I. Introduction

With the Aged Employment Promotion Act revised in 2013, along with implementation of the compulsory retirement system starting in 2016, workplaces with seniority-based wage systems are expecting a rapid increase in labor costs. Under these circumstances, it is debatable whether unilateral introduction of a wage peak system by employers seeking to cope with the new labor costs is simply disadvantageous to employees or socially acceptable rationality. For guidance, it is necessary to look at the legal criteria required in labor laws for changing working conditions, which is equivalent to changing the Rules of Employment. With labor issues appearing in this area, I would like to explain appropriate ways to make or change the Rules of Employment, obtain consent for unfavorably-changed rules and the legal principle of socially acceptable rationality.

II. The Rules of Employment: Concept & Making Changes

1. Concept
The Rules of Employment refer to the company regulations that an employer stipulates unilaterally regarding working conditions and service rules. The Labor Standards Act stipulates the employer’s obligations for preparing and filing their rules (Article 93) and ways to compose and change the rules (Article 94). In particular, if a labor contract includes employment conditions which are below the standards stipulated in the Rules of Employment, the nonconforming part of the labor contract is null and void (Article 97). Korean law stipulates that areas in which employment conditions have been invalidated shall be governed by the standards provided for in the Rules of Employment. The Rules of Employment are to put the employer and workers on equal footing, which shows that the employer can compose or revise the rules unilaterally when revising working conditions advantageously, but shall obtain collective consent from the majority of employees when revising them disadvantageously.

2. Making Changes to the Rules of Employment
(1) Advantageous changes
When preparing or revising the Rules of Employment, the employer should, as a rule, consider the views of the majority of employees. For favorable changes to working conditions, it is sufficient that the employer listens to the majority of employees, but there is no obligation to consult with or obtain consent from them. Violations of the duty to consider employee opinions regarding changes to the Rules of Employment are subject to punitive action: the violation does not invalidate the change(s). Considering employee opinions serves as a way of protecting those employees by giving the employer opportunity to reflect their opinions in changes, but the failure to do so does not invalidate those changes.

(2) Disadvantageous changes
When working conditions stipulated in the Rules of Employment are changed disadvantageously, existing employees will continue to work under the previous conditions if their consent was not received for the changes, but new employees hired after revision of the Rules of Employment will be subject to those changes.

1) Changing the Rules of Employment unfavorably
The acceptable methods for receiving employee consent are as follows: ① If there is no labor union composed of the majority of employees, it is necessary to receive consent from the majority of employees by means of allowing them to hold their own conference. Here, ‘obtaining consent through a conference’ means that employees get together and exchange their opinions for and against particular issues at the division or department level of a workplace or business, without interference from or participation of the employer, and then gathering their collective opinions for delivery to the employer. ② If there is a labor union composed of the majority of employees, the revised Rules of Employment upon the union’s consent to the changes will also be in effect for non-union employees who have not had any input into the agreement. ③ If working conditions are different for production and management divisions, and for regular and non-regular employees, consent shall be received from those groups who will be affected by the revised working conditions. This means the employer does not have to receive consent from the majority of all employees if some of them will not be affected by the changes. ④ At the time the Rules are changed, even though only a certain group of employees will be disadvantageously affected, if the revisions will affect other groups of employees, consent from these other groups shall also be required.

2) Criteria for changed working conditions to be considered disadvantageous
Whether amendment of the Rules of Employment is disadvantageous or not shall be evaluated substantially by considering all factors such as reasons and procedures for the amendment, characteristics of the jobs, and the structure of each regulation of the Rules of Employment. Accordingly, even though one working condition has been revised disadvantageously, if other related factors were changed favorably or other favorable changes were made in return for the disadvantageous change, whether these revisions were disadvantageous or not should be determined after considering all the changes.
Court rulings have showed: ① In cases where regulations on accumulating retirement payments were changed disadvantageously to non-accumulating retirement payments, if employee wages were increased and their working hours shortened, that change will not automatically be considered disadvantageous. ② In cases where a wage regulation in the Rules of Employment was changed disadvantageously for some employees, but advantageously for other employees, such changes shall be considered as disadvantageous. ③ Reducing or abolishing overtime work exceeding legal standard working hours cannot be regarded as a disadvantageous change to the Rules of Employment. ④ In cases where working at night or on holidays in the working shift system, employees used to receive additional allowances. However after changing work shifts to day time only, night and holiday work allowances were no longer available. In this case, the reduced wages cannot be seen as disadvantageous.

III. Disadvantageous Changes to the Rules of Employment and the Legal Principle of Socially Acceptable Rationality

1. Socially Acceptable Rationality
In cases where working conditions in the Rules of Employment were revised disadvantageously, if the Rules of Employment were revised without consent of the employee group, the changed rules will be invalid due to the unilateral nature of the change. However, if the revision of the Rules of Employment can be admitted as socially acceptable rationality, the change(s) may be considered legitimate. There are two opposing opinions regarding this issue: 1) As long as socially acceptable rationality is admitted, employer revisions to the Rules of Employment are effective (theory of affirmative recognition) , and 2) Disadvantageous employer revisions of the Rules of Employment are invalid (theory of negative recognition).
The point of dispute is whether, when introducing the extension of mandatory retirement to age 60, the employer can introduce a wage peak system to employees under a seniority-based wage system without their consent. We will review disadvantageous revision of working conditions under the theory of socially acceptable rationality.

2. Criteria for Socially Acceptable Rationality
A judicial ruling regarding criteria for socially acceptable rationality stipulated, “It is not permitted to apply disadvantageous working conditions that deprive employees of their existing rights and interests through unilateral establishment or revision of Rules of Employment by the e