Business Community Strongly Regrets Kia Motors' Labor Victory in Ordinary Wage Lawsuit, Predicts Continued Confusion

"Judgments Ignoring Corporate Management... Severe Management Crisis Due to Increased Labor Cost Burden"
"Ambiguous Criteria for Applying the Doctrine of Good Faith to Continue Industry Confusion"
"Unified Voice: Judgments Completely Overlooking Corporate Crises Caused by COVID-19"

Members of the Kia Motors branch of the Korean Metal Workers' Union held a press conference on the 20th in front of the Supreme Court in Seocho-gu, Seoul, regarding the Supreme Court ruling on the ordinary wage lawsuit. On the same day, the Supreme Court upheld the lower court's partial ruling in favor of the plaintiffs in the wage claim lawsuit filed by Kia Motors workers against Kia Motors. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Kim Hyewon] As the Kia Motors labor union effectively won the lawsuit over ordinary wages against the company after nine years, the business community strongly expressed regret, calling the ruling one that disregards the corporate management environment.

The Korea Employers Federation (KEF) released a comment on the "Supreme Court ruling on Kia Motors ordinary wages" on the 20th, stating, "It is deeply regrettable for the business community that companies, which have faithfully adhered to wage systems agreed upon by labor and management, are unilaterally burdened with massive additional overtime pay."

On the same day, the Supreme Court's First Division (Presiding Justice Kim Seonsu) upheld the appellate court's ruling partially in favor of the plaintiffs in the wage claim lawsuit filed by about 3,000 members of the Kia Motors labor union against the company.

The court maintained the appellate court's judgment that regular bonuses received by employees correspond to ordinary wages, which are paid regularly, uniformly, and fixedly. Since ordinary wages serve as the basis for statutory allowances, companies must pay additional unpaid amounts.

The court also dismissed the company's claim that the union's additional allowance demands would cause management difficulties and violate the "principle of good faith" (Shinui Principle).

KEF explained, "The Supreme Court ruling recognized regular bonuses as ordinary wages but did not accept exceptions based on the principle of good faith. This stems from the unclear standards of 'significant management difficulties,' which serve as the basis for the principle of good faith, as presented in the 2013 Supreme Court plenary session ruling."

KEF argued, "The court mainly judges the application of the principle of good faith regarding ordinary wages based on short-term financial statements, which largely fails to consider the situation of companies strategically operating in fierce competition."

KEF further expressed concern, saying, "Korean automobile companies have a labor cost ratio exceeding 12% of sales, and their research and development (R&D) and marketing competitiveness are deteriorating. This ruling will increase labor costs and inevitably lead to a significant management crisis." It also pointed out, "The ruling does not consider the crisis companies face due to the COVID-19 pandemic at all."

The Korea Economic Research Institute under the Federation of Korean Industries also voiced concerns in a related comment, stating that corporate management uncertainty will increase.

Choo Kwang-ho, Director of Economic Policy at the Korea Economic Research Institute, said, "In a situation where industrial competitiveness has deteriorated due to the national economic crisis caused by the spread of COVID-19 and structural changes in the automobile industry, this ordinary wage ruling is expected to sharply increase unforeseen labor costs, raising corporate management uncertainty."

Director Choo added, "Since no specific criteria have been presented regarding management difficulties where the principle of good faith can be applied, confusion in the industry will continue. To prevent both labor and management from becoming victims due to the contraction of corporate management caused by ordinary wage lawsuits, and since the essence of the ordinary wage controversy lies in legislative deficiencies, specific guidelines related to the application of the principle of good faith should be prepared to reduce futile disputes."

In the first and second trials of this lawsuit, about 27,000 workers participated, but after the second trial ruling, labor and management agreed on the payment of ordinary wages, and most withdrew their lawsuits after receiving an average of 19 million KRW per person. Accordingly, the appeal trial proceeded only for about 3,000 union members who did not withdraw.

According to the second trial ruling, the additional wages Kia Motors had to pay to about 27,000 workers amounted to approximately 312.6 billion KRW in principal plus delayed interest, totaling about 422.3 billion KRW. However, since the number of participants in the lawsuit decreased by more than 90%, the additional wages to be paid to about 3,000 workers are estimated to be around 50 billion KRW. A Kia Motors official said, "Since provisions have already been set aside, there is no impact on performance."

This content was produced with the assistance of AI translation services.