A decision by the Labor Ministry to order bakery chain Paris Baguette to directly hire bakers working at the brand’s franchise outlets is facing strong resistance from politicians and franchise operators who say that such a decision would impose a massive financial burden on companies that use workers hired by a third party. 

On Thursday, the government said that it considered Paris Baguette to be illegally supervising bakers at its franchise stores who had been dispatched by partner firms. 

Under the current law, it is legal for stores to outsource the recruitment and hiring of their employees, but the store and franchise owners are prohibited from directly supervising their work.

The Labor Ministry concluded that Paris Baguette was breaking this rule by providing guidelines about the working hours and conditions of the bakers. 

“We have a duty to aid franchise owners in creating the best circumstances to operate our brand,” said an official with the bakery chain. “By helping franchise owners recruit and employ qualified bakers, we are managing the quality of our brand products for our consumers.”

So far, Paris Baguette has not made an official comment on whether it plans to fight the Labor Ministry’s order in court. Incompliance within 25 days would lead to a 53 billion won ($46.6 million) fine, or 10 million won for each dispatched employee in question. 

If the Labor Ministry decides to run another inspection and the dispatched employees are still working under the same conditions, the penalty rises to 30 million won per employee.

If the bakery chain decides to comply and changes the status of the contracted workers to permanent positions with its headquarters, it would potentially set a huge precedent for future investigation into other companies. 

Other bakery chains including CJ FoodVille’s Tous Les Jours employ bakers in a similar fashion to Paris Baguette. Retail firms such as supermarkets also often contract employees temporarily for events such as sales promotions. 

“There is a lot of ambiguity surrounding the regulations about the boundaries of supervising workers dispatched by a third party,” said an official with a company that employs dispatched workers for sales promotions.

“This decision basically demonstrates how little the Labor Ministry understands about how franchises work,” said an official with another company with a large franchise network. “It makes no sense to have headquarter employees working in franchise stores.”

Industry watchers say that it is likely that Paris Baguette will protest the order one way or another because of the impracticality of being ordered to hire 5,300 employees in 25 days, in addition to the immense costs. 

Reported cost estimates speculate that complying with the government order will result in 60 billion won in additional labor costs per year. 

The decision was made a month after a court ruling that sided with workers at Kia Motors who requested for the company to acknowledge their bonuses and lunch allowances as part of their ordinary pay. 

By Won Ho-jung (hjwon@heraldcorp.com)