Top court rules against HD HHI subcontractors seeking collective bargaining rights

The Supreme Court ruled in favor of HD Hyundai Heavy Industries (HHI) in a lawsuit filed by subcontract workers seeking collective bargaining rights.

The legal battle drew attention over whether the top court would maintain a labor law precedent after the "Yellow Envelope" act — a revision to the Trade Union and Labor Relations Adjustment Act intended to bolster protections for subcontracted labor — broadened the definition of an employer.

The Supreme Court upheld a lower court ruling against the Korean Metal Workers’ Union in its lawsuit seeking collective bargaining with HD HHI on Thursday.

Subcontractors of HD HHI, part of the Korean Metal Workers’ Union, argued that they should be part of collective bargaining with the company in 2016. The company refused, contending that it was not the subcontractors' employer, which led to a lawsuit in 2017.

The previous rulings held that HD HHI had no obligation to engage in collective bargaining, citing a 1986 Supreme Court precedent stating that an implied labor contract relationship must exist between the primary contractor and subcontracted workers in order for collective bargaining obligations to apply.

The courts said the subcontractors had independent capital and facilities, as well as separate authority over wage systems, attendance management, work hours and assigned duties.

Some questioned whether the Supreme Court might overturn the precedent as the Yellow Envelope law took effect in March.

Under the act, employers include not only direct parties to labor contracts but also those "in a position to substantially and specifically control or determine workers’ labor conditions."

The revised law doesn't include transitional provisions and doesn't apply to the HD HHI case, which involves the company’s refusal to bargain in 2016. But some speculated that the Supreme Court might depart from its precedent in light of the labor law revision.

Some also pointed to a recent trend of expanding the legal definition of workers. In April, the Supreme Court ruled in favor of subcontracted Posco workers seeking recognition as employees.

For HD HHI's case, eight justices forming the majority opinion ruled that "it is difficult to interpret the former Trade Union and Labor Relations Adjustment Act as including all entities in a position to substantially and specifically control or determine workers' labor conditions as employers even if they are not direct parties to labor contracts."

The majority opinion added that "even considering the recent revisions and legislative history of the Trade Union and Labor Relations Adjustment Act, lawmakers expanded the definition of employer on the premise of respecting the Supreme Court’s previous legal decisions."

"It is not appropriate to change previous legal doctrine in a way that effectively applies the revised law to cases governed by the former law,” the justices said.

Four dissenting justices argued that "in light of the Constitution and the legislative purpose of the trade union act, even without an explicit or implied contractual relationship, an entity that substantially controls or determines working conditions at its workplace should be considered an employer obligated to engage in collective bargaining."

The dissenting justices also said the court should consider the constitutional purpose of guaranteeing labor rights and the broader trend toward expanding the definition of workers amid increasingly diverse forms of labor.

"The Supreme Court has developed a legal doctrine to protect workers in new forms of labor relationships in response to changing labor realities," the dissenting justices said. "The previous doctrine has lost logical consistency and compatibility with constitutional principles."

A Supreme Court official said the ruling confirms that previous legal doctrine remains valid in cases governed by the former Trade Union and Labor Relations Adjustment Act.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.

BY CHOI SEO-IN [[email protected]]