New amendments to Korea’s major employment and labor-relations laws

On December 9, 2020, the Korean National Assembly passed amendments to several significant Korean employment and labor-relations statutes. With 2020’s legislative elections having delivered a majority to President Moon’s left-leaning party for the first time during his five-year term, new pro-labor legal changes had been expected.

The effects of these changes could be significant and remain subject to significant discussion and debate.

Trade Union and Labor Relations Adjustment Act

President Moon’s government has been pursuing a policy of ratifying core ILO Conventions. This amendment to the Trade Union and Labor Relations Adjustment Act (the “Union Act”) is intended to bring Korean law into compliance with ILO standards before ratifying these ILO Conventions.

These amendments will take effect on July 6, 2021.

(a) Ex-employees permitted to remain union members

The Union Act has been amended to allow ex-employees to remain members of an enterprise union indefinitely, even after their employment has terminated and regardless of the reason for termination. The current Union Act allows dismissed employees to remain union members pending a legal challenge before the Labor Relations Commission, on the condition that they allege unfair labor practices. However, the current law has been interpreted to otherwise prohibit non-employees from remaining members of an enterprise union (as opposed to an industrial union, which is already allowed under current law). This will now change.

These non-employee members, however, will be subject to various restrictions: they cannot serve as union officers, they do not count when voting for industrial action, and they can only engage in union activity at the employer’s workplace if it does not adversely affect the operation of the business. What it means to “adversely affect the operation of the business” will be a significant issue, among others, which requires interpretation and clarification.

(b) Maximum CBA period extended to three years The maximum effective period of a collective-bargaining agreement (“CBA”) will increase from two to three years. Under current law, although CBAs are often executed for the legal maximum term of two years, it is very common for wages to be agreed and renegotiated on an annual basis. It remains to be seen how the new three-year limit may be utilized and to what extent it will impact current collective-bargaining practices.

(c) Other changes Other notable changes include:

• Recent court precedent prohibiting unjustified discrimination among different unions in the same business (Korean law allows multiple unions at one employer) will now be enacted as law.

• The law will provide a mechanism for recombining bargaining units that have been ordered separated upon a petition to the Labor Relations Commission.

• A provision prohibiting industrial action that interferes with the normal operation of the business by occupying the employer’s workplace has been included. However, this is not considered significant as it simply reflects current court precedent and guidance from the Ministry of Employment and Labor (“MOEL”).

• The “time-off” compensation system allowing payment of compensation to union officials while they are engaged in union activities (as opposed to work for their employer) will be tweaked. One change will remove the provision of the Union Act prohibiting compensation of full-time union officers by their employer. However, the time-off limits will still apply, and the effect of this change may not be significant. The more significant change is that authority to regulate those time-off limits will be transferred from a committee within MOEL to the Economic, Social and Labor Council. The Council is expected to expand the time-off limits, and this may result in additional labor costs for unionized businesses.

Labor Standards Act

(a) Maximum averaging periods for selective-hours and flexible-hours systems increased The Labor Standards Act (the “LSA”) will allow the use of a three-month averaging period when utilizing a “selective-hours” system for employees working in R&D. Currently a maximum one-month averaging period is allowed for any kind of employee. A selective-hours system can be applied to employees who have some choice over their hours of work, if provided in a written labor-management agreement. Weekly working hours are then averaged over the agreed averaging period—which can currently be up to one month—to determine an employee’s right to overtime pay and whether an employee has worked beyond the maximum permissible weekly working hours.

The new, longer averaging period of more than one month can be used only for calculating maximum hours compliance—overtime pay will still be calculated using an averaging period of no more than one month. And employers who use an averaging period of more than one month will have to provide 11 hours of continuous rest between working days.

The maximum averaging period for a flexible-hours system will also be increased, from three months to six months. A flexible-hours system, like selective hours, works by averaging working hours over a certain period for determining maximum-hours compliance and overtime pay. It is applied to employees whose schedules are routinely varied by the employer, and it must be provided in a written labor-management agreement if the averaging period is longer than two weeks.

Employers who utilize the newly allowed, longer averaging period of over three months, will have to provide employees with their weekly work schedules at least two weeks in advance, subject to limited exceptions. They will also be required to provide at least 11 hours of continuous rest between workdays, and report to MOEL regarding measures taken to ensure the change does not reduce current wage levels.

These amendments will take effect on April 6, 2021, for employers with 50 or more employees, and on July 1, 2021, for employers with five or more employees.

(b) Additional health & safety requirements for MOEL-approved extra overtime More robust requirements to ensure worker health are also being introduced for the special approval system that can be used to temporarily allow extra overtime work under limited (exigent) circumstances, with approval from MOEL.

This amendment will take effect on April 6, 2021.

(c) Electronic contracts The law also adopted a line of existing court precedent to resolve any lingering doubt and make entirely clear that electronic copies of employment documentation satisfy the LSA’s requirement to provide a “written” statement of employment terms to an employee.

This amendment immediately took effect upon promulgation, on January 5, 2021.

Other Notable Amendments

(a) Employment insurance for non-employees: So-called “workers in special types of employment” (a term used for non-employee contractors in certain kinds of work who are already required to be enrolled in workers’ compensation insurance) will be allowed to be enrolled in the unemployment insurance scheme, with the worker and “employer” each responsible for half the premium.

(b) Workers compensation insurance for non-employees: Workers in special types of employment will be permitted to opt out of enrolling in workers’ compensation insurance only for limited reasons, so the new law is expected to cover more workers under the protection of worker’s compensation insurance.

These represent the most significant changes in Korean labor and employment laws since the passage of the 52-hour week law in 2018, which is still being phased in for smaller employers. We will continue to monitor developments and advise on how employers must adapt to, or can benefit from, these changes.

By Chul Man Kim, Soo-Jeong Ahn and In Cheon Ryu, Yulchon, Korea, a Transatlantic Law International Affiliated Firm. 

For further information or for any assistance please contact korea@transatlanticlaw.com 

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