Recent Trends & Critical HR Issues 2003

1. Recent Trends & Critical HR Issues 2003 May 23, 2003 Chun-Wook Hyun Kim & Chang

2. Mr. Chun-Wook Hyun Kim & ChangSeyang Bldg.223, Naeja-dong, Chongro-ku Seoul 110-053, KoreaTel: (82-2) 3703-1130Fax: (82-2) 737-9091/3E-mail: cwhyun@kimchang.com Partner at Kim & Chang and member of the Korean and New York Bar Associations; received his law degree (LL.B.) from the College of Law at Seoul National University. He received a Master of Law Degree (LL.M.) from Harvard Law School and was associated with Sullivan & Cromwell, New York. He served as a member of the Special Committee for the Labor Law Reform. He gave a lecture on Korean labor and employment laws at Harvard Law School in 1993. He is a legal counsel to the Ministry of Labor and co-chairman of the Amcham HR Committee. He frequently writes and speaks on labor/management relations, foreign investment, M&A, HR and restructuring issues.

3. CONTENTS • INTRODUCTION • LABOR POLICY OF THE NEW GOVERNMENT • WORKHOUR REDUCTION • IV. IMPORTANT COMPLIANCE ISSUES • RECENT COURT CASES • VI. 2003 CRITICAL HR ISSUES & SOLUTIONS • VII. CONCLUSION

4. INTRODUCTION • Brief History • 2003 : New Government • Economic Downturn • New Minister of Labor : K.H. Kwon • Tripartite Commission (노사정 위원회) / M.S. Kim • Central Labor Relations Commission / H. Shin • Concern of Inconsistency and High Expectation

5. Year Strikes Workers Involved (000s) Working Days Lost (000s) 1990 322 134 4,487 1995 88 50 393 1996 85 79 893 1997 78 44 445 1998 129 146 1,452 1999 198 92 1,366 2000 250 178 1,894 2001 234 88 1,083 2002 321 94 1,580 Industrial Disputes • Source: Ministry of Labor • Union Membership: 12.0 %

6. II. NEW LABOR POLICY • Strengthen social partnership among labor, business and government • Simultaneously pursue business competitiveness and quality of working life • To strengthen social partnership • Promote social dialogue • Promote gradual transition toward industry level bargaining • Promote workers’ participation • Build infrastructure to prevent labor–management conflict and to provide early settlement • To improve quality of working life • Early legislation of five–day workweek system • Strengthen protection of non–regular workers • Promote gender equality and protection of female workers • No discrimination

7. III. WORKHOUR REDUCTION • Background • Korea has the longest work hours among major countries • Employment generation through job sharing after 1998 crisis • Discussions began at tripartite commission in May, 2000 • Basic agreement between labor and management to reduce work hour : October, 2000 • Government proposal presented to the National Assembly, October, 2002 • National Assembly initiates roundtable negotiation up to May, 2003

8. Government Proposal for Workhour Reduction (Revision of Labor Standards Act) Reduction of statutory workhour per week 44 hours 40 hours Annual / Monthly paid leaves Monthly paid leave Abolish Annual paid leave: 10 days plus 1 additional day for 1 year service 15~25 days for those with 80% or more of attendance 1 additional day per every 2 years of seniority 1 day per 1 month of work for those with less 1 year of service

9. Government Proposal for Workhour Reduction (Revision of Labor Standards Act) Compensation for Unused Leaves: In case annual leave days are not used with 1 year in spite of encouragement by the employer, exempt from paying unused leave day Optional compensatory leaves: Overtime work can be compensated with paid leaves as long as agreed upon with the workers

10. For the first 4 hours of OT 25% Government Proposal for Workhour Reduction (Revision of Labor Standards Act) Menstruation leave / Weekly paid day off No paid menstruation leave Weekly paid day off remains as current is Maximum overtime hours/OT premium 16 hours of maximum overtime hours for 3 years after introduction then 12 hours

11. Government Proposal for Workhour Reduction (Revision of Labor Standards Act) Flexible working hour system Rules of Employment: Two week unit period → No Change Labor Management Agreement: 1 month → 3 months Maintenance of previous level of compensation The employer should maintain the previous level of compensation after the reduction in working hours Rules of Employment / CBA Labor and Employer should make necessary efforts to revise the CBA and ROE in order to reflect the contents of the concerned labor law changes

12. Government Proposal for Workhour Reduction (Revision of Labor Standards Act) • Schedule of Implementation 2003. 7. 1 • Public sector, Banking and Insurance, Companies with more than 1000 employees 2004. 7. 1 • Companies with more than 300 employees 2005. 7. 1 • Companies with more than 100 employees 2006. 7. 1 • Companies with more than 50 employees 2007. 7. 1 • Companies with more than 20 employees No later than year 2010 • All Others

13. IV. IMPORTANT COMPLIANCE ISSUES • Just cause requirement for disciplinary actions (Wrongful Termination case) • Work Rules(Rules of Employment) / 10 or more Adverse Change - group consent • Labor Management Council : 30 or more • Role • Requirements • Issues • Practice • Hiring requirement of veterans’ or family members’ family : 20 or more • Overtime pay

14. V. RECENT COURT CASES • Restructuring, lay off or change of organization is not subject to collective bargaining (Supreme Court, February 11, 2003 and January 11, 2002). • In the case of a business transfer, employment relationship shall be transferred to the buyer (Supreme Court, May 29, 2002). • Strike conducted without strike vote is illegal (Supreme Court, October 25, 2001). • Serious misrepresentation of past work experience may be cause for dismissal (Supreme Court, July 5, 2000). • Involuntary waiver of bonuses is not valid, and voluntary group consent is required (Seoul District Court, January 13, 2000).

15. V. RECENT COURT CASES • Performance Bonus calculated based upon fixed formula should be deemed "wage" (Seoul District Court, December 28, 2000). • Discrimination in severance provisions applicable to temporary workers is not allowed (Supreme Court, October 20, 2000). • Fixed-term contract (3 years) will expire without notice of termination (Supreme Court, May 2, 2000). • Employer must comply with procedures for disciplinary sanction (due process) (Supreme Court, May 19, 2000).

16. VI. 2003 CRITICAL HR ISSUES & SOLUTIONS (주요 쟁점 및 해결방안) • Protection of Non-regular Workers (비정규직 보호) • Fixed-term contract workers/ Risk of Renewal • Outsourcing and dispatched workers • Court case / New legislation • Union Creation by Non-regular Employees • Industry Level Union and Bargaining (산별교섭) / Metal Workers’ Union Vs. 96 Co’s • Life Time Employment, Seniority Pay and Promotion  Life Time Job, Performance Pay • Change of Compensation System (임금체계변화) • Annual Total Compensation System (연봉제) • Equal Pay for Equal Work

17. VI. 2003 CRITICAL HR ISSUES & SOLUTIONS (주요 쟁점 및 해결방안) • Sexual Harassment (성희롱) / Hostile Work Environment • Privacy Protection • Early Retirement Program (명예퇴직, 조기퇴직) • Voluntary Separation Program • Equal Opportunity (남녀고용평등) • Severance Pay (퇴직금) vs. Corporate Pension (기업 연금) • Restriction on Civil Damage Suit & Provisional Attachment (손배, 가압류 제한) • Employment Permit (노동 허가제)

18. VI. 2003 CRITICAL HR ISSUES & SOLUTIONS (주요 쟁점 및 해결방안) • Upcoming challenges for HR management • Compliance • Equal Treatment • Labor Market Flexibility / Non-regular Workers 4) Cost: Excessive Salary Demands and Expectations 5) Poor Performance 6) Union / Employees Participation in Management Issues

19. VII. CONCLUSION • Major Labor Law Reforms – Five-day workweek, protecting of Non-regular workers, severance pay, industry level bargaining • Practical Advice • Compliance issue / voluntary compliance audit • Laws / policy / practice & precedents • Clear policy and procedures • Proactive HR Strategy • Communication (formal & informal) • Importance of line managers • Be sensitive to cultural, emotional and long-term implications • Practical solutions