Business Expansion as Restructuring? Calls for Supplementary Legislation on Labor Dispute Guidelines

Guidelines Making Workforce Transfers for New Factories Subject to Negotiation
"Golden Investment Opportunities Could Be Lost Due to Project Delays"
Limitations in the Effectiveness of Guidelines and Recommendations for Supplementary Legislation

A government guideline that allows workforce reassignment arising from new investments or the construction of new factories to be subject to labor disputes has been criticized for presenting a legal contradiction—treating business expansion and restructuring as equivalent. Some argue that administrative guidelines, which are not binding on the courts, cannot by themselves resolve uncertainty in industrial settings, making supplementary legislation necessary.

According to industry sources on September 4, the Ministry of Employment and Labor announced the previous day an implementation guideline that excludes demands from labor unions such as performance bonuses linked to operating profit from mandatory bargaining and labor dispute subjects. However, the guideline clarified that workforce reduction through layoffs or workforce reassignment plans resulting from investment, when specified in detail, could become subjects for negotiation.

Experts pointed out that treating workforce reassignment due to the establishment of new factories or new investments the same as restructuring for business downsizing presents legal issues.

Jisoon Park, a professor at Korea University School of Law, stated, “New investments or the establishment of factories are ‘plus-sum’ decisions aimed at expanding the business rather than measures that would disadvantage employees,” adding, “New investments and workforce reassignment follow a unified trajectory as part of reorganizing the business, and it is difficult to accept that the labor authorities have ambiguously included this under the ‘restructuring’ category, making it a bargaining subject.”

He explained that recognizing workforce reassignment associated with new investments made for business expansion as subjects for collective bargaining or dispute could restrict companies’ investment decisions and HR management rights.

Professor Park also pointed out the legal limitations of administrative guidelines. He noted, “Guidelines issued by the executive branch are merely internal management instructions that do not bind the courts, making them inherently unstable as they can be overturned in court at any time,” adding, “Only by clearly establishing the legal basis for delegation in enforcement decrees or rules, and setting binding criteria through annexes, can supplementary legislation eliminate such legal uncertainty.”

Some have also analyzed that by specifying the boundaries of labor-management disputes with this guideline, the risk of strikes may actually increase.

Youngjin Kim, an attorney at BKL, pointed out, “By removing performance bonuses calculated as a fixed percentage of operating profit from mandatory collective bargaining subjects, the guideline has properly delineated the boundaries and respected management’s autonomy.” However, he added, “Even when a company makes new investments or relocations out of management necessity, employees may simply refuse to transfer or put forward strong demands, such as hefty severance payments or support for living conditions, leading to major burdens for companies.”

There is also analysis that the guideline’s exclusion of performance bonuses from labor dispute subjects will face limitations in practice at work sites.

Heungjun Jung, a professor of business administration at Seoul National University of Science and Technology, said, “In most cases, performance pay negotiations are conducted in conjunction with general wage negotiations, which are mandatory bargaining subjects, rather than as standalone negotiations.” He predicted, “As unions can exercise their bargaining and strike rights under the pretext of wage negotiations, but in reality demand increased performance pay, it will be difficult to completely prevent strikes over performance bonuses with a single guideline.”

Meanwhile, the Korea Chamber of Commerce and Industry, the Federation of Korean Industries, and the Korea Employers Federation welcomed the exclusion of performance bonuses and decisions regarding the introduction of new technology from the scope of labor disputes. However, they expressed concern that if workforce reassignment following investment is acknowledged as a bargaining subject, it could dampen corporate investment and business restructuring. In particular, the Korea Employers Federation emphasized that assigning workers to expanded production organizations resulting from investment should be completely excluded from the scope of labor disputes.

This content was produced with the assistance of AI translation services.