Acting on behalf of a foreign auto parts supplier company with multiple labor unions in Korea (the “Company”), litigation experts from Kim & Chang’s Labor & Employment Practice successfully defended the Company in court.  The Court ruled that the Company did not violate its duty of fair representation under the Trade Union and Labor Relations Adjustment Act (the “TULRAA”) in the course of collective bargaining.

The Company had three labor unions: Labor Union A, which is a company-level union, and Labor Union B and C, which are subdivisions of the industrial-level union.  In order to execute a wage agreement and collective bargaining agreement in 2020, the Company bargained with Labor Union A, which was selected as the representative bargaining labor union through a process of deciding on a single bargaining channel.

However, Labor Union C (the “Minority Labor Union”) filed a total of three claims to the Labor Relations Commission for the correction of the Company’s violation of the duty of fair representation.  The claims were made on the grounds that “the Company unreasonably discriminated against the bargaining representative union and the Minority Labor Union in relation to (i) distribution of paid time-off limits, (ii) payment of salaries to paid time-off workers, (iii) provision of office equipment, and (iv) designation of a paid holiday on the union’s foundation day in the course of bargaining for the execution of wage and collective bargaining agreements.”  The Labor Relations Commission recognized all of the claims raised by Labor Union C.

Based on the above decision by the Labor Relations Commission, the Minority Labor Union filed a tort action for damages against the Company.  Despite of the Labor Relations Commission’s decision, the Court in this matter ruled that the Company’s liability in tort for violation of its duty of fair representation cannot be recognized on the grounds that it is difficult to conclude that the Company discriminated against the Minority Labor Union and that there was a reasonable justification for such differentiation.

More specifically, the Court acknowledged the following:
 

• It is difficult to conclude that the Company unfairly discriminated against the Minority Labor Union if the Company also granted paid time-off requests to the Minority Labor Union to the extent possible in the absence of an agreement between the parties (even if the Company did not acknowledge paid time-off for the Minority Labor Union for a certain time period).

• The Company did not unilaterally decide on the allocation of the paid time-off limits or reach an agreement with the representative labor union.

• The fact that the Company paid different wages to the Minority Labor Union and the representative labor union cannot automatically be deemed as unfair discrimination, if the Company used a fair criteria to determine wages to be paid to the Minority Labor Union in the absence of an agreement between the parties.

• The Company was not obliged to provide the representative labor union and the Minority Labor Union an office or other office equipment in a uniform or proportional manner.

• Even if the foundation anniversary of the bargaining representative labor union was designated as a paid holiday under the collective bargaining agreement, it is difficult to conclude that the Company intentionally or negligently discriminated against the Minority Labor Union if there was no request to also designate the foundation anniversary of the Minority Labor Union as a paid holiday during the collective bargaining and such agenda was not raised.
   

Accordingly, the Court did not recognize the Company’s liability in tort for the violation of its duty of fair representation.

Based on our extensive experience and in-depth understanding of businesses with multiple labor unions, fair representation obligations, paid time-off, and collective bargaining agreements, as well as our extensive analysis of the materials prepared in the course of collective bargaining, we actively argued that (i) the Company did not discriminate against either the bargaining representative union or the Minority Labor Union, and (ii) even if there was in fact discrimination, the Company had a reasonable justification from a factual and legal perspective to engage in such differential treatment.  Nearly all of our arguments were accepted by the Court, and we were successful in overturning the decisions of the Labor Relations Commission.

With the recent increase in the number of businesses with multiple labor unions, the collective bargaining process has become more time-consuming and complicated, and the risk of a company being accused of violating its duty of fair representation in relation to issues such as paid time-off, etc. has increased.  Accordingly, this case is meaningful in that it highlights that an employer should not engage in discrimination against the bargaining representative union and minority labor union “without reasonable grounds.”