patterns, employee training, and supervision indicated that they were under the company's work-related direction and supervision.

During this process, Mr. A also claimed that the practitioners were freelancers receiving commissions based on sales performance rather than fixed salaries. However, the store lease contracts were made in the company's name, and the tools and materials necessary for nail treatments were found to be owned by the company.

The Supreme Court's judgment was no different. The court stated, "The obligation to report public hygiene business is imposed on the 'person intending to operate a public hygiene business,' and the 'person operating the business' is the subject to whom the rights and obligations arising from the business belong." It added, "Even if the individual actors who directly performed the treatments are not recognized as employees under the Labor Standards Act, the lower court's judgment recognizing Mr. A as the subject of the violation is reasonable," thereby confirming the prison sentence.