Collective Agreements in Korea
Formation, Legal Effect, and Duration
How is a Collective Agreement Concluded?
Required Form, Authority, and Reporting Obligations
A collective agreement must be documented in writing; any agreement not reduced to writing has no legal effect. The title of the document is not determinative. It will be regarded as a collective agreement as long as it substantively reflects the terms mutually agreed upon by labor and management through bona fide collective bargaining.
The parties’ signatures or seals are required. On the union side, the representative of the union, namely the union president, must sign or affix the seal. On the employer side, the representative director must do so in the case of a corporation, and the business owner in the case of an individual business.
Once a collective agreement is concluded, the union and the employer must jointly file a report with the local labor office having jurisdiction within 15 days of the date of execution. However, failure to file such report does not invalidate the collective agreement. In such cases, a corrective order may be issued, and an administrative fine may be imposed if the order is not complied with.
Who Is Covered by the Agreement?
Scope of Application and the General Binding Force
In principle, a collective agreement applies only to the members of the trade union that concluded the agreement. However, under the Trade Union and Labor Relations Adjustment Act (“Trade Union Act”), if more than half of the employees of the same category at a workplace are covered by a particular collective agreement, the agreement shall also apply to other employees of the same category. The term “employees of the same category” refers to employees who are eligible to join the union but have chosen not to do so. This is referred to as the “general binding force” (일반적 구속력) of a collective agreement.
Although this system is sometimes criticized as allowing non-members to free ride on the benefits of the collective agreement, the system serves a public interest by protecting unorganized employees and promoting the principle of equal work, equal treatment.
What Happens When the Company Changes?
Corporate Mergers, Business Transfer, and Splits
In the case of a corporate merger, the surviving company or the newly established company succeeds to all rights and obligations of the merged company. Accordingly, any collective agreement previously concluded between the merged company and the trade union will be succeeded to by the surviving or newly established company.
Likewise, in a business transfer, the transferee succeeds to the employment relationships on a comprehensive basis, and the collective agreements concluded by the transferor and the trade union will likewise be succeeded to by the transferee.
However, in the case of a corporate split, collective agreements are, in principle, not succeeded unless otherwise expressly agreed.
How Long Does a Collective Agreement Remain in Effect?
Duration, Renewal, and Automatic Extension Clauses
The duration of a collective agreement may be freely determined by labor and management within a maximum period of 3 years. If no specific duration is set, or if the agreed duration exceeds 3 years, the duration is automatically deemed to be 3 years.
As a general rule, a collective agreement expires upon the end of its effective period. However, under the Trade Union Act, if the parties continue collective bargaining in an effort to conclude a new collective agreement around the time of expiration but are unable to reach an agreement, the previous collective agreement shall remain in effect for up to 3 months from its expiration date.
In some cases, the parties autonomously agree to an “automatic extension clause,” which provides that “this agreement shall remain in effect until a new agreement is concluded.” Such a clause is intended to maintain stability in labor-management relations until a successor agreement is executed. However, it does not allow the agreement to be extended indefinitely against the will of either party. Accordingly, either party may terminate the collective agreement by giving notice to the other party at least 6 months prior to the intended date of termination, after the agreement has expired. Upon such notice, the collective agreement shall be terminated and cease to have legal effect.
Under Korean labor law, the provisions of a collective agreement are commonly divided into “normative provisions” (규범적 부분) and “obligational provisions.” (채무적 부분)
Even if the collective agreement ceases to be effective, its normative provisions – provisions incorporated into individual employment relationships and establishing standards for working conditions and the treatment of employees – continue to apply to union members.
In contrast, its obligational provisions – provisions governing the rights and obligations between the parties to the collective agreement, including those relating to union activities, collective bargaining, time-off arrangements, and industrial action – cease to have effect when the collective agreement expires.
What If the Employer Violates the Agreement?
Criminal Penalties for Breach of Specific Terms
If the employer breaches any of the following provisions of a collective agreement, the employer may be subject to criminal fines;
Key Takeaways
Collective agreements have legally binding effects that extend beyond the terms agreed upon between a trade union and an employer. Depending on the circumstances, their provisions may apply to non-union employees, continue to affect individual employment relationships after the agreement expires, and remain binding following certain corporate transactions. Understanding how collective agreements are concluded, applied, renewed, and terminated is therefore essential for both employers and trade unions in managing collective labor relations in Korea.
For assistance with collective agreements and other collective labor matters under Korean labor law, please contact us.
Formation, Legal Effect, and Duration
A collective agreement must be documented in writing; any agreement not reduced to writing has no legal effect. The title of the document is not determinative. It will be regarded as a collective agreement as long as it substantively reflects the terms mutually agreed upon by labor and management through bona fide collective bargaining.
The parties’ signatures or seals are required. On the union side, the representative of the union, namely the union president, must sign or affix the seal. On the employer side, the representative director must do so in the case of a corporation, and the business owner in the case of an individual business.
Once a collective agreement is concluded, the union and the employer must jointly file a report with the local labor office having jurisdiction within 15 days of the date of execution. However, failure to file such report does not invalidate the collective agreement. In such cases, a corrective order may be issued, and an administrative fine may be imposed if the order is not complied with.
In principle, a collective agreement applies only to the members of the trade union that concluded the agreement. However, under the Trade Union and Labor Relations Adjustment Act (“Trade Union Act”), if more than half of the employees of the same category at a workplace are covered by a particular collective agreement, the agreement shall also apply to other employees of the same category. The term “employees of the same category” refers to employees who are eligible to join the union but have chosen not to do so. This is referred to as the “general binding force” (일반적 구속력) of a collective agreement.
Although this system is sometimes criticized as allowing non-members to free ride on the benefits of the collective agreement, the system serves a public interest by protecting unorganized employees and promoting the principle of equal work, equal treatment.
In the case of a corporate merger, the surviving company or the newly established company succeeds to all rights and obligations of the merged company. Accordingly, any collective agreement previously concluded between the merged company and the trade union will be succeeded to by the surviving or newly established company.
Likewise, in a business transfer, the transferee succeeds to the employment relationships on a comprehensive basis, and the collective agreements concluded by the transferor and the trade union will likewise be succeeded to by the transferee.
However, in the case of a corporate split, collective agreements are, in principle, not succeeded unless otherwise expressly agreed.
The duration of a collective agreement may be freely determined by labor and management within a maximum period of 3 years. If no specific duration is set, or if the agreed duration exceeds 3 years, the duration is automatically deemed to be 3 years.
As a general rule, a collective agreement expires upon the end of its effective period. However, under the Trade Union Act, if the parties continue collective bargaining in an effort to conclude a new collective agreement around the time of expiration but are unable to reach an agreement, the previous collective agreement shall remain in effect for up to 3 months from its expiration date.
In some cases, the parties autonomously agree to an “automatic extension clause,” which provides that “this agreement shall remain in effect until a new agreement is concluded.” Such a clause is intended to maintain stability in labor-management relations until a successor agreement is executed. However, it does not allow the agreement to be extended indefinitely against the will of either party. Accordingly, either party may terminate the collective agreement by giving notice to the other party at least 6 months prior to the intended date of termination, after the agreement has expired. Upon such notice, the collective agreement shall be terminated and cease to have legal effect.
Under Korean labor law, the provisions of a collective agreement are commonly divided into “normative provisions” (규범적 부분) and “obligational provisions.” (채무적 부분)
Even if the collective agreement ceases to be effective, its normative provisions – provisions incorporated into individual employment relationships and establishing standards for working conditions and the treatment of employees – continue to apply to union members.
In contrast, its obligational provisions – provisions governing the rights and obligations between the parties to the collective agreement, including those relating to union activities, collective bargaining, time-off arrangements, and industrial action – cease to have effect when the collective agreement expires.
If the employer breaches any of the following provisions of a collective agreement, the employer may be subject to criminal fines;
Collective agreements have legally binding effects that extend beyond the terms agreed upon between a trade union and an employer. Depending on the circumstances, their provisions may apply to non-union employees, continue to affect individual employment relationships after the agreement expires, and remain binding following certain corporate transactions. Understanding how collective agreements are concluded, applied, renewed, and terminated is therefore essential for both employers and trade unions in managing collective labor relations in Korea.
For assistance with collective agreements and other collective labor matters under Korean labor law, please contact us.
