In principle, an employer must obtain group consent from employees through a collective decision-making process to amend the rules of employment (“ROE”) that could result in disadvantageous changes to working conditions that deprive employees of their vested rights and interests. The Supreme Court’s firmly established position on this issue has been that the failure to obtain group consent in and of itself will not nullify the disadvantageous change if the change is reasonable in light of social norms, notwithstanding the potential disadvantage to employees (Supreme Court Decision 78Da1046, September 12, 1978; Supreme Court Decision 87Daka2853, May 10, 1988, etc.).
On May 11, 2023, however, the Supreme Court issued an en banc decision reversing its position, holding that “...unless there are special circumstances to conclude that the labor union or employees abused their group consent right, the disadvantageous change shall not be deemed valid solely on the ground that it is reasonable in light of social norms...” (Supreme Court Decision 2017Da35588, 35595, May 11, 2023).
Specifically, the Supreme Court provided the following reasons for abolishing the social norm reasonableness standard: (i) the employees’ collective consent right is an important procedure in achieving labor-management equality under the Constitution and the Labor Standards Act and thus cannot be ignored merely because the changes to the ROE are “reasonable” or “appropriate;” (ii) it contradicts Article 94, Paragraph 1 of the Labor Standards Act, which explicitly requires group consent for any disadvantageous changes to the ROE; (iii) “reasonableness based on social norms” is an ambiguous concept that will impair legal stability and predictability if maintained; (iv) changes to working conditions should be made through persuasion and good faith efforts by the employer; and (v) disadvantageous changes to the ROE can be made without group consent if employees abuse their group consent right.
The Supreme Court highlighted the group consent right as a significant procedural requirement and held that the proposed change, considered “reasonable in light of social norms,” cannot justify the failure to fulfill such a procedural requirement in making disadvantageous changes to the ROE. Through this decision, the Supreme Court reconfirmed the need for employers to engage in serious persuasion and good faith efforts to obtain the group consent required to make disadvantageous changes to the ROE. That said, the Supreme Court also recognized the court’s authority to accept disadvantageous changes to ROE without group consent on an exceptional basis where employees abuse their group consent rights.
This Supreme Court decision has made it even more important for employers to obtain group consent and engage in good faith efforts to persuade employees prior to making any disadvantageous changes to the ROE. We also note that the Supreme Court expressly acknowledged the possibility of the employees’ abuse of group consent rights being the basis for recognizing disadvantageous changes if the employer engages in persuasion and good faith efforts.
