Improving the industrial and labour relations framework

The labour market reforms discussed above have been complemented by important recent measures to improve the Korean framework for industrial and labour relations. These reforms address two issues:

i) The rules governing the remuneration of union officials for time taken away from their duties as employees in order to accomplish their duties as trade union representatives; and

ii) The replacement of the single union system at the level of the individual firm with a multiple union system.

These two issues have been a recurring topic of discussion in Korea since the first Trade Union and Labor Relations Adjustment Act (TULRAA) was approved in 1997. Consistent with international norms supporting the right of workers to be represented by the unions of their choice, that act recognised the multiple union principle. More specific to Korea, it also terminated employers’ obligation to remunerate all time-off hours for union officials, a practice that threatened to become increasingly expensive for firms with the shift to a multiple union system. However, trade unions expressed concerns that banning employers’ support for union officials would severely undermine their financial situation and hence their ability to represent their members effectively. As a result, implementation of these two provisions of the TULRAA was delayed by a series of moratoriums, allowing more time to reach agreement about how to implement them.

After years of intense negotiations between the government and the social partners, a compromise plan was reached in 2010 for implementing a multiple union system and reducing employers’ responsibility for the remuneration of union representatives. The revised Trade Union and Labor Relations Adjustment Act (TULRAA) of January 2010 incorporates this compromise while confirming the key principles of the 1997 Act.

The first pillar of the reform establishes new rules defining employers’ responsibility to remunerate union representatives for the off-work time they require to accomplish their union responsibilities (in vigour since July 2010). Prior to the reform, it was a deeply rooted practice in Korea for union officials to receive full remuneration from their employers for the time spent on union affairs. Rather than abolishing time-off remuneration altogether, the new TULRAA includes a compromise solution. Under the new rules, workers are allowed to take time off work to fill certain union duties, such as engaging in bargaining and consultation activities with the employer, handling grievances, and promoting workplace safety. These activities can be performed without any loss of pay, provided that they do not exceed the maximum time-off limits prescribed by the law, or higher limits agreed to with the employer. Union representatives remain free to engage in other union activities, but cannot be paid for time spent on openly antagonist actions (e.g. strikes and picketing). The statutory caps limiting the overall number of paid time-off hours for covered union activities vary depending on the number of union members in the firm. These caps range from 1 000 hours annually for companies with fewer than 50 union members up to 36 000 hours a year for companies with 15 000 or more union members.

The second pillar is the formal introduction of a multiple union system and it has been fully in vigour since July 2011. Before the reform, there were very strong restrictions on workers’ rights to establish new unions of their choice within firms where a union was already present. For example, even a temporary overlapping in membership coverage was not permitted, thus implying a strong bias in favour of the incumbent union.

The new amendment to the TULRAA sets out the framework governing the establishment and operation of multiple unions at the level of each firm. To keep the system manageable and avoid employers having to deal with many excessively small trade unions, the amendment introduces a bargaining representative mechanism. The bargaining representative mechanism is also intended to assure appropriate working conditions for workers by increasing the bargaining power of labour unions. If two or more trade unions come to exist in the same firm, they are generally required to appoint their bargaining representative before a new bargaining process is launched. However, it is possible for each union to bargain separately, provided that the employer accepts to deal with multiple bargaining unions. Should the trade unions be unable to achieve a consensus on the choice of the bargaining representative, the trade union garnering a majority of members will act as bargaining representative. If no union garners a majority, then a joint bargaining representative team will be established. In order to prevent discrimination against members of trade unions that are not the representative union, the revised act sets out a remedy mechanism, which can be invoked by appealing to the Labor Relation Commission.

Although these recent industrial relation reforms do not address the dualism problem directly, there are grounds to hope that the effort to create a more pluralistic industrial relations framework will prove to be helpful. Labour market dualism in Korea tends to create conflicts of interest between regular workers (the “insiders”) and non-regular workers (the “outsiders”), which have tended to be reflected in the organisation and operation of collective bargaining. Many unions operating in large companies do not accept non-regular workers as members and few seek to represent their interests. As a result, enterprise-based collective bargaining agreements generally do not cover non-regular workers. This pattern tends to reinforce inequalities in the treatment of regular and non-regular workers. However, it may also pose a long-run risk to trade unions and the job security of their members, because non-regular workers are potential substitutes for regular workers (Kim, 2010).

In this context, reforms that promote the inclusion of non-regular workers in unions may help reduce inequality between regular and non-regular workers (Choi et al., 2012). Provided the revised TULRAA is fully implemented as planned, the system of multiple unions it promotes could open the way to a trade union movement that better represents the interests of the entire workforce. By lowering employers’ costs, the new limits on employers’ responsibility to remunerate trade union representatives for off-job time could also reduce a barrier to the expansion of the trade union system among the small and medium-sized enterprises. If so, this could also contribute to a reduction of labour market duality in Korea.

There are encouraging signs that some of these desirable effects may already have begun to materialise. According to a recent survey prepared by the Korean Labor Relations Academy, the number of union officials who are paid by their employer for off-job time has decreased in large firms since the revised TULRAA entered into force in July 2010 (Lee, 2012), even as there has been an increase in the number of enterprises with fewer than 500 employees remunerating one or more union officials. Despite the new limits on employers’ responsibility to remunerate union representatives, evidence that union fees increased was found in only 5% of the firms reviewed by the survey. More generally, the survey concluded that there has been no significant change in labour relations or union activities so far.

As many as 842 new firm-based unions were created in the year following the launch of the new multiple-union approach (July 2011-June 2012), although the pace of union creation has subsequently decelerated (KLF, 2012).34 Nearly two-thirds of the new unions (64.4%) were established within enterprises where the existing union belonged to one of the two major national umbrella unions, the Federation of Korean Trade Unions and the Korean Confederation of Trade Unions. A large majority of the new unions (85.6%) did not join either of the national umbrella unions, preferring to remain independent. Among new unions, 28.1% have obtained the status of representative union.

Taken together, these results are encouraging because they suggest that some progress is being made to make the industrial relations system more inclusive in Korea, even while somewhat allaying concerns that the new time-off system could undermine the effectiveness of trade unions. However, it is much too soon to be confident that the reforms to date are sufficient to insure that the industrial relations system will evolve so as to make an important contribution to reducing duality.

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