Labor unions in South Korea will no longer be able to stage legal strikes to demand a fixed share of a company's profits as performance pay, or to oppose management decisions themselves such as mergers, the construction of new plants or the adoption of new technology.
The Ministry of Employment and Labor announced the guidelines on the scope of labor disputes under the revised Trade Union Act, known as the Yellow Envelope Act, on the 3rd. The revised law took effect in March after interpretive guidelines were drawn up in February, but confusion persisted on the ground, including a dispute over performance pay at Samsung Electronics and opposition to a special semiconductor zone. President Lee Jae-myung repeatedly instructed at Cabinet meetings that the standards for industrial action be clarified, prompting the ministry to reinforce the existing guidelines.
Under the guidelines, demands that a fixed percentage of corporate earnings — revenue, operating profit or net profit — be set aside as a source of performance pay are excluded from mandatory bargaining. The ministry judged that performance pay is largely distributive after the fact, and that demanding a company carve out and distribute its earnings in advance fundamentally infringes on management rights and on the interests of third parties such as shareholders and creditors. Demands for performance pay set as a percentage of base pay or annual salary, or as a fixed amount, remain subject to normal bargaining. When an item is excluded from mandatory bargaining, an employer that refuses a union's bargaining demand cannot be punished for unfair labor practice, and the union cannot secure the right to strike.
Demands to withdraw or oppose the building or relocation of plants, overseas investment, the sale or acquisition of a business, or the adoption of new technology such as artificial intelligence are likewise excluded from mandatory bargaining and cannot be grounds for a strike. The ministry said, however, that such matters may exceptionally fall under mandatory bargaining when changes to working conditions are objectively expected under specific workforce plans in the course of a management decision, such as layoffs or reassignments.
The ministry made clear that unions will not be able to obtain the right to strike through bargaining demands that fall outside the guidelines. The Labor Relations Commission, which determines whether industrial action is permitted, plans to issue administrative guidance at the mediation stage based on the guidelines. Labor Minister Kim Young-hoon said the guidelines are a standard "to raise predictability on the ground, prevent disputes and promote dialogue."
