Hyundai, Kia Under Fire in Korean Labor Skirmishes

Managers at Hyundai may be facing a very tough week on two labor fronts.

First, they are in last-ditch efforts to revive stalled labor talks with the Hyundai Branch of the Korea Metal Workers Union, which represents most of their employees.

Last week the workers voted to strike by a margin of nearly 70%, and the statutory cooling-off period for trying to resolve things runs out at the end of this week.

Also later this week, two Seoul courts will render decisions on two contract-worker lawsuits filed by the KMWU on behalf of 1,569 employees. The union claims they were performing the work of dispatched employees who worked alongside Hyundai’s regular workers and were managed and regulated by Hyundai supervisors.

Dispatch workers are those provided by a third-party agency to work within the plant of the dispatcher’s customer, but under wages, supervision, scheduling and discipline of the customer.

They are paid much less than regular workers, receive virtually no benefits and have no labor-union protection, as only the union representing fulltime regular employees is recognized under Korean law.

Korean labor law requires that any person employed as a dispatch worker for two years must be automatically classified as a regular fulltime employee and must receive all of the pay, allowances, working conditions and perks all regular workers receive.

Hyundai’s lawyers argue the 1,569 workers were not dispatched workers sent to the automaker by a third party or supervised by Hyundai employees. They say the workers properly were classified as subcontractor employees working under supervision of the subcontractors who supply parts, systems or services within the Hyundai plants.

Although in some cases they worked side by side with regular workers on assembly lines, Hyundai lawyers say that was a modified type of subcontracting in which the subcontractors regulated their attendance and gave them their orders.

KMWU Case Strong, Analysts Say

The KMWU lawyers dispute this. They insist there is ample proof the workers were under direct management of Hyundai supervisors who disciplined and scheduled them. They say the legal action is in response to a “clear-cut case of dispatch working” and that all of the workers must be granted regular fulltime status.

The lawsuits were filed separately, one covering 1,287 workers and the other covering 282. They are being tried by two different judges with rulings due Aug. 21 and Aug. 22.

Several analysts believe the KMWU lawyers have presented a strong case and will be victorious. They note that while this week’s expected rulings constitute “first verdicts” that are subject to a lengthy appeal process, decisions in favor of the workers will have a resounding effect not only throughout Korea’s automotive industry but also the entire manufacturing sector.

Virtually every manufacturing company in Korea employs a large number of subcontract workers, and in most cases they claim to be in fact dispatched workers who qualify for recognition as fulltime employees.

Hyundai’s sister company, Kia, has many such workers and the KMWU has filed a similar lawsuit on behalf of 520 of them.

The rulings on the Hyundai cases have been a long time in coming, as both lawsuits were filed in September 2010 – nearly four years ago.

Some analysts note the courts already have ruled in favor of one such dispatched worker whom Hyundai claimed was a subcontractor employee.

In July 2010, the Supreme Court of Korea made a final ruling that Choi Byeong-seung legally was a fulltime Hyundai employee because he had worked for more than two years alongside regular workers on a vehicle production line, and was scheduled and supervised by Hyundai employees.

Though the dispatch-worker lawsuits are worrisome with possible far-reaching impact, much of Hyundai management’s heartburn this week comes from the possibility that all of its workers may launch part-time strikes that immediately will curtail production.

Once again a legal matter is at the crux of their dispute. The union, under direction of the KMWU hierarchy, is demanding that Hyundai recalculate basic wages to include amounts paid to workers as bonuses. This would significantly increase the amounts workers would receive in overtime pay, severance pay when they retire and in some other situations.

The KMWU has sued Hyundai on behalf of some of its workers, demanding recalculation of basic wages to include the bonuses.

Hyundai management is adamant it will not move on the matter unless the court makes a final ruling, which could be years in the future because the automaker has the right of appeal.

The KMWU refuses to back down, especially since it already has won the basic wage recalculation in negotiations with two of Hyundai’s rivals: Ssangyong, which was first to yield, followed closely by GM Korea, which had to give in to avoid strike action and maintain its recovery momentum.

GM Korea is suffering from an acute drop in export sales but has been showing good progress within the domestic market. The automaker also has four cases pending where contract workers have sued, claiming to be illegally dispatched workers, and are seeking immediate conversion to full-time employee status.