Hello, this is Lawyer Choi Jong-ha from Cheongchul Law Firm.

Personnel management is always closely linked to the management situation and needs to be flexibly changed. To alleviate the complaints of field workers whose workload has increased, field allowances may be introduced, and new benefits may also be implemented; however, on the contrary, if the cost of certain benefits is high compared to their utility, they may be discarded.

However, as the size of the company increases, it becomes difficult for senior management to make individual judgments on each issue. Therefore, in the end, the company goes through the process of introducing various regulations and revising them as situations change for consistent and systematic management.

However, not all regulations can be arbitrarily revised by the company. Article 94, Paragraph 1 of the Labor Standards Act states, "If a labor union organized by a majority of workers exists in the business or workplace, the employer must consult with that union regarding the establishment or revision of employment rules; if there is no labor union organized by a majority of workers, the employer must seek the opinion of a majority of workers. However, if the employment rules are changed to the disadvantage of workers, the consent of the workers must be obtained."

This time, I will summarize the matters to be careful about when establishing or revising internal regulations related to the above provision.

1.     Let's check if the internal regulation falls under employment rules.

It is easy to assume that Article 94, Paragraph 1 of the Labor Standards Act applies only to documents designated as 'employment rules', but the scope of 'employment rules' under labor standards law is very broad.

The Supreme Court has stated, “The employment rules referred to in Article 94 of the Labor Standards Act are those that contain the principles regarding working conditions such as service regulations and wages, regardless of their designation,” (Supreme Court, February 27, 1996, 95Nu15698 ruling), and courts view any internal regulation as falling under employment rules if it (1) deals with working conditions and (2) has been communicated to employees. 'Leave guidelines' regarding how to use vacation, and even 'annual salary tables' which have no special designation can qualify as employment rules. In lower court rulings, it has been ruled that “The announcement issued based on each of the remuneration regulations in this case that specified its content is also considered employment rules,” thus even 'notifications' sent to employees are regarded as employment rules (Busan High Court, August 25, 2021, 2020Na58291 ruling, finalized without appeal).

Ultimately, when revising internal regulations, it is necessary to always check whether the regulation (1) affects the working conditions of workers (working hours, place of work, salary, welfare, disciplinary actions, etc.) and (2) whether its content has been communicated to workers in any form. Furthermore, if the regulation falls under the broadly defined employment rules, the following checklist should be reviewed.

2.     Check whether it is being changed to the disadvantage of workers

If a principle that is judged to be an 'employment rule' according to the above criteria is changed, it is necessary to verify whether the changes are advantageous or disadvantageous to the workers. According to Article 94, Paragraph 1 of the Labor Standards Act, a majority consent of the workers is needed for any disadvantageous changes, and if such procedures are not followed, the revised regulations cannot be applied to existing workers.

Practically, however, it is common to change multiple regulations and clauses simultaneously rather than going through cumbersome procedures repeatedly, which often leads to concurrent advantageous and disadvantageous changes. In this case, the Supreme Court has stated, “In determining whether there is a disadvantageous change, when various factors influence working conditions, even if one factor changes disadvantageously, if other factors that are related or interconnected change favorably, they must be considered comprehensively; thus, even if the payment rate of voluntary retirement benefits is lowered and becomes disadvantageous in itself, if the basic salary is increased, it cannot be definitively concluded that there was a disadvantageous change,” indicating that if viewed comprehensively, it is not deemed disadvantageous, then the consent procedure does not need to be followed.

Then what if the change is advantageous for some workers and disadvantageous for others? The Supreme Court stated, “Whether it constitutes a disadvantageous change for workers should be uniformly determined for all workers, and in cases where the change is advantageous for some but disadvantageous for others, and it is difficult to definitively assess whether it is overall advantageous or disadvantageous for workers, it is appropriate to treat it as disadvantageous to workers and to decide based on the consensus of all workers,” (Supreme Court, June 28, 2012, 2010Da17468 ruling), thus in such conflicting situations, it is primarily treated as disadvantageous.

3.     Check the signed employment contract

The employment contract is one of the most important documents that determine the working conditions of workers, but in many cases, it is a document that is overlooked. When initially hiring workers, there is often a tendency to download a standard employment contract from the internet without much thought, and subsequently, it is common to modify that contract. There are times when it becomes difficult to accurately identify what content is in the employment contract signed with the workers and what is not.

However, the Supreme Court has ruled that “The portions of individual employment contracts that define working conditions more favorably than those specified in the employment rules are valid and take precedence over the provisions of the employment rules,” and furthermore, “Even if employment rules that are revised to disadvantage workers have received collective consent, they cannot have precedence over the existing individual employment contract provisions that define more favorable working conditions. In such cases, the content of the employment contract remains valid, and the contents of the employment contract cannot be changed based on the criteria of the revised employment rules, and unless there is individual consent from the workers, the content of the more favorable employment contract takes precedence over the employment rules,” (Supreme Court, January 13, 2022, 2020Da232136 ruling). In summary, no matter how much the employer changes the employment rules—even with the consent of a majority of workers—the individual employment contract is unconditionally applied first.

In practice, situations often arise where welfare applicable to workers is explicitly stated in the employment contract, making subsequent changes challenging. For example, if 'monthly meal subsidy of 200,000 won' or 'fuel reimbursement' or 'holiday bonus of 300,000 won' are included in the employment contract, the meal subsidy, fuel reimbursement, or holiday bonus cannot be reduced merely by changing the employment rules thereafter.

In particular, regarding matters related to wages, there may be instances where changes to employment rules are thought to be acceptable but are treated as wage arrears, so caution is especially needed.

4.     Check whether labor practices have been established

So, when changing regulations that have been secretly operated and organized only in internal documents of the HR team, is it permissible to bypass these procedures? If the contents have not been communicated to the workers, there may be no need to follow the procedures for changing employment rules, but it is important to verify whether labor practices have been established. The Supreme Court has stated, “For a specific practice that exists within a company to be deemed to constitute part of the employment contract, such practice must be unambiguously acknowledged as a normative fact that governs labor relations in the corporate society or must be widely accepted without objection among the company's members as a matter of course, thus obtaining support by a normative consciousness such that it is established as a de facto system within the company,” thereby recognizing labor practices (Supreme Court, November 27, 2014, 2011Da41420 ruling).

It should be noted that even when changing institutionalized practices, the procedures similar to revising employment rules must be followed.

Cheongchul Law Firm has extensive experience and rich expertise in various HR labor issues such as labor relations, personnel management, wages, and dismissals. If you need assistance, please feel free to contact us, and we will be your reliable partner.