The Act On The Promotion Of Worker Participation and Cooperation (“Act”) requires that companies and their employees consult with each other in order to promote a harmonious work environment by establishing Labour Management Councils (“LMC”). This article examines what this means for businesses operating in South Korea.

When must a LMC be established?

The Act requires that a LMC must be formed “in each business or workplace which is vested with the right to decide working conditions” where such workplace has at least 30 employees. In principle, one LMC is established for a single business. Multiple LMCs may be established at very large businesses with widely-dispersed working locations, or whose different divisions handle work of such disparate character that the divisions can be seen to be wholly separate businesses.

What is the prescribed composition of an LMC?

The LMC must be composed of 3-10 members representing the company (“Company Members”) and 3-10 members representing the employees (“Employee Members”). There must be an equal number of Company Members and Employee Members.

Employee Members must be elected by the employees and, if there is a union composed of a majority of employees, the representative of the union and persons appointed by the union must be Employee Members. Company Members must be representatives of the business or workplace concerned.

The LMC must nominate a chairperson and the chairperson must be elected by the unanimous agreement of all LMC members. The chairperson will have responsibility for representing the LMC in its communications with both the company and the employees, and they must chair LMC meetings.

The LMC must also nominate a secretary who will be responsible for any clerical work including recording the minutes of any meetings

How long is the LMC term?

Members will sit on the LMC for a term of three years. Where a replacement LMC member is required to fill a vacancy (for example, because an LMC member has left the company), their term will be the remaining period of the three year term of their predecessor.

LMC members must continue to perform their LMC duties until a successor is elected even in circumstances where their three year term has expired.

LMC members may sit on the LMC for two or more terms if this is agreed between the parties in the bylaws.

What are the bylaws?

The LMC must establish bylaws which govern the organization and operation of the LMC, and must submit the bylaws to the Ministry of Employment and Labour (“MOEL”) within fifteen days from the date of establishment of the LMC. Where any amendments to the bylaws are made, the amended bylaws must be submitted to the MOEL within fifteen days from the date they are amended.

The bylaws address the composition of the LMC membership and selection of members, members’ terms, appointment and removal of members and matters for consultation through the term of the LMC.

What does the LMC do?

The Company must obtain a resolution of the LMC before it can, for example,:

  •  establish any plans in relation to the education, training and skills development of employees;
  •  set up and manage any welfare facilities;
  •  establish an employee welfare fund;
  •  deal with any matters not resolved by the grievance handling committee;

The company must also report to or provide explanations to the LMC at the regular meetings of the LMC any matters of the following kind:

  •  management plans and results;
  •  quarterly production plans and results;
  •  manpower plans;
  •  economic and financial positions of the business

In practice, presentations to the LMC take the form of PowerPoint presentations. Where a company fails to report such matters or provide or give an explanation to the LMC in respect of the above matters, the Employee Members may request that the company submit the relevant documents, and the company is required to comply with such requests in good faith. Non compliance is a criminal offence which can attract a fine of up to KRW 2 million; however, this penalty is rarely pursued in practice.

What is the Grievance Handling Committee?

Every business or workplace with 30 or more employees must have a grievance handling committee in order to hear and handle employees’ grievances.

The grievance handling committee must be composed of a maximum of 3 members being representatives of both the company and the employees. Where an LMC is in place, the LMC must select members of the grievance handling committee from its members.

Upon receipt of a grievance from an employee, a member of the grievance handling committee must consider the grievance and inform the employee concerned of the measures taken to address such a grievance and other outcomes within ten days from receiving the grievance.

Where the grievance is too complex or difficult for members of the grievance handling committee to respond to, it must be raised by the grievance handling committee to the LMC and settled through consultation at an LMC meeting.

Key Takeaways

It is important for businesses operating in South Korea to ensure that they have properly established their LMCs. In addition to ensuring compliance, an effective LMC is key to ensuring employee engagement and satisfaction and gives companies an early indication when aren’t going as well as they should. In practice, where there is a well-functioning LMC, the relevance and influence of an external union will be significantly reduced.