[NEWS IN FOCUS] Court rules authoritarian smart system means Posco must make amends
The Korean manufacturing industry is panicked by the Supreme Court’s latest decision against Posco. The court ordered the steelmaker to hire its subcontractors as regular employees, which could cost the company some 2 trillion won ($1.5 billion) a year.
The July 28 ruling ended an 11-year legal battle between Posco and its 59 contract workers, who sued the steelmaker in 2011 and 2016, arguing they should be recognized as regular employees. because they worked under the direction of the company.
Their argument lies in the difference between ‘posted workers’, who are sent by approved labor companies, and ‘sub-contractors’, who work under a sub-contract with a Services Society. The main difference between the two is in who oversees and controls them.
Posco workers argued that the work they were doing was the same as posted workers despite Korean law specifying that manufacturing companies cannot have posted workers. The Supreme Court recognized the act as an “unlawful dispatch of workers” and ordered Posco to hire the 55 workers as regular employees. He dismissed the lawsuits of the four people who had already passed retirement age.
The 59 workers were employed at the Posco steel plant in Gwangyang in South Jeolla.
The lower court dismissed the lawsuits in 2013, but an appeals court overturned the decision in 2016.
Posco released a statement saying it immediately “sent hiring letters to all 55 workers” and will shortly offer them “vocational training and assign them to appropriate positions.”
“We will carefully review the decision to offer follow-up action,” Posco said.
The decision is expected to have a major financial impact on Posco which currently employs around 15,000 contract workers.
Hyundai Motor and Kia are also in legal battles with some of their employees over the same issue.
In Korea, manufacturing industries, especially steelmakers and automobile manufacturers, traditionally utilize labor by entering into agreements with subcontractors for flexibility and lower labor costs.
A major factor in the court’s decision was the manufacturing execution system (MES) that the subcontractors used during their work. They argued that they had been ordered to use the system, which they said amounted to receiving instructions from the company.
“In the case of subcontracted workers, they cannot receive any instructions or orders from the company,” said Park Su-bin, chief labor attorney at Jae IL Labor and HR Consulting Firm. “This distinguishes them from posted workers, who are allowed to get instructions and orders.”
MES, also known as intelligent manufacturing process, is a computerized system for optimizing the manufacturing process by connecting, monitoring, documenting and controlling the entire production life cycle, from raw materials to finished products. MES helps improve quality and reduce inventory and costs, and is an essential tool for a factory to become a smart factory.
A smart factory is defined as a factory where production processes are combined with digital technology, smart computing and big data and advanced networks to create an agile and automated manufacturing environment.
MES shows workers what to do, so all workers have to watch the system while they work. Subcontracted workers argued that looking at the monitor and being told by it what work to do is tantamount to getting instructions from the company.
And the Supreme Court agreed.
“The plaintiffs performed tasks after being notified by the computer system,” the Supreme Court said. “The act can be recognized as a work-related binding order.”
But it’s not just big manufacturing companies that are worried about what the decision will mean for their future. The Korean government has been pushing for the expansion of smart factories, with ministries of employment and labor and SMEs and startups constantly increasing their budgets for the development of these factories.
Korean companies started adopting intelligent systems in the early 2000s, following the global trend.
Many business lobbies and civic groups have also spoken out against the Supreme Court’s decision, arguing that the decision was made “without regard to the situation of workers in the fields” and that it will have “a negative impact on national competitiveness”.
“Subcontracting is a universal method that is used worldwide for production efficiency, including in steel-industry competitor countries like Germany and Japan,” the Federation of Steelworkers said. Korean Enterprises (KEF) in a statement.
“And MES is just one system that helps increase efficiency and enhance safety. Foreign countries do not consider the use of MES illegal.
“If the Supreme Court continually makes decisions like this on similar cases, it will reduce the competitiveness of our businesses and eventually lead to a huge loss of jobs.”
The Korea Iron and Steel Association also issued a statement agreeing with KEF, adding that the decision “will inevitably come at the expense of steelmakers”, which will leave Korea “lagging behind in the steel industry. competitive world”.
“MES is just a system that details worksheets, it cannot be seen as ordering or commanding workers,” said Kim Young-mun, an honorary professor at Jeonbuk National University’s law school. “It’s a decision that goes against the global movement towards digitization.”
The huge cost of labor is another problem, they argue.
Posco currently has around 15,000 contract workers working at its factories in Gwangyang and Pohang, making it the largest employer of contract workers in the country. If the company has to hire them all as regular employees, it will have to spend about 2 trillion won a year in labor costs.
Some 800 contract workers have filed similar lawsuits against Posco.
The Posco ruling is expected to impact similar lawsuits against Hyundai Steel and Hyundai Motor.
Hyundai Steel currently has some 7,000 contract workers, according to data from the Korean Confederation of Trade Unions, which would cost the company some 665 billion won if it had to hire them as regular employees. Hyundai Motor has about 3,000 workers, which would cost it some 240 billion won to hire as regular employees, while Kia would have to pay 86 billion won to hire its 900 workers as regular employees.
“The latest decision against Posco will have a huge effect on future lawsuits as the court is likely to make similar decisions,” said attorney Park of Jae IL Labor and HR Consulting Firm.
BY SARAH CHEA [[email protected]]