Amid recent dismal investment and consumption rates in Korea, companies with lower profitability need to restructure or take other management actions to improve competitiveness.
However, this is not easy in the current business environment. Besides excessive employment protection laws and regulations that make the labor market too rigid, some companies have collective agreements which violate their personnel and management rights.
Trade unions make demands during collective bargaining every year: employment security, maintaining the level of production, requiring trade union’s approval when conducting early retirement programs and other restrictions on actions taken for business reasons as well as business spin-offs, transfer and mergers. These are obstacles that impede appropriate measures to respond to a rapidly changing business environment, and will eventually undermine competitiveness, seriously damaging both employer and employees.
This year, the Ministry of Employment & Labor will inspect collective bargaining agreements at workplaces with at least 100 employees to see whether they contain any provisions that breach the employer’s personnel and management rights, and order changes to those provisions. Therefore, wage and collective bargaining this year has become critical. Let’s take a look at which provisions are deemed to restrict employer’s personnel and management rights and ways to ensure a proper collective agreement is made.
Personnel & management rights belongs to the employers, which is protected by the Constitution
When managing a company, an employer has to make decisions on matters such as restructuring, expansion/downsizing, business mergers/spin-offs/transfers, and introduction of new technology. Management rights refer to the authority to make decisions on business matters at the employer’s discretion which are exclusive to employers. Issues with respect to personnel rights are included in these management rights.
The legal basis for the employer’s right to manage his business can be found in the Constitution: ⅰ) Article 119 (1) ‘The economic order of the Republic of Korea shall be based on a respect for the freedom and creative initiative of enterprises and individuals in economic affairs,’ ⅱ) Article 23 ‘The right of property of all citizens shall be guaranteed,’ ⅲ) Article 15 ‘All citizens shall enjoy freedom of occupation.’ Court precedents also recognize that management rights are guaranteed by the Constitution.
At the collective bargaining table, trade unions often insist that some management rights be open to negotiation in accordance with the three fundamental labor rights prescribed by the Constitution. However, as the employer’s management rights are also guaranteed by the Constitution, those three fundamental labor rights need to be protected within the extent that maintains a balance with those management rights, and the core parts of those personnel and management rights shall not be infringed upon for any reason. Employers, therefore, should not accept any union demands that place labor rights as superior to employers’ management rights.
In principle, matters related to personnel & management rights are not subject to collective bargaining
Union demands violating the provision of employer’s personnel and management rights include obtaining prior consent from the union before business spin-offs /mergers/transfers/acquisition, recruiting new employees, determining the portion of non-regular workers, transferring/promoting personnel, taking disciplinary action and restructuring the organization.
If the current collective agreement contains provisions requiring prior consent of the union or consultation with it, unions may question effectiveness of the company’s business activities under the reason that there was no agreement, accusing the company of failing to honor the requirement to obtain prior agreement from its employees, and therefore declare that the actions go against the collective agreement. Such union actions aim at intentionally obstructing their agreement and business activities on the grounds of what is in the collective agreement, in order to gain traction with other demands.
Given the fact that the main purpose for union activities should be to maintain and improve employee working conditions, matters in collective bargaining are to be confined to issues related to this purpose. Employers are not obligated to negotiate with unions over matters related to personnel and management rights during collective bargaining. An employer who refuses to discuss such matters is not engaging in unfair labor practice, and any industrial action that aims at negotiating such non-negotiable matters is not justifiable and therefore illegal.
Existing provisions regarding personnel & management rights need to be removed
Once a collective agreement is made, even if it contains provisions concerning personnel and management rights, the agreement is deemed to be effective in principle. Therefore, demands which require prior consent or consultation with the union over matters related to these rights should not be included in the agreement in the first place, and if such provisions already exist in the current agreement, they must be removed. According to court rulings, even if a collective agreement contains provisions requiring prior consent of the union, such provisions will not apply to the extent that they violate the core part of the employer’s authority concerning business management. If a union continues to oppose business activities regardless of the company’s sincere efforts to obtain consent from the union, the union can be considered to be abusing or waiving its rights. However, as union’s abuse of their right is rarely recognized, provisions in the collective agreement requiring their consent need to be dealt with carefully.
If the collective agreement already includes such provisions, this year’s collective bargaining is very important. As the Ministry of Employment & Labor has expressed its firm intention to order changes to unfair collective agreements, companies also need to actively demand that any unfair provisions be changed or removed at the collective bargaining table. While the unions may strongly oppose in order to maintain their vested interests, companies need to show their strong will for improvement, keeping in mind that the best defense is a good offense. For example, when Hospital A proposed revisions to its unfair collective agreement, its union rejected the proposals. When Hospital A declared that it would terminate the agreement, the union had no choice but to agree to revise it. Remember that collective agreements which violate the employer’s personnel and management rights can threaten the company’s business. Seeking to improve the agreement is worth the risk of trouble and employers need to actively develop clear proposals, negotiating strategies and countermeasures for this year’s collective bargaining to see such unfair provisions removed.
Another type of unfair provision is those allowing unions to participate in management boards which deliberate on or determine business matters. Sometimes unions demand the right to establish special committees with such names as a “Win-Win Relationship Committee”, or a “Joint Labor-Management Committee for Mutual Development” in order to discuss issues related to business activities. As unions aim at officially interfering with management rights, if such demands are accepted at the bargaining table, collective bargaining will actually continue all year round. Such provisions need to be changed or deleted as they are likely to hinder the employer’s decision-making on business matters and disturb business activities.
For mutually-beneficial relationship between management and labor to be possible, both parties need to respect each other’s rights
To prevent controversy over personnel & management rights, unions need to be fully aware that they must not violate them. Companies need to stand firm that personnel & management rights are not negotiable but are at the employer’s sole discretion.
At collective bargaining tables, some companies accept union’s demands that violate their personnel & management rights to avoid conflict with their unions. However, such measures which go against legal principles will boomerang back to the company with adverse effects. Once a collective agreement is concluded, it is very difficult to change it in a direction more favorable to the employer. For example, Company B’s collective agreement contains a provision that a disciplinary committee should be made up of an equal number of employer and employee representatives, with disciplinary action for union activities requiring the consent of at least two-thirds of the representatives present. Because of this provision, Company B has been unable to take any disciplinary action against union members, which has resulted in severe conflict between labor and management. It took Company B 5 years to revise this provision.
The most important thing is to stick to legal principles even though this may be difficult. Trade unions tend to act like their right to organize, bargain collectively and take collective action are omnipotent powers, and many employers hesitate to assert their personnel & management rights at the negotiating table, which often results in provisions that give unions the right to be consulted for matters related to personnel & management rights. Some might think that requiring ‘consultation’ with the union is not an unreasonable demand. However, collective bargaining is not one-time event. It happens every year. Unions will sooner or later demand that the term ‘consultation’ be changed to ‘agreement’.
Reasonable and mutually-beneficial relations between labor and management cannot be built without effort. They cannot be developed when employers accept all demands from their unions. Both labor and management need to respect each other as partners, which preconditions respecting each other’s authority. In particular, it is very important for employers to maintain the position to actively protect their personnel and management rights.