Court Says "No Disclosure"... Only 500 Million Won of Hyundai Steel's 20 Billion Won Damage Claim Recognized

Claimed 20 Billion Won in Damages for Industrial Action
Court Points Out "Disclosure Obligations Not Fulfilled"
"Occupation Deemed Illegal"... Responsibility of Listed Companies Also Raised

Hyundai Steel filed a damages lawsuit worth 20 billion won, claiming that production was disrupted due to industrial action by non-regular workers. However, the court in the first trial recognized only about 500 million won in compensation. As a listed company, Hyundai Steel would have been obligated to make a public disclosure if normal operations had been suspended, but it failed to do so. The court therefore found Hyundai Steel's claims to lack credibility.

This ruling is seen as a case demonstrating that the disclosure obligations of listed companies can serve as a key criterion in proving damages in civil lawsuits. Some interpret this as providing implications for the overall capital market legal system, as it links the responsibilities of listed companies?which are premised on trust with shareholders and the market?to the burden of proof in civil disputes.

Hyundai Steel Dangjin Steelworks panorama. Photo by Asia Economy DB

According to the legal community on June 25, the Incheon District Court Civil Division 16 (Presiding Judge Park Sungmin) ruled the previous afternoon that more than 100 workers and union officials from partner companies, who were sued by Hyundai Steel for damages, must jointly pay 591.55 million won in compensation. This amount is only about 3% of the 20 billion won claimed by Hyundai Steel.

The main issue in this case was the industrial action that took place from August to October 2021. At that time, non-regular workers from partner companies occupied the control center at the Dangjin Steelworks in South Chungcheong Province and went on strike, demanding direct employment. Hyundai Steel claimed that this led to a suspension of normal operations, resulting in 28.7 billion won in production losses, as well as an additional 4.2 billion won in damages due to the use of subcontracted labor and demurrage fees. The company filed a civil lawsuit on these grounds.

However, the court questioned the credibility of Hyundai Steel’s claim that production had actually been suspended. The court stated, "Hyundai Steel is a company listed on the Korea Exchange. If there had been a suspension of production activities, the company would have been required to report this immediately under the Capital Markets Act and the Exchange’s disclosure regulations. However, there was no disclosure related to this incident."

The court further noted that Hyundai Steel had made disclosures in July 2021 regarding the suspension of operations at its Incheon plant due to COVID-19, and in October of the same year regarding a strike by regular workers at the Ulsan plant. The court added, "Given that the alleged suspension at the Dangjin Steelworks was on a larger scale, the absence of any disclosure makes it insufficient to recognize that damages occurred due to production disruptions."

Hyundai Steel also claimed tens of billions of won in damages due to the use of additional outsourced labor, demurrage fees, and security service expenses, but the court dismissed most of these claims as well. The court ruled, "The emergency subcontracting costs increased tenfold, which lacks persuasiveness, and the calculation of demurrage fees was based on coincidental numerical differences, making it an unreasonable method."

However, the court did recognize the illegality of occupying the control center itself. The court stated, "The building in question houses core infrastructure such as electricity and utility control and the logistics network. The act of a large number of people occupying this facility without authorization was violent and anti-social in nature, and therefore lacks legitimacy as an industrial action."

Accordingly, the court recognized only half of the approximately 1.183 billion won in overtime pay for regular workers who were forced to work extra hours due to the occupation as compensable damages. The reason was that the total of 1.183 billion won in overtime, night, and holiday pay included amounts that would have been paid even under normal circumstances without industrial action, and it was difficult to clearly distinguish these portions. In other words, Hyundai Steel failed to sufficiently prove its claims.

A lawyer from Seocho-dong commented, "While the collective bargaining rights of labor unions are protected within certain limits, a complete occupation of core facilities such as the control center can be deemed illegal. However, when a company claims damages, it must fully comply with its disclosure obligations as a listed company in order to earn civil trust."