A construction company ‘living without the law’? The government with its sword drawn due to the spread of wage arrears, even punishment with a soft bat is ‘deceptive’

Government checks on non-payment of wages, construction sites “only now”
Despite repeated violations of the law, the punishment is 'a soft bat', and the government's responsibility is boiling over
Concerns over small and medium-sized construction company ‘Domino’: “Due to the lukewarm response and the formation of an abnormal structure”

Ahead of the Lunar New Year holiday, the government is launching the largest ever inspection of unpaid wages at construction sites. In particular, we plan to conduct a thorough investigation of all 105 construction sites nationwide of Taeyoung Construction, which is facing a liquidity crisis. However, it appears that the government will not be able to avoid criticism for its ‘delayed response’. This is because it has been a long time since non-payment of wages began to become widespread in the construction industry in the first place. The lack of punishment for non-payment of wages and violations of the Subcontracting Transactions Act also emerged as a target of criticism.

Ministry of Employment and Labor “We will operate a period of intensive guidance on preventing and clearing arrears”

The Ministry of Employment and Labor announced on the 11th that it will operate an intensive guidance period for preventing and clearing non-payment for four weeks starting from the 15th. According to the Ministry of Employment and Labor, the amount of unpaid wages amounted to 1.6218 trillion won as of November last year. This is a 32.9% increase compared to the same period last year (KRW 1.2202 trillion). This measure for non-payment is centered on the construction industry, where wage arrears have increased due to the sluggish real estate economy, increased construction costs due to rising raw material prices, and interest rate hikes. Construction industry arrears amounted to KRW 398.9 billion, an increase of 51.2% compared to the same period last year (KRW 263.9 billion).

First, the Ministry of Employment and Labor plans to conduct the largest-ever inspection of construction sites. During the intensive guidance period, two labor inspectors will visit approximately 500 private construction sites with a construction cost of 3 billion won or more to check the status of arrears. At the same time, we also investigate whether unpaid wages are due to illegal subcontracting. Taeyoung Construction, which is facing a liquidity crisis, will also conduct a full survey on 105 construction sites across the country. This is a response to the Korean Confederation of Trade Unions’ National Construction Workers’ Union’s outpouring of criticism over Taeyoung Construction’s non-payment of wages. Preemptive planning and supervision is also conducted for current employees. This is because it is difficult to report. As a result of operating the ‘Anonymous Report Center’ for non-payment of wages for employed employees, 165 reports were received, and after reviewing the necessity of labor supervision for the details of the reports, supervision will begin. This is the first time that preemptive planning supervision has been implemented for incumbents.

In addition, property-related investigations have been strengthened, and large-amount and habitual non-payment employers who have maliciously delayed wages by concealing assets or misappropriating funds will be subject to arrest and investigation. In the case of an employer who intentionally fails to pay wages, even if it is a small amount of less than 50 million won, we plan to apply for an arrest warrant and take him to court. Planning and supervision will also be conducted until the end of January for vulnerable industries for young people, where labor rights violations, such as non-payment of wages, are frequent. We plan to self-select 60 workplaces with the possibility of non-payment, including workplaces with two or more reported incidents in the past year and the four major insurance premium arrears. Livelihood support for affected workers will also be strengthened. To ensure that simple payments can be received quickly, the processing period has been temporarily shortened (14 days → 7 days), and the living expenses loan for workers in arrears, which provides up to 10 million won per person, has also been temporarily reduced (1.2. to 2.29.) from 1.5% to 1.0% per annum. lower it The Ministry of Employment and Labor explains that the interest rate on loans for business owners in arrears will also be reduced by 1.0%p during the same period.

Construction industry with pus burst, workers protesting

Recently, as wage arrears unique to the construction industry have worsened, pus is bursting out. In particular, construction workers working at the Taeyoung Construction construction site, who had applied for a workout due to a liquidity crisis, directly protested and appealed for unpaid wages. On the 8th, the Seoul Gyeonggi Northern Construction Branch of the Korean Confederation of Trade Unions’ Construction Union held a ‘press conference condemning Taeyoung Construction for misusing bills for unpaid wages’ in front of the youth housing construction site in Yongdap-dong, Seongdong-gu, Seoul, and said, “Construction workers employed by subcontractors at the Taeyoung Construction construction site are doing work. “Wages are not being paid,” he said, raising his voice. The construction sites with delayed payment identified by the Gangbuk region of the Seoul Gyeonggi Northern Branch of the Construction Workers’ Union include youth housing construction sites in Yongdap-dong, Sangbong-dong, and Muk-dong in Seoul. They said, “Taeyoung Construction paid the subcontractor with a bill, and the subcontractor is experiencing serious difficulties in cashing the bill, resulting in non-payment of wages across all Taeyoung Construction sites.” Construction workers usually work for subcontractors.

According to the construction union’s claim, 45 union members who worked at the youth housing construction site in Sangbong-dong, Jungnang-gu, Seoul did not receive about 200 million won in wages for November of last year until today. This means that the wages that should have been paid on the 15th of last month, the month following work in accordance with the construction union’s collective agreement, were not paid until the 8th, almost a month later. Another Taeyoung Construction site, a subcontractor at the youth housing construction site in Yongdap-dong, Seongbuk-gu, Seoul, also withheld about 60 million won in wages for 15 union members last November, paying it only on the day the press conference plan was announced. In response, the workers said, “Taeyoung Construction’s workout issue is receiving attention, but only the construction company is having a hard time, but there is no interest in the powerless day laborers who are struggling together.”

The government’s ‘original sin’ of ‘delayed response’

Since the issue of delayed wages is directly related to the lives of ordinary people, it is important for the government to respond more quickly. This is why the Ministry of Employment and Labor has launched a full-scale inspection. However, there is also the view that even after a large-scale inspection, the problem of non-payment of wages will not be directly resolved. This is because the level of punishment for construction companies that fail to pay construction fees is very weak. In fact, over the past six years, on average, more than 75% of violations of the subcontracting law in the construction industry were due to incorrect payment of construction fees, but the punishment was only mild. According to the Fair Trade Commission, of the 857 allegations related to incorrect payments over the past six years, the proportion of warnings or cautions issued was 70.8%. There were only 103 complaints, fines, and corrective orders, or 12%. In addition, according to the ‘Results of the 2023 Subcontract Transaction Survey’ conducted by the Fair Trade Commission, the percentage of contractors paying subcontracts within the legal payment due date in the construction industry was 94.6%, the lowest compared to other industries.

Given this situation, there are many voices criticizing the government’s delayed response. It is pointed out that although there have been cases of non-payment of subcontract payments due to uncertainties in the liquidity of construction companies’ funds, it was late to identify the situation. In response to this, the Fair Trade Commission explained, “This emergency inspection is not conducted after a problem has occurred, but rather is conducted to investigate in case a problem arises,” adding, “The purpose is to go directly to the site and prevent non-payment of subcontract payments from occurring.” did. Regarding the fact that the penalty does not extend to a fine even if subcontract payment is not paid or late interest is not paid, he said, “What the subcontractor wants most is to receive payment as quickly as possible,” and added, “If the contractor voluntarily corrects it, a warning is issued, so the proportion of voluntary correction is high. “The larger it is, the lower the fine,” he explained.

However, any explanation cannot be an excuse for the delayed response. The government’s lukewarm response has made wage arrears widespread throughout the construction industry. The side effects that come with this are also significant. This is because the flow of funds through the construction industry itself is so intertwined that even if the practice of non-payment of wages is stopped immediately, there is a high possibility that a reaction will occur. This is also closely related to the concern that some small and medium-sized construction companies may fall like dominoes if the government starts to take action. This is the government’s original sin of not properly checking for violations of the Subcontracting Transactions Act.