Members of the KCTU-affiliated Plant Construction Workers' Union, which represents subcontract construction workers, vote on whether to authorize a strike on July 19. [Yonhap]
Members of the KCTU-affiliated Plant Construction Workers' Union, which represents subcontract construction workers, vote on whether to authorize a strike on July 19. [Yonhap]

As South Korean companies enter this year's wage and collective bargaining season, the first full year under the so-called Yellow Envelope Law — which expanded the definition of employer and broadened the scope of legitimate labor disputes — is shaping up to produce the most intense summer labor offensive on record. Not only are unions at prime contractors pushing for better terms, but subcontractor unions emboldened by the law's stronger bargaining protections are also declaring negotiations deadlocked one after another and signaling strikes.

Companies are struggling to navigate an unprecedented and increasingly complex labor-relations landscape. They face a fork in the road: absorb the risk of a strike and pursue litigation against the unions, or reluctantly take a seat at the bargaining table. Amid all this, they are scrambling to limit production disruptions that could deal a serious blow to their earnings.

Subcontractor unions move into strike footing

According to industry sources Wednesday, a growing number of subcontractor unions that have won recognition of their prime contractors' employer status from labor commissions are now preparing to strike. Starting with Hanwha Ocean's subcontractor union, the KCTU-affiliated Posco subcontractor union has already filed for labor dispute mediation and secured strike rights. HD Hyundai Heavy's subcontractor union and the Plant Construction Workers' Union, which represents subcontract workers in the construction sector, have also signaled they will file for mediation.

With the summer labor season approaching, business circles are warning that this year's strike activity will be more intense than in previous years. The manufacturing sector, which relies heavily on subcontractors, faces particularly severe production risks. A key reason is that a ban on replacement workers — prohibiting companies from bringing in outside labor to fill positions vacated by strikers — is now widely expected to apply to subcontractors as well.

"In the past, when a subcontractor's workers went on strike, companies would respond by temporarily hiring a different subcontractor," said Song Yeon-chang, an attorney at law firm Yulchon. "Subcontractor strikes are nothing new, but what makes this year so damaging is that companies no longer have that option."

Provisions in the Yellow Envelope Law that reduce unions' liability for strike-related damages are also expected to embolden more walkouts this year. The law stipulates that even if a company suffers losses from a strike, the union bears no liability for damages if the strike was called for "unavoidable reasons." Park Ji-soon, a professor at Korea University School of Law, said the law has in effect neutralized the main tools companies had to deter strikes, leaving unions with little reason not to walk out.

Hanwha Ocean heads to court; Posco opens talks

Companies are responding in divergent ways ahead of the summer offensive. Some are challenging labor commission rulings in court rather than accepting them, while others are moving to the bargaining table to head off an all-out strike. Hanwha Ocean has taken the litigation route, filing a lawsuit with the Seoul Administrative Court to overturn a National Labor Relations Commission ruling that recognized its employer status over in-house catering firm Welliv, and also seeking a stay of execution. It is the first case in which a prime contractor has launched full-scale litigation over employer-status recognition since the Yellow Envelope Law took effect.

Pressure from Hanwha Ocean's subcontractor union is equally fierce, pointing to a head-on confrontation this summer. The union secured strike rights earlier this month after the South Gyeongsang Province Regional Labor Relations Commission issued a mediation-suspension ruling — a decision labor commissions make when the gap between labor and management is too wide to bridge, effectively ending mediation and granting the union the right to strike. The subcontractor union says it requested collective bargaining with the prime contractor 10 times but was rebuffed each time.

Posco, by contrast, has begun talks with its unions in an effort to defuse the strike threat. The steelmaker faces negotiations with its own in-house union as well as three subcontractor unions — affiliated with the KCTU's Korean Metal Workers' Union and the Plant Construction Workers' Union — and has been holding introductory meetings with each. Posco's in-house union filed for labor dispute mediation with the National Labor Relations Commission on Wednesday, saying six rounds of bargaining with the company had failed to produce an agreement. The KCTU-affiliated Posco subcontractor union had already received a mediation-suspension ruling from the labor commission earlier this month.

Posco is continuing collective bargaining with its in-house union while also beginning introductory sessions with subcontractor unions. The company held an opening meeting with its Federation of Korean Trade Unions-affiliated subcontractor union on Tuesday and is coordinating a schedule for a similar session with the KCTU-affiliated subcontractor union. Substantive bargaining has yet to begin, as the company and each union remain at odds over procedural matters such as the frequency of sessions. A representative of the KCTU-affiliated Posco subcontractor union said the union has asked that the introductory meeting be held in August and that specific arrangements are still being worked out.

Song said companies are effectively being forced to choose between two options: endure a strike and pursue litigation challenging their employer-status designation, or reluctantly sit down at the bargaining table with subcontractor unions.

Critics also point to the lack of clear standards for determining prime contractors' employer status as a driver of labor disputes. "Because labor commissions have not spelled out specific criteria for making employer-status determinations, legal disputes between labor and management will only multiply," Park said.


klee@heraldcorp.com
eyre@heraldcorp.com