Korean Supreme Court Abolishes Old Exception to Workforce-Consent Requirement for Adverse Changes to Collective Terms and Conditions – Supreme Court Case No. 2017Da35588 (en banc).

Under Korean law, when an employer changes its policies and regulations that establish collective terms and conditions of employment (referred to as “rules of employment” or simply “work rules”):

•        it must consult with a majority union or, if there is no majority union, with the workforce generally;
•        if a change is adverse to the employees, it must also obtain the consent of a majority union or, if there is no majority union, a majority of the employees; and
•        if workforce consent is required but not obtained, the adverse change is invalid as to all existing employees.

However, for the past 45 years the Korean courts have traditionally recognized an exception to the workforce-consent requirement: if the adverse change is “reasonable in accordance with social norms,” workforce consent is not required (the “Social-Norms Exception”). Although this exception has been interpreted narrowly and rarely applied, it provided a basis to argue that an adverse change imposed without seeking or obtaining workforce consent was valid.

However, on May 11, 2023, in an en banc decision, the Supreme Court of South Korea abolished this exception. Instead, the Court held that the majority-consent requirement will apply unless it is unreasonably abused by the union or workforce (the “Bad-Faith Exception”).

Although it remains uncertain how the Bad-Faith Exception may work in practice, it appears that the primary difference between the old Social -Norms Exception and the new Bad-Faith Exception may be whether a good-faith consultation and attempt at persuasion is necessary to rely on the exception. Under the Social-Norms Exception, consultation was one factor in the analysis—thus, an adverse change could theoretically be valid without any consultation at all, if the change were reasonable in accordance with social norms. Whereas under the Bad Faith Exception, good-faith consultation may be a firm prerequisite to rely on the exception at all, regardless of the nature of the change itself, because it only applies if the union/workforce refuses the change in bad faith and that appears to require good-faith efforts at persuasion by the employer.

The main takeaway from this decision is that an employer likely must make good-faith efforts at persuasion before having any hope of relying on the Bad-Faith Exception.

By Yulchon, Korea, a Transatlantic Law International Affiliated Firm. 

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

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