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Kia loses, union wins, in latest bonus ruling

Carmaker is ordered to pay up, but appeal remains a possibility

Feb 23,2019
Bonuses are regular pay, the Seoul High Court said in a ruling Friday in favor of the union and against the employer, Kia Motors.

The victory is the second for the workers after a lower court decision in 2017, and now the long-brewing case might be headed for Supreme Court.

On Friday, the high court rejected an appeal from Korea’s second-largest automotive company.

Kia claimed that the workers have broken the Civil Law principle of good faith, which says one cannot exercise their rights when going against fairness and betraying trust between negotiating parties.

The automotive company argued the demands from the labor union would endanger the viability of the company.

If bonuses are counted as ordinary wages, the total used to calculate overtime, severance pay and other benefits would be higher.

Last year, Kia Motors claimed that because of a rise in labor costs it had to cut back on some weekend operations, and said that this led to a drop in production.

In the first ruling, the lower court concluded that when looking at Kia’s performance between 2008 and 2015, the automaker made enough in profit and wasn’t in danger of failure if the bonuses were counted as ordinary wages.

The high court agreed, saying the company doesn’t seem to be on the brink of collapse considering the size of its business and profits.

After the first ruling, the company reported an operating loss of 427 billion won ($379.5 million) in the third quarter of 2017. It was the company’s first operating loss in a decade and was to a great extent due to reserves put aside to cover for any additional payments as a result of the ruling.

The Seoul High Court Friday told the company to pay 422 billion won, which includes 312.5 billion won in unpaid bonuses and break payments, which the union claimed were agreed to with the company, as well as interest.

The 312.5 billion won is a slight drop from the 312.6 billion won accepted by the lower court ruling in August 2017.

This was largely because the Seoul High Court excluded meal allowances and family allowances, which the company regularly pays to union workers, from regular salary.

A representative from the automaker’s union released a statement demanding that the company accept the court ruling and no longer delay or avoid paying the money that it owes the workers.

In a statement Friday, Kia Motors expressed disappointment with the court’s dismissal of its argument that union workers have broken the good faith principle, adding that it will review the court’s ruling before deciding on whether to appeal the case to the higher court.

The business community immediately raised concerns over the court’s ruling.

“The ruling that didn’t recognize the violation of the good faith principle has raised corporate management uncertainty stemming from the additional labor cost burden, and it is worrying that this will lead to not only the weakening of industry but also the nation’s competitiveness,” said Choo Kwang-ho, head of jobs strategy at the Korea Economic Research Institute.

The controversy has been ongoing since 27,000 union workers at Kia Motors in 2011 filed a 1 trillion-plus won suit related to bonus payments mischaracterized between 2008 and 2011.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]


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