Ⅳ. Disadvantageous Changes in the Rules of Employment and Exceptions

1. Effect of disadvantageous changes to the rules of employment

When changing rules of employment in a way that is unfavorable to workers, consent from the labor union is required if there is a labor union organized by a majority of workers. If there is no such union, consent from the majority of workers is required (Article 94 of the LSA). If the employer unilaterally changes the rules of employment without obtaining such consent, the change(s) have no effect on workers who have been subject to the existing rules, and shall only apply to new workers hired after the rules were changed. Even in court rulings, if the employer wishes to lower the existing working conditions for specific workers due to disadvantageous changes in the rules of employment, consent from the workers subject to the previous working conditions or rules is required. If such consent is not obtained, changes to the rules of employment are of no effect. If no such labor union exists, the consent of a majority of workers, according to meeting procedures for business or other units, is required. It is also acceptable to gather opinions of each worker in each department and then the workers discussing among themselves in a setting where there is no intervention or interference from the employer.
In spite of previous court rulings changing the employment rules disadvantageously, recent court rulings have determined that the working conditions stated in the labor contract of a few workers who oppose the collective consent continue to apply in accordance with the principle of priority on favorable conditions.

2. Related cases

(1) Supreme Court ruling on Nov. 14, 2019 (2018 Da 200709)

1) Background
An employer and worker signed a contract with a basic annual salary of 70,900,000 won in March 2014. The monthly salary was 5,908,330 won. On June 25, 2014, the employer introduced and announced a wage peak system as part of the rules of employment, with the consent of the labor union organized by a majority of the employees. This wage peak system stipulated that the basic salary in an annual salary contract would be 60% of the 'standard wage peak' for workers with less than two years before reaching retirement age, and 40% for workers with less than one year remaining. From October 1, 2014 to June 30, 2015, the employee in this case received 3,545,000 won per month, which is 60% of his monthly basic wage, because less than two years remained for the employee before the employee reached retirement age, while 40% of the monthly basic wage or 2,363,330 won would be paid for the final year before reaching retirement age When the employer in this case notified the employee of the details due to the application of the wage peak system on September 23, 2014, the employee expressed his objection to application of the wage peak system.

2) Summary of the court ruling
Article 97 of the Labor Standards Act protects workers, who are in subordinate positions, preventing them from being subject to working conditions that do not meet the standards set in the employment rules. If Article 97 of the Labor Standards Act is interpreted for opposite situations, taking into account the content of these regulations and their legislative purpose, individual labor contracts that stipulate working conditions more favorable than the standards stipulated in the rules of employment are valid and take priority over the standards stipulated in the rules, since the collective consent stipulated in Article 94 of the Labor Standards Act is only a requirement for effective change of the rules. Even if there is collective consent for unfavorable changes to the rules of employment, the principle of free determination of working conditions stipulated in Article 4 of the Labor Standards Act is still observed. Therefore, rules revised unfavorably cannot be regarded to take precedence over existing individual labor contracts that set more favorable working conditions even if collective consent is obtained. The labor contract details remain valid, and cannot be changed according to the revised rules of employment, without the worker’s individual consent.

(2) Supreme Court ruling on Dec. 13, 2017 (2017 Da 26138)

1) Background
An employer and employee signed a labor contract for a full-attendance allowance of 600,000 won when actual working days numbered at least 20 days per month. As the company’s financial situation deteriorated, the employer held a labor-management council meeting on April 26, 2016 to decide on a “self-reliance plan.” That same day, 144 (69.9%) of the 206 employees agreed that all contract allowances besides basic wage would be rescinded, to be effective from May 1, 2016. The employee in question received the self-reliance plan, but did not agree to the plans to rescind allowances, so did not sign or place his seal on the labor contract with working conditions that followed the self-reliance plan. The employer determined that it was not necessary to pay the contracted allowance to the worker since the majority of workers agreed to the rescinding, and the employee did not receive the full-time allowance in his original labor contract.

2) Summary of the court ruling
The standards in rules of employment invalidate the part(s) of labor contracts with poorer working conditions. However, better working conditions in a labor contract take precedence over the rules of employment. As long as rules of employment only set the workplace’s minimum standards, if they have been changed unfavorably for the employees, even through legitimate procedures, they are not more applicable than the individually-signed employment contract.


Ⅴ. Rules of Employment and Other Rules

1. Relations

If a labor contract includes employment conditions below the standards stipulated in the rules of employment, such nonconformity shall be null and void. In this case, the invalidated provisions shall be governed by the standards in the rules of employment(Article 97 of the LSA).

2. Rules of employment, law, and collective agreement

Even though an employer may prepare or amend the rules of employment, the amendment shall not conflict with any law or decree or collective agreement applicable to the workplace concerned(Article 96 of the LSA).

(1) Differences between the collective agreement and the rules of employment
The collective agreement concerns working conditions and other standards on the treatment of employees, and should be in writing and signed by both parties, that is, the employer and the employee representative. Besides, the collective agreement is, in principle, effective only for unionized employees for a limited period of time. By contrast, the rules of employment are drawn up unilaterally by the employer and contain general rules and regulations on the employees’ service and working conditions applicable to all employees at the workplace.

(2) ROE amendments that infringe on the collective agreement have no legal effect, regardless of justifiable procedure in their amendment
As Article 96(1) of the Labor Standards Act regulates, “Rules of employment shall not conflict with any Act, subordinate statute, or a collective agreement applicable to the business or workplace concerned,” amendments to the rules of employment that infringe on the collective agreement have no legal effect, regardless if justifiable procedures were followed in their amendment. Accordingly, it is definitely unfair dismissal if the employer notifies an employee of his/her dismissal on the basis of a regulation of ‘retirement age’ as stipulated in the ineffective rules of employment.

(3) Procedures for revision of rules of employment concerning working conditions after a collective agreement becomes ineffective.
Although the collective agreement may become ineffective, portions concerning working conditions will continue to be applied as before. A revision procedure is required, as stipulated in Article 94 of the Labor Standards Act, in order to revise the rules of employment unfavorably to employees about portions related to working conditions. On the other hand, an employer shall, with regard to disadvantageous amendment of the rules, receive the consent of a labor union, if there is a labor union composed of the majority of the workers in the business or workplace concerned, or otherwise the consent of the majority of said employees. Accordingly, the sole approval of the employee representative cannot be seen to be evidence that procedures were followed prior to disadvantageous revision of the rules.

(4) Retroactive application of the collective agreement
The collective agreement refers to the agreement made between the labor union and employer or employers’ association concerning the determination of terms and conditions of employment. In cases where the labor union and the employer have agreed or approved the criteria for retroactively determining working conditions such as previous wage, working hours, and retirement pay, such agreement or approval applies to the labor union members or employees who have worked after implementation of the collective agreement. Even though the payment rate for severance pay in the rules of employment are changed disadvantageously, in cases where the labor union and the employer agree on the collective agreement regarding a revised severance pay rate, such agreement applies to those existing employees to whom the collective agreement applies, regardless of whether those employees knew the disadvantageous revision to their severance pay.