Hyundai Motor won a wage dispute over extra employee payments that could have resulted in more than 1 billion additional expense annually.
Twenty-three union workers, representing all of the companys South Korean employees, launched a lawsuit in March 2013 against Hyundai and demanded that the company lift their payments in line with a Supreme Court ruling, according to which some regular bonuses should be labeled as “ordinary wages.”
On Friday the court ruled against twenty one of the complainants and said that Hyundai is obligated to provide extra payments to the rest of them, however the bonuses would be smaller than what was initially demanded.
The ruling will only affect less the 10% of Hyundais workforce in South Korea. The workers that partially won are involved in the companys service division, which employs close to 5 700 staffers.
Hyundai said workers are entitled to receive an extra payment of around ₩2 million, translating into an overall expense for the company at about ₩11.4 billion.
“Hyundai may have dodged the worst-case scenario but affiliates like Kia may not be so lucky,” said Lee Sang Hyun, an analyst at IBK Investment & Securities, cited by Bloomberg. “There are concerns that this partial ruling could trigger labor issues as workers resist the results that only benefit some of the employees.”
South Korean analysts have estimated that if Hyundai had to pay the full demanded amount and to all of its employees, the expense figure would have gone up to ₩1 trillion.
However, a union spokesman announced that employees would appeal the ruling. The labor union criticized the courts decision and accused it of being “lopsided” and “political” as it was defending the interests of influential family-owned businesses.
Hyundai projected that the ruling will have favorable outcome in future negotiations, while also adding that it had gathered a committee which is to review the companys payment procedures and report its findings by March. Hyundai said it may make some compromises regarding its bonuses based on the committees report.
“We are concerned that new conflict will emerge as the court recognized the bonuses of a very small number of workers as part of base wages,” Hyundai said in a statement.
Hyundai lost 2.01% on Friday and closed at ₩171 000 in Seoul, marking a one-year decrease of 25.97%. The company is valued at ₩39.10 trillion.
According to the Wall Street Journal, the 33 analysts who rate the stock at “Buy” estimate price target for Hyundai Motor at median ₩239 000, high ₩300 000 and low ₩182 000.
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