Prime minister hints at compulsory arbitration over Samsung union strike

Prime Minister Kim Min-seok, center, delivers a speech on the planned strike by Samsung Electronics labor unions during a press conference at Government Complex Seoul, Sunday. On the left is Minister of Employment and Labor Kim Young-hoon, and on the right is Minister of Trade, Industry and Resources Kim Jung-kwan. Yonhap

Prime Minister Kim Min-seok on Sunday hinted at the possibility of invoking emergency arbitration in the labor dispute between Samsung Electronics’ management and unions, urging the two sides to reach an outcome in the additional round of wage talks scheduled for Monday.

It was the first time the government had officially mentioned the potential use of the emergency measure, which is often regarded as a last resort in labor disputes. Kim’s remarks served as a strong warning ahead of what may be the last chance for a settlement before the unions begin an 18-day strike Thursday, which could cause losses of up to 100 trillion won ($66.67 billion), according to Kim.

“If the strike inflicts enormous damage on the national economy, the government will have no choice but to consider all possible response measures, including an emergency adjustment of industrial action, in order to protect the economy,” Kim said during a press conference.

“I, along with fellow Korean citizens, sincerely urge labor and management to produce tangible results in tomorrow’s follow-up mediation session, which is effectively the last opportunity for a settlement,” he said.

A Samsung flag waves at Samsung Electronics' office in Seocho District, Seoul, Sunday. Yonhap

Emergency adjustment of industrial action is one of the strongest tools the government can employ to handle labor disputes. If the scale of a strike is deemed likely to impair the national economy or endanger citizens’ daily lives, the labor minister can invoke the emergency measure, immediately suspending collective action for 30 days.

It not only halts strikes but also effectively forces labor and management into a settlement process, in which both sides are required to resume mediation sessions. If that mediation fails, the case moves to a binding arbitration process with the National Labor Relations Commission (NLRC). At that stage, both sides must accept the commission’s compromise plan, and no legal appeal is permitted.

In his speech, the prime minister stressed that the current situation amounts to a “very grave crisis.”

“Even a single day of a factory shutdown could result in direct losses of up to 1 trillion won, and if wafer disposal occurs, the damage could reach as much as 100 trillion won,” he said.

“Production disruptions at Samsung Electronics, which supports 120,000 employees and some 1,700 partner firms, would lead to weaker exports, financial market instability and worsening employment conditions, leaving deep scars across the national economy.”

Stressing that Samsung Electronics’ recent achievements were made possible not only by labor and management but also through support from central and local governments as well as public backing, Kim urged the two sides to “come up with a mutually beneficial solution swiftly.”

After Kim’s speech, Choi Seung-ho, leader of the Samsung unions participating in the joint negotiations, did not comment on the possibility of compulsory arbitration, but only said the unions would “sincerely participate in the follow-up mediation process so that labor-management harmony at Samsung Electronics can be achieved.”

Samsung Electronics Executive Chairman Lee Jae-yong, center, reads his statement on the company's labor dispute at Seoul Gimpo Business Aviation Center in southwestern Seoul, Saturday. Yonhap

Samsung Electronics’ labor and management failed to narrow their differences in an NLRC-arranged mediation session last week, after they locked horns over the unions’ demands for fixed performance bonuses equivalent to 15 percent of operating profit generated by the company’s semiconductor division, along with the removal of the payout cap.

After the talks broke down, the government urged the two sides to resume talks throughout the weekend, and Samsung Electronics Executive Chairman Lee Jae-yong on Saturday issued a public apology while calling on the unions to return to the table.

“Union members, Samsung family members, we are one team, one family,” Lee said upon returning to Korea from an overseas business trip.

“Now is the time to wisely unite our strengths and move in one direction. Let me face all the challenges ahead and take full responsibility. Let us all do our best so we can take pride in being part of Samsung.”

After Lee’s statement, the unions decided to participate in another round of mediation sessions arranged by the NLRC, scheduled for 10 a.m. Monday. NLRC head Park Soo-geun will participate in the sessions himself.

Given the timeframe, it is likely to be the final opportunity for negotiations before the strike begins. As of Sunday afternoon, more than 46,000 union members had expressed their intention to join the walkout.

Expectations for a settlement increased after the government invoked the possibility of compulsory arbitration, but the two sides remain far apart on key issues, including the formalization of a fixed ratio in performance bonuses.

In recent negotiations, the unions reportedly showed willingness to compromise from their original demand of bonuses equivalent to 15 percent of operating profit entirely in cash, proposing instead a structure in which 13 percent would be paid in cash and 2 percent in shares. However, the unions reiterated that such a framework must be institutionalized.

Management, meanwhile, is reportedly open to institutionalizing special incentive payments, but maintains that it cannot accept formalizing the allocation of 15 percent of operating profit for bonuses.