The Supreme Court has put an end to a long-running dispute over the status of workers at Hyundai Motor who are formally hired by the carmaker’s in-house subcontractors but work just like its regular employees ― for far lower wages.
On Thursday, the court ruled in favor of a former Hyundai worker who filed a suit in 2005 claiming that he was unlawfully fired. The worker, who was then employed by an in-house subcontractor at the carmaker’s plant in Ulsan, claimed that he should have been converted into a regular Hyundai employee because he had worked under the direct instruction and control of Hyundai officials for longer than two years.
Under the current employment-related regulations, a host company is not allowed to directly control workers employed by its in-house subcontractors. But Hyundai Motor has disregarded them. At Hyundai assembly lines, employees hired by in-house subcontractors work together with Hyundai’s regular workers under the direct control of Hyundai officials.
The court saw the subcontracting arrangement at Hyundai Motor as a disguised form of worker dispatch. A company that has concluded a contract with a worker dispatch agency can control the workers sent by the latter just like its own staff. But it is obliged to hire them as regular employees if the dispatch period exceeds two years. In the court’s view, Hyundai uses the in-house subcontracting arrangement to avoid this obligation.
The court’s view is spot-on. As a matter of fact, following the 1997-98 foreign exchange debacle, many domestic companies have used in-house subcontracting extensively as a means of lowering labor costs.
According to a survey conducted by the Ministry of Employment and Labor in 2010, more than 41 percent of domestic manufacturing companies employing 300 workers or more had the in-house subcontracting arrangement in place. The number of workers under this form of contract accounted for about 25 percent of their entire workforce.
As such, the court’s ruling will have far-reaching repercussions. For workers who have been exploited under the in-house subcontracting system, the court’s verdict is good news. Now they can expect equal pay for equal work.
But for corporations that use the controversial work arrangement, the court’s decision is a devastating body blow. They have long dreaded such a verdict but have been reluctant to change, as doing so would increase labor costs.
But the time has come for domestic companies to ditch the exploitative practice. They should respect the court’s judgment and explore ways to treat their workers fairly. The government, for its part, should help companies transition to a new work arrangement without serious erosion in competitiveness.
