The Ministry of Labor and Employment said Tuesday that it has decided to impose a penalty on Paris Baguette for failing to follow its order to directly hire bakers by the deadline which expired on the same day.

The ministry said that the bakery chain will pay fines corresponding to the number of subcontracted bakers, excluding those that expressed their wish not to become full-time employees of the food company. The total fine amount has not been finalized, it added.

The ministry also said that it will open an official investigation into the alleged illegal dispatch of bakers and refer the case to the prosecution, for alleged violation of laws related to hiring conditions.

The government earlier in September had ordered Paris Baguette to directly hire 5,379 bakers currently dispatched by its partner firms, citing it was in violation of the local labor law. The ministry argued that Paris Baguette performed direct supervision of the bakers employed and dispatched by partner firms, which the ministry viewed as illegal.

The bakery franchise firm has maintained that the company cannot directly hire them, explaining the number of bakers exceeds the current number of regular employees at 5,200. The company also cites how most franchisees do not wish to hire bakers directly employed by the headquarters and that it should be a decision made among the company, the franchisee owners and the bakers.

The latest decision by the ministry comes amid heated debate over the government’s move to increase employment transparency and protection -- or what critics call the administration’s “excessive” interference in business operations, overlooking realistic working conditions and practices.

In response to the ministry‘s latest decision, Paris Baguette said it will continue holding sessions to persuade the bakers to join its newly launched three-way joint business formed with franchisers and subcontractors, named Happy Partners.

Paris Baguette launched the joint venture last week in a move to seek an alternative, offering enhanced benefits while maintaining the current hiring system. The three-way joint venture is to provide an annual raise of 13.1 percent, the company explained.

Paris Baguette said some 3,700 bakers, which account for around 70 percent, have agreed to join the system. The company plans to continue to make reconciliations with the remaining 1,600 bakers, it said.

The fine that Paris Baguette could be subjected to pay is currently estimated to reach some 16 billion won ($14.7 million) as the company has reportedly failed to make reconciliations with 1,600 bakers.

The fine amount accounts for almost 25 percent of the operating profit of Paris Croissant, the parent company of Paris Baguette.

According to the company’s labor union, there are currently 870 bakers who are still demanding direct employment, and the number could increase.

Meanwhile, the ministry also said it will investigate the allegation raised by the labor union that the company has forced bakers to give up their direct employment demands and join the third-party venture instead, before finalizing the total fine amount.

By Shim Woo-hyun (ws@heraldcorp.com)