The Supreme Court of South Korea has ruled that workers employed by subcontractors at POSCO, a major steel producer, are to be considered direct employees of POSCO. This landmark decision stems from cases where lower courts found the employment practices to be illegal, mandating POSCO to directly hire these workers. This is the first time workers from second-tier subcontractors have received such recognition, potentially impacting numerous similar lawsuits currently underway against POSCO.
Supreme Court Upholds Direct Employment for Subcontracted Workers
In a significant ruling delivered on May 16th, the Supreme Court’s Second Division confirmed lower court decisions in two separate cases involving 378 POSCO subcontractor employees. These employees had sued POSCO seeking recognition as direct employees. The court’s decision validates the findings of the lower courts, which determined that these workers were effectively integrated into POSCO’s operations and followed POSCO’s directives, thus qualifying them as direct employees.
The cases involved individuals, including a Mr. Kim, who worked at POSCO’s steelworks in Pohang and Gwangyang for its subcontractors in 2018 and 2021. Crucially, 18 of these workers were employed by SI&M Tech, a second-tier subcontractor responsible for the maintenance and repair of coke ovens, a vital part of the steel production process. The lower courts had already established that these workers were substantially involved in POSCO’s business and performed tasks under POSCO’s direction and orders. The Supreme Court’s affirmation of these rulings means that the established practice of using multiple layers of subcontracting in South Korean manufacturing may face significant disruption.
Broader Implications for the Manufacturing Sector and Labor Practices
This Supreme Court decision arrives in the wake of POSCO’s announcement in April to directly hire approximately 7,000 subcontracted workers. This move was framed by POSCO as a measure to mitigate business risks associated with the revised “Yellow Book” labor law, which significantly expands employer responsibilities. However, the Supreme Court’s ruling on second-tier subcontractors could lead to a substantial increase in the number of workers POSCO is obligated to directly employ.
POSCO stated that while SI&M Tech was not initially included in the direct hiring plan, they intend to onboard these workers sequentially. Labor unions, however, are expected to push for the direct employment of a larger number of workers. The POSCO Gwangyang branch of the Minju Labor Union released a statement confirming that the Supreme Court ruling expands the scope of direct employment to all workers who receive direct instructions from POSCO.
