Supreme Court Issues Consecutive Rulings Unfavorable to Companies... Concerns Over 'Business Contraction'

Hyundai Motor Faces Consecutive Damage Compensation Restrictions Against 'Illegal Strike' Union Members
Monthly Construction Site Allowance Also Recognized as 'Wages' in Practice

The Supreme Court has recently issued a series of rulings unfavorable to companies, such as limiting the liability for damages of unions and workers involved in illegal strikes, leading to concerns that corporate management is being weakened.

According to the legal community on the 1st, the Supreme Court consecutively ruled in favor of workers in damage claims filed by Hyundai Motor Company against union members who participated in illegal strikes. Additionally, on the 29th of last month, the Court effectively recognized the ‘monthly allowance’ paid separately to tower crane operators at construction sites by construction companies as wages.

From the corporate perspective, the most difficult part of the Supreme Court’s rulings to accept is the judgment that “if the union restores damages caused during the strike period later, it can be exempt from liability for the illegal strike.” This reflects the intention to limit individual workers’ responsibility for collective labor actions as much as possible.

Although the Supreme Court has not changed its precedent, this is the first ruling that limits the liability for illegal strikes committed by unions and union members, meaning that future first, second, and third instance courts will likely base their judgments on these recent rulings in similar disputes.

As the court’s standards for recognizing liability for damages due to illegal strikes become stricter, it is expected that companies’ efforts to hold unions accountable for such damages will be restrained.

In fact, on the 29th of last month, the Supreme Court’s First Division (Presiding Justice No Tae-ak) ruled in a case where Hyundai Motor Company claimed a total of 540 million won against union members and the union related to factory occupations in August, November, and December 2012. Following a new legal principle established by the Supreme Court’s Third Division (Presiding Justice No Jeong-hee) on the 15th of the same month regarding liability for damages, the Court ruled that “even if production decreased due to an illegal strike, if it is proven that this did not lead to a decrease in sales, liability for damages cannot be imposed.” The case was sent back to the second instance court to verify whether the lost production volume due to the illegal strike was compensated.

The ruling on the monthly allowance for construction companies could also be a factor that weakens corporate management. The monthly allowance at construction sites was not an official wage but a customary practice in the industry where companies paid tower crane operators and other workers under the name of overtime pay. However, the Supreme Court judged that an ‘implied donation contract’ was established and that compensation was paid accordingly, concluding that the operators have no obligation to return the monthly allowance.

However, since the Supreme Court did not explicitly rule that the monthly allowance constitutes wages, there remains a possibility that future judgments could overturn this. When ruling on the monthly allowance, the Supreme Court dismissed the appeal without oral argument, a procedure under the Act on Special Cases Concerning Appeal Procedures, where the Supreme Court dismisses appeals without additional reasoning unless there is a significant legal violation or other special reasons in the lower court’s judgment, thereby confirming the lower court’s decision as is.

Inside and outside the legal community, there is speculation that the Supreme Court’s trend of rulings unfavorable to companies will continue until Chief Justice Kim Myung-soo retires this coming September.

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