Strike Ended but... Daewoo Shipbuilding Faces Accumulated Damage and Compensation Lawsuits Challenges

On the 22nd, when the subcontractor labor-management negotiations at Daewoo Shipbuilding & Marine Engineering were dramatically settled, representatives of partner companies and subcontractor union members shook hands at the Okpo Shipyard of Daewoo Shipbuilding & Marine Engineering in Geoje-si, Gyeongnam.
Kwon Su-o, CEO of Noksan Enterprise (left), and Hong Ji-wook, Vice Chairman of the Metal Workers' Union.
[Image source=Yonhap News]

[Asia Economy Reporter Jeong Dong-hoon] The unprecedented long-term dock (shipyard) sit-in strike that nearly led to a catastrophe in the labor dispute between Daewoo Shipbuilding & Marine Engineering (DSME) subcontractors and management has been resolved for now. After 51 days of strike, the occupation was lifted, and striking workers returned to their workplaces. However, DSME, which suffered enormous cumulative losses during the strike, now faces another period of hardship to overcome the damage. While an opportunity for recovery has been seized, the Korean shipbuilding industry is also confronted with challenges related to the principal-subcontractor structure and the strike risks that have surfaced.

◆What about the accumulated damage losses?=According to the shipbuilding industry on the 23rd, after several recesses and resumed negotiations, the labor and management reached an agreement around 4:15 p.m. the previous day. They agreed on a 4.5% wage increase. In addition, they promised to pay 500,000 KRW for Lunar New Year and Chuseok holiday bonuses and 400,000 KRW for summer vacation bonuses. Regarding the employment succession of union members who worked at closed workplaces, partial agreement was reached, but specific details were not disclosed.

Kwon Soo-oh, chairman of the DSME in-house subcontractors' council, said, "This is a matter of national interest, and I apologize to the public and all employees and their families working at DSME and related companies, which are lifelines, for the fact that DSME has been halted for 51 days." He added, "The strike lasted 51 days, which felt like 51 months to me, and we have been negotiating day and night for 22 days to reach this provisional agreement today."

Hong Ji-wook, vice chairman of the Metal Workers' Union of the Korean Confederation of Trade Unions (KCTU), said, "Fortunately, although late, we have resolved this serious situation and reached a smooth provisional agreement, which we report to the public." He added, "It was truly a blood-draining situation, and I declare the complete approval of the vote."

Earlier, the Geoje, Tongyeong, and Goseong shipbuilding subcontractor branches of the Metal Workers' Union under KCTU went on strike from the 2nd of last month, demanding a 30% wage increase and recognition of full-time union officials. From the 18th of last month, they began a sit-in protest occupying Dock 1 at the Okpo Shipyard. Occupying a dock where ships are under construction is illegal under the Enforcement Decree of the Labor Union Act.

The dock is where ships are built and launched into the water. If this place stops, work on other production lines such as painting, piping, and welding is delayed, causing serious damage to the shipbuilding industry, where delivery deadlines directly affect performance. This is why previous shipbuilding strikes have not escalated to extreme protests like dock occupations. The currently occupied Dock 1 at Okpo Shipyard is the world's largest, equivalent to the size of nine soccer fields, capable of constructing four ships simultaneously.

Four ships were under construction here, but the launching of an oil tanker scheduled for last month has been indefinitely postponed. To launch a ship, the dock must be filled with water, but due to the union's occupation, seawater cannot be filled in the dock. Accordingly, DSME estimates the damage caused by this strike to be about 800 billion KRW. The management estimates daily sales losses of 25.9 billion KRW and fixed cost losses of 5.7 billion KRW.

Yu Choi-an, Vice Chairman of the Metal Workers' Union Geoje Tongyeong Goseong Shipbuilding Subcontracting Branch, is being carried out on a stretcher after coming down from an iron structure installed in Unit 1 at Daewoo Shipbuilding & Marine Engineering Okpo Shipyard in Aju-dong, Geoje-si, Gyeongnam, on the afternoon of the 22nd.
The iron structure where Vice Chairman Yu was protesting measures 1 meter in width, length, and height. The subcontracting labor-management negotiations at Daewoo Shipbuilding & Marine Engineering were dramatically concluded on the same day. [Image source=Yonhap News]

◆Compensation lawsuits against striking workers still unresolved=One reason DSME finds it difficult to recover losses is that the damage was caused by subcontracted workers. Not only is it difficult to compensate for losses amounting to hundreds of billions of KRW, but the issue of whether to file or withdraw damage claims remains unresolved between subcontractor labor and management.

Both sides stated that they did not reach an agreement on damage compensation issues during the strike, i.e., civil and criminal immunity. The management insisted that damage claims are inevitable due to losses amounting to hundreds of billions of KRW caused by illegal strikes. They emphasized that if responsibility for illegal strikes is not held, it could set a bad precedent and that management could be prosecuted for breach of duty. The labor side has argued that such actions against workers who cannot actually pay compensation are retaliatory measures.

The regulation related to damage compensation is found in Article 750 of the Civil Act: "A person who causes damage to another by an unlawful act intentionally or negligently shall be liable to compensate for the damage." In this case, the legality or illegality of the subcontractor union strike itself is controversial.

The labor side argues that the strike is a lawful collective action and thus cannot be subject to damage compensation. They cite Article 33 of the Constitution, which states, "Workers have the right to autonomous association, collective bargaining, and collective action for the improvement of working conditions," and Article 3 of the Labor Union and Labor Relations Adjustment Act, which states, "An employer cannot claim damages against a labor union or workers for damages caused by collective bargaining or collective action."

Even if management files lawsuits, there are no workers capable of paying damage compensation amounting to tens or hundreds of billions of KRW. Workers who cannot afford litigation costs sometimes take extreme measures if their rental deposits or ancestral gravesites are subject to provisional seizure. Therefore, depending on how future damage compensation is handled, it could become another source of conflict.

◆'Strike risk' K-Shipbuilding, restoring trust also a challenge=About 16,000 production workers are employed at DSME's Okpo Shipyard. Approximately 11,000 employees work for in-house subcontractors. Of the roughly 400 union members in the subcontractor union, about 120 participated in the strike, and currently, seven people are occupying Dock 1. These few, accounting for only 1% of all subcontractor employees, have caused losses worth hundreds of billions of KRW to DSME.

On the 51st day of the subcontractor union strike at Daewoo Shipbuilding & Marine Engineering, workers are arriving at the Okpo Shipyard of Daewoo Shipbuilding & Marine Engineering in Geoje-si, Gyeongnam, on the morning of the 22nd. [Image source=Yonhap News]

In-house subcontractors are facing the risk of bankruptcy. According to the in-house subcontractors' council, five subcontractors closed last year when the subcontractor union began the strike, three companies closed in June this year, and four companies are closing this month. Considering there are about 200 in-house subcontractors, there are concerns that up to one-tenth of these companies could close in the worst case.

Especially, the delay in delivery due to the suspension of construction work at the dock means that DSME and, by extension, the Korean shipbuilding industry could face distrust from shipowners who cannot meet promised delivery schedules. The entire shipbuilding industry, which has emerged from a long recession and seized a chance for recovery, is exposed to 'strike risk.'

The unreasonable issues revealed by this strike, such as wage gaps and treatment disparities between principal and subcontracted workers, need to be addressed. The shipbuilding industry operates through multi-tier subcontracting from the principal contractor to first-tier and second-tier subcontractors, causing subcontracted workers to suffer from low wages and long working hours. Consequently, over the past five to six years of order shortages, the shipbuilding industry has experienced continuous outflow of manpower to other industries. Over the past six years, the number of in-house subcontracted workers has decreased from 130,000 to about 57,000, a reduction of more than 70,000.

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