[Exclusive] Judicial and Labor Risks Intensify... Korean GM's 16-Page 'Furious Rebuttal'

"Directly Employ Contract Workers from Gunsan Plant Closed 2 Years Ago at Other Sites," Korean GM Lawyers Submit Rebuttal to Ministry of Employment's Correction Order... Address Legal Issues Point by Point
Over 40 Lawsuit Risks Due to COVID Deficit... Labor Negotiations Stalled, Union Nears Strike Rights

[Asia Economy Reporters Kim Hyewon and Woo Suyeon] Korean GM, pressured by the government to directly employ subcontracted workers who worked at a factory closed two years ago at another business site, has rebutted point by point that the correction order is illegal and unjust. Facing severe deficit management difficulties due to the direct impact of the COVID-19 pandemic, Korean GM's management has been struggling for over a decade dealing with more than 40 simultaneous lawsuits. On top of this, this year's wage and collective bargaining agreement (Wage and Collective Agreement, WCA) negotiations have reached an impasse, and the labor union is showing signs of a strike, creating a comprehensive crisis.

Korean GM’s Legal Counsel Submits Opinion Requesting Reconsideration of Correction Order to Gunsan Labor Office

According to industry sources on the 24th, Korean GM’s legal counsel recently submitted an opinion letter requesting reconsideration of the employment order (correction order) related to the Gunsan plant to the Gunsan branch of the Gwangju Regional Employment and Labor Office under the Ministry of Employment and Labor. This follows the Ministry’s earlier correction order to directly employ 148 subcontracted workers who worked at the Gunsan plant.

The 16-page opinion letter obtained by this outlet shows that Korean GM’s legal counsel sees many legal issues with the Ministry of Employment and Labor’s correction order. First, they argue that the workers at the Gunsan plant in question fall under an exception where the employment obligation clause under the Act on the Protection of Dispatched Workers (Dispatch Act) does not apply. The Gunsan plant was completely closed in 2018, making business operations impossible.

Even if the employment obligation clause were to apply, Korean GM’s position is that issuing a correction order for the Gunsan plant, which has been closed for over two years, is illegal and unjust. Labor inspections or correction orders presuppose the existence of a “business site,” and it is judged that a correction order cannot be issued for a business site like the Gunsan plant that no longer exists.

Additionally, based on the Labor Standards Act and the Labor Inspector’s Work Regulations, correction orders should target “business sites,” not “businesses.” However, the Ministry of Employment and Labor issued correction orders to Korean GM’s headquarters or the Bupyeong and Changwon plants citing issues that occurred at the Gunsan plant. The legal counsel pointed out that issuing correction orders targeting the business Korean GM operates is not only illegal in itself but also an arbitrary administrative action that contradicts existing practical customs.

More than 40 Lawsuits Big and Small... Labor Disputes Hampering Due to Illegal Dispatch and Ordinary Wages

Labor-related disputes such as illegal dispatch and ordinary wages frequently occur in the automobile industry, but Korean GM has an especially troubled history. Starting with the Ministry of Employment and Labor filing a complaint with the prosecution in 2006 against then-President Nick Reilly of Korean GM and six subcontractor heads for violating the Dispatch Act, two lawsuits for worker status confirmation are still ongoing. There are also lawsuits regarding ordinary wages.

In this situation, the court has caused controversy by demanding Korean GM to post a cash deposit of 200 billion KRW as collateral for suspension of compulsory execution. Although current law explicitly allows submission of guarantees, only cash deposits are being enforced. Jung Manki, President of the Korea Automobile Manufacturers Association, said in an interview with Asia Economy, “We requested changing the deposit from cash to a guarantee issued by Seoul Guarantee Insurance to overcome the liquidity crisis caused by COVID-19, but the court rejected it.” He added that the association plans to submit a proposal to related government departments including the Prime Minister’s Office, Ministry of Trade, Industry and Energy, and Ministry of Justice. The proposal requests improvement of the court’s system and practices so that the method of providing collateral for payment guarantees can be replaced not only by cash but also by guarantees as stipulated by law. Recently, a bill encouraging guarantees and curbing excessive cash deposit practices by courts was also introduced in the National Assembly related to the Credit Guarantee Fund Act.

Kaher Kazem, President of Korean GM, and other current and former executives have been indicted for violating the Dispatch Act and are currently under travel bans. They are effectively tied up and frequently summoned to court. President Kazem set a management goal this year to return to profitability at the U.S. headquarters, but with the liquidity crisis caused by COVID-19, overlapping judicial and labor risks, and failure to smoothly resolve the WCA, it is reported that the worst-case scenario of withdrawing from the Korean market is under consideration. If this continues, withdrawal of investment plans for the Changwon plant is also inevitable.

President Jung said, “The CEO, who should focus on product development, is wasting nearly six months a year negotiating with the union,” and emphasized, “The automobile industry consists of four pillars?management, workers, developers, and shareholders?and cooperative gameplay among them is crucial.”

This Year’s Wage and Collective Agreement Negotiations in Uncertainty... Union Close to Securing Strike Rights

While Hyundai Motor Company’s labor and management swiftly concluded wage and collective agreement negotiations by agreeing to a wage freeze for the first time in 11 years considering the COVID-19 crisis, Korean GM’s WCA negotiations remain in uncertainty. Korean GM is the only completed vehicle union that has applied to the Central Labor Relations Commission (CLRC) for labor dispute mediation to secure strike rights this year. The decision on whether the Korean GM union will secure strike rights is expected this afternoon.

Although the union strongly opposes it, Korean GM’s unprecedented proposal this year to extend the WCA negotiation cycle to two years is considered significant in the industry. President Jung said, “Korean GM, which recorded a deficit of 300 billion KRW last year, was at a critical turning point to return to profitability this year but is facing great difficulties due to the COVID-19 variable,” and emphasized, “Within the scope permitted by law, if the company commits to payments related to wages, bonuses, and employment, the energy spent on annual negotiations can be focused on production and sales normalization, which is expected to alleviate labor-management instability.”

He added, “The Korean GM union harbors deep distrust toward management regarding employment and distribution issues, but a two-year contract can dispel this anxiety and guarantee production and sales stability,” and further noted, “Except for wage and working condition matters, various urgent workplace issues can be discussed in committees or consultative bodies under the collective agreement.”

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