The court puts a brake on the illicit practice of worker dispatch in manufacturing industry including the Hyundai Motors, which can cause a wave of class action.
To cause a stir, the Supreme Court ruled that an in-house subcontracted worker working at the direct production lines in the manufacturing industry like auto assembly is not a subcontracted worker but a de facto dispatch worker, so if he worked more than two consecutive years, he must be regarded as an employee directly hired by the prime contractor.
By this ruling, a drastic change in production method became unavoidable. Up to now, ‘in-house subcontracting’ has been a practice long used to reduce costs in manufacturing industries such as auto, shipbuilding, electronics, etc. The ripple that the ruling would make will further intensify as the labor circle including the Korean Metal Workers Federation (KMWF) is poised to proceed with a series of class action lawsuits around similar cases.
Main points of the ruling
On July 22, the Supreme Court ruled on the case brought by a Mr. Choi who worked at the Ulsan factory of the Hyundai Motors as a subcontracted worker and was dismissed. “Mr. Choi was under the direct human resource (HR) management by the Hyundai Motors after being employed by one of its subcontracting companies. So, it will be assumed that he was a dispatch worker to the Hyundai Motors. Under the Act on the Protection of Dispatch Workers, etc. (Dispatch Worker Act), he should be regarded as a worker employed by the Hyundai Motors from the day after he has worked more than two consecutive years.”
Mr. Choi filed an application for remedy to the Labor Relations Commission (LRC) and an administrative lawsuit when he was fired in February 2005 due to his labor union-related activities working at one of subcontracting companies of the Ulsan factory of the Hyundai Motors since March 2002. He insisted that it was an unfair dismissal and the Hyundai Motors, instead of the subcontracting company, was the real employer. However, the LRC and lower courts ruled against his argument in that in-house subcontracting is a subcontract rather than worker dispatch. In addition, the courts ruled, the Dispatch Worker Act cannot apply to Mr. Choi since dispatch work was prohibited in manufacturing industry in 2005.
However, the Supreme Court ruled that he was a worker illegally dispatched to the Hyundai Motors rather than a subcontracted worker in that the HR management (posting for work, post change, order, management of working attitude, etc.) for Mr. Choi was in fact exercised by the Hyundai Motors and workers from both the Hyundai Motors and the subcontracting company worked together at the same workplace. In addition, it ruled again, illegal dispatch work should be under the application of the clause of the assumed ‘direct employment’ to serve the purpose of the Dispatch Worker Act. So, the Supreme Court sent back the case to the lower court to retry the lawsuit filed by Mr. Choi based on the judgment of the Supreme Court.
Ramifications of the ruling and its effects
The labor and management of the manufacturing industries such as auto, shipbuilding, etc. have been arguing over the nature of employment of in-house subcontracting which has been a long practice since the 1998 foreign exchange crisis.
The management argued that it is a subcontract needed for the completion of independent work, but the labor circle countered that it is illegal dispatch work disguised as a subcontract. In addition, the management reasoned that the subcontracting companies are the employers of subcontracted workers but the labor circle rebutted the prime contractors are the real employers as they control production and HR management. Against this backdrop, the ruling is expected to put an end to the arguments between the labor and management over the issue of in-house subcontracting.
This is not the first ruling by the Supreme Court to recognize illegal dispatch, but the ruling seems to be far-reaching in that it has ruled on the practice of using in-house subcontracting by the biggest carmaker Hyundai Motors and regarded it as a form of dispatch. The effects of the ruling seem to go beyond the Hyundai Motors to impact on the general auto industry in Korea because in case of the auto industry, practices of production line, work method, in-house subcontracting, etc. are similar among the companies. Moreover, it is expected that the effects will reach other manufacturing industries such as shipbuilding, metal industry, etc. In particular, the ruling opens a chance that a massive class action be raised against similar cases and labor unions request a direct collective bargaining with prime contractors in case of unfair dismissal, application for remedy of unfair labor practices, etc.
Responses from the labor and management
The Korean Metal Workers Federation held a press conference regarding the ruling on July 26 and announced, “The ruling puts a brake on discrimination and extortion by employers for non-regular workers. We will request all the employers hiring in-house subcontracted workers including the Hyundai Motors a special round of collective bargaining and also proceed with a series of class action lawsuits gathering dismissed workers, retirees, etc.” The Hyundai Motors defendant of the case as well as the business circle alike are busy with arranging an emergency counterplan.
On the other hand, according to the survey conducted by the Ministry of Labor in 2008 inquiring large enterprises hiring employees of more than 300 and registered under the employment insurance, 368,590 workers or 21.9% out of total 1,685,995 workers from 963 workplaces were counted as subcontracted workers. In case of the auto industry, 19,514 or 14.8% out of total 132,046 workers were surveyed as subcontracted workers.
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