Business

In South Korea's deadly shipyards, subcontracted workers most at risk

Reuters

Park Chol-hee was working a holiday shift at Samsung Heavy Industries’ Geoje shipyard on Labor Day in 2017 when a giant crane collided with another and crashed to ground, killing six people, including Park’s younger brother.

“It was as if a bomb was dropped,” Park said. “Bodies were too damaged to describe.”

Park and his brother, Sung-woo, were among nearly 1,500 subcontracted employees — 90 percent of the shipyard workforce that day — building an oil and gas platform for the French energy giant Total.

All six killed and 25 workers who were injured were subcontractors, who receive lower pay, fewer employment protections and less training than full-time employees.

Samsung and other South Korean conglomerates increasingly rely on subcontractors and temporary workers to cut costs and increase labor flexibility but take little responsibility for accidents, according to interviews with about two dozen workers, subcontractor executives and experts.

According to a 2018 government-commissioned report, lenient sentences for companies and officials are hampering attempts to reduce occupational accidents in South Korea, which has the third-worst industrial safety record among countries in the Organisation for Economic Co-operation and Development.

More than two years after South Korea’s worst shipyard accident in at least a decade, Park is suffering from depression and post-traumatic stress disorder, which worsened after a court in May ruled that no Samsung officials will serve prison time over the accident.

In an emailed response to questions, Samsung Heavy said it regretted the casualties caused by the accident but could not elaborate further because of the appeal trial. Samsung’s email sign-offs read, “Safety is the No. 1 value in management.”

Total and Park’s direct employer, Haedong, declined to comment. Haedong, which remains a subcontractor for Samsung Heavy, was not prosecuted.

Multilayered subcontracting

Conglomerates have been the backbone of South Korea’s transformation from the devastation of the Korean War into a global manufacturing and engineering powerhouse.

But amid growing competition and slowing growth, these conglomerates, known as chaebol, have increased hiring of temporary and subcontracted workers to cut costs, boost production and make it easier to dismiss staffers when demand fluctuates. Temporary workers accounted for 21.2 percent of all workers in South Korea in 2018 — nearly double the OECD average of 11.7 percent.

Workers at subcontracted firms earned 3.4 million won ($334) per month, only 62 percent of what their peers at prime contractors made, the state-funded Korea Labor Institute said in a report in October 2018.

“This is not just a problem of Samsung, but Korea Inc.,” said Lyou Sung-gyou, a labor attorney and a member of a presidential labor advisory body. “Conglomerates take profits but they escape legal responsibility by creating a multilayered subcontractor structure.”

The Labor Ministry said it is “essential” to strengthen the responsibility of prime contractors for their subcontractors’ safety measures. “(Prime) contractors know the best harmful and risk factors at workplaces controlled or managed by them,” the ministry said in a statement.

The ministry added it had revised an occupational safety law to expand the scope of work sites where prime contractors are responsible for worker safety.

Outsourcing is especially prevalent in South Korea’s shipbuilding industry, the world’s largest by order volume last year. Subcontractors at its shipbuilders accounted for less than half of the workforce in 2000 but topped 70 percent from 2014 to 2015, according to a report by a state-sanctioned panel of experts who investigated the 2017 crane accident.

Subcontractors further outsourced their work to third-tier workers to cut costs more, which would “inevitably increase the risks of industrial accidents,” the 2018 report said.

Ju Young-kyu, a senior manager at the South Korean unit of Royal Dutch Shell, a major client for the shipbuilders, said multitier subcontracting is a “unique” feature in Korean shipyards. Better management and assessment of unskilled workers are needed to reduce accidents, he added.

The use of subcontractors has also enabled businesses to reduce premiums for occupational accident insurance.

Samsung, the biggest chaebol, enjoyed discounts of nearly 400 billion won ($334 million) from 2016 to June 2019 for its occupational accident insurance premiums because of fewer accidents involving staff employers and because it was not liable for accidents involving subcontractors, two ruling party lawmakers said this year, citing internal government data.

Samsung Heavy, asked about insurance premiums and legal responsibilities, said prime contractors or subcontractors shoulder responsibility depending on the legal liabilities of each accident.

Workers for subcontractors in other industries are also vulnerable.

For instance, a fire at Seil Electronics, which supplies phone parts to Samsung Electronics, left nine dead and several injured last year, a court ruling showed.

Samsung Electronics did not comment on the fire at its second-tier phone parts supplier, as did Seil itself.

Gag clauses

In South Korea, private settlements between companies and individuals at criminal proceedings are a key factor leading to lighter sentences in civil workplace accident cases, according to last year’s government-commissioned report.

Over 90 percent of offenders received suspended sentences or minor fines — less than 10 million won ($8,500) in most cases — according to the report, which analyzed 1,714 rulings on industrial accident cases between 2013 and 2017.

“Because of light punishments, employers may find it cheaper to pay fines and compensation instead of investing in safety equipment,” said Kim Sung-ryong, the lead author of the report and a law professor at Kyungpook National University.

Out-of-court settlements between the families of workers who died in the 2017 crane accident and Samsung contributed to suspended prison sentences for seven Samsung employees, a ruling by the Changwon District Court in May shows.

Samsung Heavy paid compensations of hundreds of thousands of dollars each to the families of some victims on behalf of subcontractors, an executive at a supplier firm said. In return, the families agreed not to sue Samsung Heavy or the subcontractors.

After the death of a temporary worker at a power plant prompted a public outcry last year, South Korea in January amended occupational safety laws to restrict subcontracting, but only in limited areas. The labor ministry declined to say if the new laws apply to the shipbuilding sector.

The restrictions, which take effect next year, will barely affect the outsourcing practices of the shipbuilding industry, which reported nearly 2,000 industrial accidents, including 26 deaths last year, said lawyers and labor activists who analyzed the laws.

Since the deadly 2017 crane accident, Park has been unable to take the subway or elevators for fear they might collapse.

In his first interview with international media, he recalled the mangled bodies around the shipyard after the crane collapsed and hit workers who were on cigarette breaks, including his brother.

Sung-woo, whose back was hit by a swinging wire, died in the emergency room from heavy bleeding.

“In the ambulance, my brother said it hurts really bad,” Park said, tearfully recounting the moment. “We were there to work, not to be killed.”

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