Court Ruling on Direct Employment of POSCO Partner Company Employees Amid "Emergency Management"... Impact on Industry

Supreme Court Recognizes Indirect Work Orders
Reaches 18,000 Subcontracted Workers
KEF Warns of Impact on Corporate Competitiveness and Jobs

[Asia Economy Reporter Oh Hyung-gil] POSCO, which declared an "emergency management" in response to the global complex crisis, has been hit by another wave. The Supreme Court concluded that certain subcontracted production methods constitute illegal dispatch, forcing POSCO to directly employ about 18,000 subcontracted workers. As the possibility of claims for retroactive wages that subcontractor employees have not received at the level of regular employees increases, management uncertainty is growing even more.

Not only the steel industry but the entire industrial sector is on alert. The business community is concerned that if similar rulings continue in ongoing lawsuits, management burdens will increase.

The Supreme Court's 3rd Division finalized on the 28th the appellate court's ruling in favor of 59 employees of POSCO’s subcontractors who filed a lawsuit to confirm their worker status against POSCO. After 11 years since the subcontractor employees filed the lawsuit requesting recognition as POSCO workers, they finally won. They performed various tasks such as crane operation, roll transportation, and maintenance support at the Gwangyang Steelworks.

Previously, the first trial court accepted the company's argument that subcontractor employees could not be considered to have worked under POSCO's direction and command, ruling against the plaintiffs. However, the second trial court overturned the decision, recognizing that POSCO indirectly gave instructions and exercised command over the work.

This ruling is expected to influence other ongoing collective lawsuits by subcontractor workers. So far, lawsuits have been filed in seven rounds, with this ruling covering the results of the first and second rounds. The third and fourth rounds resulted in plaintiff victories at the Gwangju High Court in February, and the first trials for the fifth to seventh rounds are currently underway.

POSCO now faces the issue of directly employing subcontractor employees. It is in a position where it must initiate employment conversion or improve treatment for about 18,000 subcontracted workers. On the 21st, POSCO Group held a group management meeting chaired by Chairman Choi Jeong-woo and entered an emergency management system company-wide, now compounded by the direct employment issue.

Significant changes are also expected in the status of subcontracted workers in the steel industry. On the 21st, 258 irregular workers at Hyundai Steel won a lawsuit confirming their worker status against Hyundai Steel.

The Steel Association expressed concern, stating, "Banning in-house subcontracting in the steel industry, which is recognized even in advanced countries, and directly employing all subcontractor employees will inevitably cause cost increases and productivity declines for steel companies. This will have tremendous negative effects on the overall industrial competitiveness of South Korea, a country centered on steel-intensive manufacturing."

Not only the steel industry but also Hyundai Motor, Kia, and GM Korea are facing final trials in worker status confirmation lawsuits.

The business community estimates that if these five companies lose the final rulings, the annual labor costs they must bear will exceed 3.1 trillion won based on the average annual salary in 2021.

The Korea Employers Federation (KEF) stated in a position paper, "We deeply regret the court's judgment that applied the Act on the Protection of Dispatched Workers to certain subcontracted production processes and deemed them illegal dispatch. The nature of subcontracting contracts, the characteristics of the work, changes in the industrial ecosystem, and the realities of our labor market were not sufficiently considered." They added, "If similar rulings continue, it will negatively affect not only the global competitiveness of our companies but also jobs."

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