The Guidebook on Wage System Reform, published by the Korean Ministry of Employment & Labor, has sparked more interest, in the private sector, than the revamping of Korea’s wage system based on seniority.
The major issue, in this regard, is if the Rules of Employment of a company may be amended, without violating the Labor Standards Act of Korea (“LSA”), when “wage system reform” is not consented to by a majority of the employees or the trade union.
Numerous Korean government agencies have successfully moved to a more merit-based promotion and bonus system from a strict seniority-based wage system. The private sector has carefully watched this trend, because of public failures by noted international conglomerates. The private sector, to date, has been slow to move to a merit-based wage or like system because of these public failures.
The MOEL’s Guidebook on Wage System Reform (“Guidebook”) was drafted to be a guide for companies wishing to move from a seniority-based system to a system based on merit and/or job scope/responsibility.
LSA Article 94(1) (Procedures for Preparation of and Amendment to Rules of Employment)
An employer shall seek consultation of a trade union, if there is a trade union composed of the majority of the workers in the workplace concerned, or the consultation of the majority of workers if there is no trade union composed of the majority of the workers, with regard to the preparation of an amendment to the rules of employment. However, if the rules of employment are to be modified unfavorably to workers, the employer shall obtain workers’ consent.
Some Korean courts and the Ministry of Employment & Labor of Korea have interpreted this Article 94(1) of the LSA not to impose an absolute burden to receive the consent of employees for modifications to rules of employment when the modifications are not “unfavorable to workers.” Courts and the Ministry of Employment & Labor have, recently, supported the “generally-accepted justification” test to determine if modifications to rules of employment are “unfavorable to workers.”
Generally-Accepted Justification Test
Under this Generally-Accepted Justification Test, Korean courts, should weigh the following factors in determining if the change of the rules of employment of a company violates the LSA. The factors to be considered are:
- Degree of Disadvantage to the Employee in the Changed Employment Rules;
- Degree of Change and Necessity of the Change in the Employment Rules;
- Reasonableness of the Change in the Employment Rules;
- Whether the Disadvantage was Offset by Advantages;
- Degree of Progress in Negotiations with the Union and the Reaction of the Union and employees; and
- Whether the Changes are considered Common in Korea.
Courts, recently, have moved to become more employer friendly. However, without a nuanced approach to amending rules of employment, a nuanced understanding of Korean legal and political realities and a savvy and experienced local Human Resources guide – companies will, likely, run aground in employment relationship issues. A proactive and experienced team is necessary for success in Korea. The ubiquitous teams are, not, always the best teams.
Please read an update of this issue at: Update to Korean Labor Labor Law: Guidelines on Korean Rules of Employment
Sean Hayes may be contacted at: SeanHayes@ipglegal.com.
Sean is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw. Sean is known for his proactive New York-style street-market advice and his aggressive and non-conflicted advocacy. Sean works with some of the leading retired judges, prosecutors and former government officials working in Korea.
Sean’s profile may be found at: Sean C. Hayes
Employment Law Articles
Additional Articles on Employment Law, in Korea, may be found at:
- IPG’s Labor & Employment Law Team: Proactive, Efficient & Non-conflicted
- Korean Rules of Employment Necessary
- Choice of Law Issues in Employment Disputes
- Restrictive Covenants in Korean Employment Agreements
- Korean Labor Law Check List for Employers in Korea
- Can you Revise Employment Rules in Korea without the Agreement of Employees?
- Korean Labor Law Checklist for Employers and Employees
- Increased Scrutiny of Employers by Korean’s Ministry of Employment & Labor under President Moon’s Administration: HR Audit Needed by Korean Employment Lawyers
- Guidelines on Rules of Employment & Guidelines on Fair Personnel Management Withdrawn by Korean Ministry of Employment
- Korean Independent Contractor Risks: Korean Labor Standards Act Basics
- Must I grant Male Employees Maternity/Paternity Leave in Korea?: Korean Labor/Employment Law Updates
- Suspending Korean Workers without Pay due to Economic Fallout from the Coronavirus: Korean Employment Law Basics
- The Ten Commandments of Labor Relations in South Korea: Korean Human Resources Basics
- Dismissal of Employees in Korea: Supreme Court of Korea Precedent
- Minimum Wage Raised in Korea for 2020: Employment Law Updates