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DP's Lee Jae-myung pushes to resolve Hanwha Ocean suit against subcontractors for strike damages

Published: 23 May. 2025, 16:42

Democratic Party presidential candidate Lee Jae-myung, far left, shakes hands with Shin Seung-hoon of Hanwha Ocean’s Assembly Team 4, center, on the afternoon of May 14 during a visit to the car-free zone in Geoje, South Gyeongsang. [NEWS1]

Democratic Party (DP) presidential candidate Lee Jae-myung is pushing to resolve a 47 billion won ($34.18 million) damage lawsuit that Hanwha Ocean filed against subcontracted workers for damages incurred during a strike, aiming to finalize the matter before the June 3 presidential election. While the move is seen as an effort to win labor support, critics warn it may infringe on shareholder interests.

“Lee is strongly willing to resolve the lawsuit,” a key member of Lee’s DP campaign committee told the JoongAng Ilbo in a phone call on Thursday. “Although time is tight, it would be a significant achievement if we could convince the company to drop the suit and forge a cooperation agreement with the workers before the election.”

During a closed-door meeting with shipbuilding industry representatives in February, Lee, as a DP leader, reportedly urged Hanwha Ocean CEO Kim Hee-cheul to “explore ways to withdraw the lawsuit.” In response to Kim’s concerns over a possible breach of trust, Lee assured his support “as long as the method violates no laws.”

In April, the DP launched a social dialogue platform involving Hanwha Ocean and subcontracted worker representatives to seek a resolution.

Hanwha Ocean, then Daewoo Shipbuilding & Marine Engineering, filed a 47-billion-won damages suit in August 2022 against five union leaders after a 51-day strike that included occupying a dockyard. Hanwha Group acquired the company in December 2022 but maintained the lawsuit.

However, amid a recent rebound in the shipbuilding sector, pressure from labor groups, local communities and political circles has intensified. Hanwha Ocean’s first-quarter operating profit surged 388 percent on-year to 258.6 billion won, surpassing its full-year earnings of 237.9 billion won last year.

While internal discussions were held on dropping the lawsuit, concerns over legal repercussions, including potential breach of trust accusations, have stalled progress.

“If we drop the suit without compensating for the loss, shareholders may sue the management,” a company spokesperson said.

Yang Kyung-soo, head of the Korean Confederation of Trade Unions (KCTU), speaks during a press conference held by five opposition parties, labor groups and civil society organizations on March 6 on the steps of the National Assembly building in Yeouido, western Seoul, calling for the passage of the so-called Yellow Envelope Act. [NEWS1]

The social dialogue platform is currently reviewing a cooperation pact in which Hanwha Ocean promises to improve working conditions for subcontractors, while subcontracted workers agree to avoid illegal strikes.

The company has also asked National Assembly Speaker Woo Won-shik to issue a mediation letter to help persuade shareholders. However, an industry official noted, “A specific clause such as a five-year wage freeze must be included to avoid any breach of trust accusations.”

Many observers see Lee’s efforts as part of his broader pro-labor agenda. During a televised debate on Sunday, he said the Yellow Envelope Law "must definitely be passed.”

In February, he criticized companies that “squeeze workers through high-damage lawsuits after a strike,” questioning whether such companies could attract international investment.

The so-called Yellow Envelope Law — an amendment to Articles 2 and 3 of the Trade Union and Labor Relations Adjustment Act — would allow subcontracted workers to negotiate directly with primary contractors and limit damage suits arising from strikes. It restricts companies from claiming losses caused by illegal strikes unless violence or destruction is involved, effectively leaving them few legal remedies for production disruptions.

A labor union of subcontractors working at Hanwha Ocean demand both the payment of bonuses and increased full-time hiring at the Hanwha Group headquarters in Jung District, central Seoul, on March 18. [YONHAP]

On April 21, Lee also pledged to reintroduce amendments to the Commercial Act to enhance shareholder protection. In November last year, as DP leader, he said, “The business community opposes the revisions, but can companies truly gain global competitiveness while relying on unfair advantages?”

“If Hanwha Ocean unilaterally drops the lawsuit, it could actually harm the shareholder interests that Lee claims to value,” said Lee Jong-cheon, a professor emeritus of accounting at Soongsil University and former head of the Korean Accounting Association. He warned that excessive political pressure could sacrifice corporate interests for electoral gain.

A key to resolving the lawsuit lies in last year’s wage and collective bargaining negotiations between Hanwha Ocean’s subcontractors and their labor union. The union has demanded a raise in bonuses to 300 percent of base salary as a prerequisite to any broader discussion. Subcontractors have so far proposed a 10 percent increase in bonus.

The union has also called on Hanwha Ocean to raise settlement payments to subcontractors, which the company has resisted, citing legal prohibitions on direct involvement in subcontractor negotiations. Industry sources say a compromise involving a 50 to 100 percent bonus increase is possible.

In the long term, experts argue that the bifurcated labor structure in shipbuilding must be reformed. A 2022 survey by the Ministry of Employment and Labor found that subcontracted workers earn just 50 to 70 percent of regular employees’ wages. Of the 51,000 workers in direct production roles, only 11,000 — or 21.5 percent — are regular employees, while the rest are subcontracted.

“Shipbuilders have prioritized short-term, low-wage hiring over permanent recruitment to cut costs,” said Yang Seung-hoon, a sociology professor at Kyungnam University. “As skilled workers in their 40s and 50s retire over the next decade, the industry could face a severe labor shortage. Now is the time to expand permanent positions and improve conditions for subcontracted workers.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY KIM HYO-SEONG [[email protected]]