President Park Geun-hye revealed her strong will for labor reform in the second half of her administration. The Saenuri Party also plans to provide active support for labor reform through establishment of a Special Committee for Structural Reform of the Labor Market in the National Assembly. The opposition parties, however, such as the New Politics Alliance for Democracy (NPAD) party, expressed their view that labor reform has to be done in tandem with conglomerate reform. This opposition will make it difficult for the labor bills pending in the Environment & Labor Committee to pass the National Assembly.
There is, however, a possibility that most pending labor bills will pass within this year through the Tripartite Grand Bargaining since dialogue has resumed. Therefore, we will take a look at the main details of those labor bills pending in the Environment & Labor Committee in the 2nd half of the year, and discuss the desired direction of legislation and point out problems.
Reduction of Working Hours
The government plans to put effort into getting labor market reform into legislation as soon as possible and push forward particularly with legislation on working hours in accordance with the Tripartite Agreement.
There are two bills pending in the National Assembly regarding inclusion of holiday work in extended working hours. One is to include holiday work in extended working hours followed by the necessary law revision for working hour reduction and the other one is to implement the inclusion in stages (from 3 to 6 stages) by company size. There are differences in each bill over whether to allow additional extended working hours and the scope of reduction of industries exempt from working hour regulations (allowing extended work hours in excess of 12 hours per week for public convenience upon agreement between labor and management in industries such as transportation, movie production, and entertainment under the Labor Standards Act Article 59). However, both the ruling and opposition parties share the view on including holiday work in extended working hours and reduction of industries exempt from working hour regulations.
The government’s policy is to reduce working hours to 52 hours per week by including holiday work in extended working hours for soft-landing of the new system. This will be implemented one year after the revision in 4 stages (1 stage per year) according to company size (workplaces with more than 1,000 employees → 300 employees → 100 employees → fewer than 100 employees). Up to 8 hours per week of special extended work is allowed on a temporary basis upon agreement between labor and management. The number of industries exempt from working hour regulations will be adjusted down from 26 to 10. The unit period for a flexible working hour system will be expanded from 2 weeks to 1 month, and 3 months to 12 months, but this will be implemented once the period for temporary special extended work upon agreement between the labor and management ends.
However, there will be unexpected side effects for both enterprises and workers if total working hours are reduced rapidly due to inclusion of holiday work in extended working hours. Therefore, policies that alleviate the burden on industrial sites and minimize the social/economic side effects are absolutely necessary. In other words, reduction of working hours should take place gradually, in stages, along with a stipulation that special extended working hours (8 hours per week) need to be allowed, and extra pay for overlapping hours for holiday work not required. In addition, discussions on improving working hour systems should not only deal with reduction of working hours, but also an overall system that reflects the rapidly changing times should be comprehensively reviewed, as described in the following paragraphs.
Clarifying ordinary wage
When the Supreme Court en banc decision came out in 2013, it was expected that the controversy over ordinary wage would calm down. However, conflicts over the issue have continued during collective bargaining at each workplace, and lawsuits involving ordinary wage are still occurring. Inconsistent rulings by lower courts on the issue have particularly stoked legal disputes at workplaces, making it necessary to address the uncertainties around the ordinary wage issue through legislation.
Currently, three revision bills on ordinary wage presented by the ruling and opposition parties are pending at the National Assembly. The ruling party bill, which reflects the Supreme Court decision, states that regularity and uniformity are prerequisites for payments to be considered as ordinary wage, and the list of wages to be excluded from the scope of ordinary wage are to be prescribed by Presidential decree. Opposition party bills, however, stipulate that regularly-paid bonuses and any kind of wage or valuables, regardless of what they are called, that an employer agrees to pay his/her employees shall be considered as ordinary wage.
The government will also legislate on the definition of ordinary wage and clear criteria for elements of wage to be excluded, based on the Supreme Court en banc decision. Therefore, it is expected that ordinary wage will be defined as any kind of money and valuables, whatever they are called, that an employer agrees to pay his/her employees on a regular and uniform basis in return for contractual work. Also, elements of wage which are paid regardless of the quantity or quality of work or are determined by each employee’s situation would be excluded.
However, given the fact that ordinary wage is an instrumental and ex ante concept used to calculate additional allowances for holiday/extended work, it is necessary to clarify its scope by setting the payment interval at one month. It is therefore reasonable to exclude money or valuables paid at intervals longer than one month from calculation of ordinary wage, and to illustrate other wage elements which are excluded from the ordinary wage in a lower statute.
Strengthening conditions for dismissal for managerial reasons
The current Labor Standards Act requires an employer to abide by considerably strict conditions and procedures to dismiss employees for managerial reasons. Furthermore, the Courts also continue to expect those strict conditions be followed. On top of this, the ruling and opposition parties have presented bills to strengthen the already strict conditions for laying off employees for managerial reasons since the opening of the 19th National Assembly. Furthermore, recently presented legislative bills also contain provisions that would place a greater burden on companies by demanding that employers make specific efforts to avoid dismissals and creating the obligation to re-employ those dismissed employees when the need for more workers occurs in the future.
For example, one bill stipulates that if an employer identifies a need to dismiss employees, he/she must make every effort to avoid doing so by reducing working hours, adjusting work, etc. If the employer does not make every such effort, an urgent need to dismiss employees for managerial reasons will not be recognized. Besides this, the bills contain other provisions such as requiring employers to develop an outplacement program for employees to be dismissed and obtain approval from the Ministry of Employment and Labor when dismissing more than a certain number of employees for managerial reasons, compensating dismissed workers for damages if the employer concerned violates the obligation to re-employ them.
However, if the procedures and conditions required to dismiss employees for managerial reasons are to be strengthened further, this definitely runs counter to the initial purposes of normalizing and rehabilitating companies in financial crisis. In order to ensure the original purpose of dismissal as a way to overcome such crisis, dismissals for managerial reasons need to be generously allowed if ‘necessity for business reasons’ and ‘necessity to reduce workforce’ are verifiable. Meanwhile, if clear conditions and procedures for terminating employment contracts are provided by law and confusion over dismissals minimized, dismissals for managerial reasons and other collective employment adjustments would not be needed.
Stronger protection of fixed-term/dispatched/in-house subcontracted workers
As the government announced a comprehensive measure for non-regular workers last December and decided to develop guidelines on use of fixed-term/in-house subcontracted workers, non-regular employment is emerging as a primary agenda when it comes to structural reforms of the labor market.
However, the guidelines have been put on hold due to strong labor opposition to such measures as extending allowed fixed-term employment periods and allowing the use of dispatch employees for more types of jobs. No progress has been made on the issue after the government declared that it will work on deregulation and legal revision after consulting with experts and tripartite representatives.
As a part of the national agenda, the government and ruling party attempted to pass an In-house Subcontracted Work Act, which is currently deadlocked due to objections by opposition parties. Most pending bills related to non-regular workers and presented by opposition parties are about restrictions on the use of fixed-term and dispatched workers for regular/continuous work and core work involving people’s lives/safety, and reduction of employment contract periods for them.
In the current situation where employers are forced to hire regular workers for regular and continuous work, companies have become reluctant to create new jobs. Lawmakers need to recognize that various forms of employment such as fixed-term and dispatch work will serve as a stepping stone to providing vulnerable groups with stable employment. Some bills also contain unconstitutional provisions such as allowing a trade union, which is a third party, the right to request remedy for discrimination on behalf of an employee, notwithstanding the personal and exclusive nature of a discrimination issue, and considering illegal dispatched workers to be employees directly hired by the using company without taking the concerned parties’ desires into consideration.
Protection for those in special types of employment
The government and opposition parties are pushing to revise certain laws to expand coverage of employment insurance and industrial accident compensation insurance to those in special types of employment. Labor groups and opposition parties also presented bills to recognize their legal status as employees under labor laws.
However, the key difference between such workers and other employees is that the former enter into a contract for work, not an employment contract, and autonomously conduct their business without any direction or supervision from the contractor. Given reality and the legal system, it is unreasonable to regulate such workers at the same level as other employees. Such provisions require fundamental reconsideration.
Collective industrial relations
Regarding collective relations, the presented bills contain provisions restricting employer rights to claim compensation for damage caused in labor disputes (provisional seizure, requests for compensation), strengthening requirements for lockout, and revising/abolishing the current time-off system.
Such provisions infringe on employers’ due rights against illegal industrial actions and, given the fact that the time-off system is quite new, more caution should be given when discussing revision.
A desire for the National Assembly to carefully consider bills pending in the 2nd half of 2015
As the National Assembly’s Environment & Labor Committee is composed of equal numbers (8:8) of ruling and opposition party members, it is not easy for the government to push ahead with legislation. What is worse is that it is impossible to pass bills without opposition party agreement according to the National Assembly Advancement Act.
If the government and opposition parties focus on legislation per se, and not on the contents of the bills, bills irrelevant to labor reform may be passed. In order to dispel such concerns, concrete outcomes need to be realized through tripartite dialogue. Based on the Tripartite Agreement, the government needs to carefully aim at labor reform rather than political interest when considering legislation.