Kia Faces Multimillion-Dollar Payout in Wage Lawsuit

Lawyers for Kia are working on an appeal of the company’s stunning defeat in a wage-dispute lawsuit that has left the automaker responsible for $422.3 billion won ($375.5 million) payment in back wages.

This calculates to roughly 15 million won ($13,300) per employee.

The Seoul Central District Court has ordered Kia to pay about one-third of the $1.1 trillion won ($169 million) the Korea Metal Workers Union members had sought in their lawsuit.

Under the ruling, Kia must make back payments for recalculated wages for the period of August 2008 to October 2011 that includes bonuses and lunch allowances as part of the workers’ basic wage. When calculated in, these amounts inflate overtime payments made in the period for all workers and the shortfall is the amount that Kia must reimburse as back wages.

Kia says Thursday it anticipates paying roughly 1 trillion won ($887 million) after adjustments are made for all employees, using the court ruling as a basis for all years since the suit was filed.

The workers who filed the claim under the direction and sponsorship of the KMWU also had asked the court to award the readjusted overtime pay for all holiday and weekend work, but the court did not uphold that claim.

Kia argued the union lawsuit violated the principle of good faith and claimed a ruling in favor of the workers would seriously damage its financial position.

The court, however, ruled the workers deserved the back payments. Kia possibly would suffer a financial strain but would not be damaged financially, the court said, because the automaker has enjoyed several years of good profits and is not facing any management crisis.

It cited robust profits for 2008-2015 and noted Kia enjoyed a good assets-to-debt ratio.

Although Kia is immediately appealing the ruling, it must set aside enough funds to cover the liability. That means it is likely to report a net loss for third-quarter 2017.

Kia’s net income for the first six months of 2017 was down 34.8% at 1.15 trillion won ($1 billion).

Kia had argued in court that sales deterioration in China was severely impacting sales revenue and that the crisis will continue.

The court contended Kia did not present sufficient evidence to show the Chinese market situation figured into the automaker’s argument that the ruling would damage the company financially.

The ruling comes as the KMWU and Kia are deadlocked on wage demands in current contract negotiations. The union, which has staged a partial strike, is demanding a 154,883 won ($136) average monthly wage increase, plus 30% of 2016 net income spread among the workers as bonuses.

Kia affiliate Hyundai, facing the same wage-increase demands also is deadlocked with the KMWU. The union has waged nine partial strikes so far since mid-August.

Analysts anticipate the Hyundai union as well as the Kia union will press for recalculation of all overtime payments retroactive to the date of the Kia worker lawsuit. They also anticipate similar demands will be made by labor unions at companies all over Korea.