The Ulsan District Court recently rendered a decision regarding a case in which multiple labor unions existed at a company, and the company while conducting collective bargaining with each of the labor unions, (i) paid “encouragement payment” for improving the Rules of Employment (“ROE”) only to members of the labor union which had executed the Collective Bargaining Agreement (“CBA”), and (ii) differentially paid performance bonuses to members of each labor union (the “Court Decision”).  The Ulsan District Court reversed the decision of the court of first instance (which found that representative directors of the company engaged in unfair labor practice of controlling/interfering with the formation and operation of labor unions, and imposed a fine against them), and found the representative directors not guilty (Ulsan District Court Decision 2019No1258, June 26, 2020). 

In this Court Decision, the matter at issue was whether unfair labor practice of proposal of differential conditions existed in a business place with multiple labor unions as the company had (i) presented its CBA proposal (which had a main objective of improving the wage system which had been consistently opposed by one of the labor unions), and (ii) proposed that members of the labor union which accept the company’s CBA proposal would receive “encouragement payment” and would be entitled to more advantageous criteria for the performance bonus.  Kim & Chang represented the representative directors of the company (Defendant) and presented a thorough defense on legal principles of unfair labor practice, and this resulted in the court finding the representative directors not guilty.

In this respect, in another case concerning a business place with multiple labor unions, the Supreme Court previously found that unfair labor practice of controlling/interfering with the formation and operation of labor unions existed where the employer had provided “encouragement payment for executing the CBA without disputes” and “encouragement payment for meeting business goals and improving performance” only to members of the labor union that signed the CBA as of the execution date of the CBA (Supreme Court Decision 2017Du33510, April 25, 2019).  The Supreme Court’s decision was based on the legal principle that, if an employer, in the midst of the collective bargaining process, paid money and other valuables only to members of a labor union that signed the CBA pursuant to such CBA, and if such act was conducted with the intention of controlling/interfering with the formation and operation of labor unions, such act may constitute unfair labor practice. 
 
In the Court Decision, the district court cited the above legal principle of the Supreme Court decision as is, and found that the company engaged in unfair labor practice of controlling/interfering with the formation and operation of labor unions.  Such decision was based on the grounds that the company’s act of presenting its CBA proposal and providing “encouragement payment” and more advantageous performance bonus only to members of the labor union which accepted such proposal constituted an act of imposing discriminatory conditions which was unnecessary for executing the CBA and could pressure other unions. 

Nonetheless, the appellate court found the representative directors of the company not guilty, stating that it did not appear that the company’s above acts were conducted under an anti-labor union stance or with the intention to intervene/control the formation and operation of labor unions, and presented the following legal principles in detail: 

• If an employer presented the same CBA proposal to multiple labor unions, it shall be deemed that the employer treated all labor unions equally and thus fulfilled its obligation to maintain a neutral position.  As long as the terms and conditions of the CBA proposal were reasonable and fit for its purpose, even if in practice, different working conditions or treatment between labor unions were created due to some unions accepting the CBA proposal and others rejecting the proposal pursuant to their decision making, this cannot by itself be deemed that the employer engaged in unfair labor practice in violation of its obligation to maintain neutrality; and 
• In light of the overall consideration of circumstances regarding collective bargaining, unless special circumstances such as the fact that the differential treatment was mainly driven by an employer’s anti-union intent exist, the action taken by an employer pursuant to the results of the collective bargaining cannot be viewed to have violated its obligation to maintain neutrality or constituted unfair labor practices of controlling/interfering with the formation and operation of labor unions.

Prior to this Court Decision, except for the 2019 Supreme Court decision above, no case precedents existed on whether unfair labor practice existed with respect to business places with multiple labor unions in which employers separately conducted collective bargaining with the unions.  This Court Decision is significant as it further specifies the legal principle of the above Supreme Court decision on whether payment of money and other valuables by an employer to members of a labor union pursuant to an executed CBA in the midst of collective bargaining with other labor unions constitutes unfair labor practice. 

We provided a basis for the in-depth legal principles of the court by presenting to the court similar cases of foreign legal systems and expert opinions relating to unfair labor practices.  We also emphasized that the court should render a ruling different from the existing Supreme Court decision by analyzing differences between the facts of the Supreme Court case (in which unfair labor practice was found) and this case.  As such, the court rendered more specific legal principles on unfair labor practices where an employer with multiple labor unions engages in separate collective bargaining with the unions, and found that the company’s presentation of its CBA proposal was reasonable and fit for its purpose and therefore did not constitute unfair labor practice.

Despite the fact that a significant period of time has passed since the multiple labor union system went into effect in July 2011, courts and academia have not provided a clear position on the numerous legal disputes involving business places with multiple labor unions, such as unfair labor practice.  Thus, when employers with multiple labor unions engage in bargaining with those labor unions, we advise establishing plans for bargaining beforehand and conducting thorough legal review during the process of the collective bargaining. 

This Court Decision is significant as we, representing the Company from the appeals process after it was found guilty by the district court, utilized our know-how accumulated from our experience in litigation and advisory work regarding numerous labor unions cases and our cooperation with experts in academia to persuade the court to render more specific legal principles on unfair labor practice.