Conditions of Ordinary Wages
The Seoul Central District Court ruled on Jan. 16 that Hyundai Motor Company must pay only 4.09 million won (US$3,796) for just two former Hyundai Motor Service employees. Earlier, the labor union of Hyundai Motor Company filed an ordinary wage lawsuit claiming that the employers recalculate their wages by including six items such as bonuses and vacation expenses. The representative action was led by 23 of its employees representing respective occupational groups and 44,000 labor union members, 1,900 former Hyundai Precision & Industries Corporation employees. Approximately 5,700 former Hyundai Motor Service labor union members participated in the litigation.
Hyundai Motor’s Labor Cost Burden Dropped Significantly
The court regarded, as ordinary wages, only a part of the bonuses of the two out of the five former Hyundai Motor Service employees who represented the 5,700. It ruled that 3.87 million won (US$3,591) and 220,000 won (US$204) be paid to them, respectively. “Back in 1999, when Hyundai Motor Company combined Hyundai Precision & Industries Corporation with Hyundai Motor Service, Hyundai Motor Service’s rules did not stipulate that no bonus is paid for an employee with an employment period of less than 15 days,” the court explained.
Still, the court did not acknowledge the predictability of the bonuses paid by the automaker, the biggest issue of the litigation. “The bonuses are paid only when the additional and uncertain conditions of having to satisfy a certain number of working days is met,” it continued. In December 2013, the Supreme Court suggested regularity, uniformity, and predictability as the criteria of ordinary wages, while accepting regular bonuses as a part of ordinary wages. According to its definition, ordinary wages are those paid at regular intervals for every employee meeting certain conditions, regardless of his or her work performance.
The recent court ruling implies that the employers are on the winning side. Their additional burden for ordinary wages, which was estimated to reach 5 trillion won (US$4.6 billion), is expected to shrink to 10 billion won (US$9.2 million) or so. “It seems that the additional pay will add up to 2.1 million won per employee, and the total is estimated at approximately 11 billion won for the 5,700 workers,” one of them said.
Opposite Responses
Needless to say, the company is relieved. “The ruling that does not consider the bonuses of most employees as ordinary wages will have a positive effect on the ongoing wage structure reshaping and the activities of the Ordinary Wage Improvement Committee,” it commented. In contrast, the labor union is preparing to appeal, claiming that the court disregarded workers’ due rights according to the Labor Standards Act. “The carmaker decided last year to discuss the issue in the framework of the committee, irrespective of the court ruling, and thus we will continue dealing with the scope of the ordinary wage and when to apply new standards,” added the Korean Metal Workers’ Union.
The business community as a whole, in the meantime, is rather content with the ruling like the automaker, because a series of lawsuits and trillions of won in extra labor costs would have followed if the labor union’s demand for including the bonuses of all employees in the scope had been accepted. Nonetheless, not a few in the community expressed dissatisfaction with the fact that some of the workers’ ordinary wages were accepted.
The Federation of Korean Industries mentioned on the same day that the ruling would be an opportunity to settle the controversy over the interpretation of the scope. “Still, there remains the possibility that previously unexpected conflicts could arise among workers due to partial acceptance,” it continued. The Korea Federation of Small and Medium Business expressed concerns over a negative impact on small firms that could be caused by an increase in ordinary wages on the part of big businesses. “If the bonuses for those who work for just one day are deemed ordinary wages, the labor cost burden on smaller companies is sure to become heavier,” it said, claiming, “The law has to be revised right away, so as to prevent further confusion.”
“The clause to work for at least 15 days, on which the court denied the predictability of the bonus, was arbitrarily determined by Hyundai Motor Company,” the Korean Confederation of Trade Unions criticized, continuing, “The denial of the predictability based on the exceptional case of the workers working for less than 15 days makes no sense at all.” The Federation of Korean Trade Unions added, “Bonuses should be paid as compensation for labor regardless of conditions such as the 15-day employment, and we are extremely sorry about the court’s denial of the predictability based on minor regulations.”
Source of Another Conflict
Although the employers won the first trial, new feuds are sure to arise as they try to apply the ruling to the negotiations with the labor union opposed to it. “The management will come to the table in March with the court ruling, which means a conclusion is likely to be far away,” said Lee Kyung-hoon, director of the labor union.
However, it is also predicted that the union will opt for compromise instead of confrontation, with things becoming unfavorable for itself, and conflicts between union members will intensify during the course. In September last year, the management and the union broadly agreed upon the adoption of an expanded scope of ordinary wages, but the wage negotiations failed in the end, as hardliners in the latter adhered to the immediate inclusion of regular bonuses in their ordinary wages.