POSCO, one of the world’s largest steelmakers, has announced a sweeping plan to directly employ approximately 7,000 subcontracted workers across its Pohang and Gwangyang steelworks. This move marks a significant shift in the company’s operational structure, moving away from a long-standing reliance on third-party contractors for core production support.
The decision to provide direct employment for these workers comes amid mounting legal pressure and a shifting regulatory landscape in South Korea. For years, the company has faced a barrage of lawsuits from subcontracted employees alleging “illegal dispatch”—a practice where a primary contractor exercises direct command and control over workers officially employed by a separate agency.
A company spokesperson stated that the initiative is designed to “root out the outsourcing of risk” and fundamentally innovate the company’s safety management systems. The spokesperson added that the goal is to alleviate the burden on both the company and its employees caused by prolonged litigation and to foster a culture of coexistence between labor and management.
The Legal Catalyst: Illegal Dispatch and the ‘Yellow Envelope Law’
The drive toward direct employment is not merely a corporate social responsibility initiative but a strategic response to a decade of legal defeats. Since 2011, POSCO has been embroiled in roughly 28 separate lawsuits filed by subcontracted workers seeking confirmation of their status as direct employees of the company. A pivotal turning point occurred in July 2022, when the Supreme Court of Korea ruled in favor of subcontracted workers, marking the first time illegal dispatch was formally recognized within the steel industry.
Further complicating the company’s position is the recent implementation of the revised Trade Union and Labor Relations Adjustment Act, commonly referred to as the “Yellow Envelope Law.” This legislation expands the definition of an “employer” to include those who exercise substantial influence over working conditions, even if they are not the direct signatory to the employment contract. Under this law, POSCO may now be legally obligated to engage in collective bargaining with subcontracted unions.
With approximately 18,000 subcontracted workers currently operating within its facilities, the risk of legal mandates for bargaining—and the potential for subsequent legal strikes—has created an urgent need for the company to formalize these employment relationships.
Timeline of Labor Shifts at POSCO
| Period/Date | Event | Impact on Labor Structure |
|---|---|---|
| 2011 – Present | Wave of status confirmation lawsuits | Initiated 28 legal challenges regarding “illegal dispatch.” |
| July 2022 | Supreme Court Ruling | First formal recognition of illegal dispatch in the steel sector. |
| Recent Month | Yellow Envelope Law Implementation | Expanded employer liability and collective bargaining obligations. |
| Current Phase | Sequential Direct Hiring | Transition of 7,000 workers to regular status. |
Internal Friction and Union Skepticism
Despite the promise of regular employment, the transition has not been met with universal acclaim. Labor representatives argue that the plan was formulated unilaterally, without meaningful consultation with the subcontracted unions. The core of the dispute lies in the specific terms of the transition: whether these workers will be integrated as full equals to existing regular employees or placed into a separate, lower-tier employment category.
Lim Yong-seop, head of the POSCO Subcontracted Branch of the Metal Workers’ Union, expressed concern that the move is a tactical maneuver to stop the momentum of ongoing lawsuits. Lim warned that the company might demand that workers waive their rights to back-pay or litigation in exchange for employment. There are also fears regarding the creation of novel job classifications that could maintain a wage gap between the newly hired regulars and the veteran workforce.
The company intends to process the hiring sequentially, citing the need to maintain the stability of 24-hour steel mill operations. This phased approach is expected to be a point of contention, as workers wait to observe who is prioritized for the 7,000 available slots.
Broader Implications for the Industrial Sector
The shift at POSCO reflects a broader trend in South Korean heavy industry, where the “outsourcing of risk”—shifting dangerous tasks to third-party contractors to shield the parent company from liability—is facing intense scrutiny. By bringing these roles in-house, POSCO is attempting to align itself with stricter safety standards and a more sustainable labor model.
For other industrial giants, the POSCO case serves as a bellwether. The combination of judicial precedents on illegal dispatch and the legislative weight of the Yellow Envelope Law suggests that the traditional “prime-subcontractor” model may no longer be legally viable for core production tasks.
Disclaimer: This article discusses legal proceedings and labor law interpretations. We see provided for informational purposes and does not constitute legal advice.
The next critical phase will be the announcement of the specific hiring criteria and the terms of the new employment contracts. Whether POSCO can reach an agreement with the Metal Workers’ Union on wage parity and seniority recognition will determine if this transition leads to industrial peace or further labor unrest.
We invite our readers to share their perspectives on the transition toward direct employment in heavy industry in the comments below.
