Successful Collective Bargaining

When it comes to collective bargaining, it is essential for management to develop and adhere to its own goals and strategic plans. Of course, partial amendments to the negotiating strategy or some concessions are possible during bargaining, but management needs to remember its initial goals and strategic plans throughout the negotiating process. There are still a significant number of employers who do not realize the importance of the annex to the collective agreement in terms of developing and maintaining negotiating goals and strategies.  

Generally, such matters as the duration of effect, peace clauses, supplementary agreements, re-negotiation and rules for storage of the agreement are stipulated in the annexes to collective agreement. Here are 3 tips on how management can deal with union demands with respect to annexes to collective agreement. 

Tip (1) Set the period of effect for the wage agreement to 2 years

As Korea has achieved unprecedented speed in economic growth, most Korean companies have been conducting their wage bargaining every year and collective bargaining every two years. Now the Korean economy seems to have entered a low-growth stage, yet management and unions seem to repeat the decades-old labor practice of negotiating their wages and other working conditions every year. For some companies, both management and union have to meet every year at the collective bargaining table because their collective agreement expires every year. Since trade unions tend to demand working conditions better than the previous year’s, such frequent collective bargaining inevitably leaves employers with greater financial burdens and a higher risk of management-labor conflict in the workplace. Thus, it is advisable to extend the effective period of wage and collective bargaining agreements to 2 years, which is the limit for effective periods of collective agreements under the Trade Union & Labor Relations Adjustment Act (TULRAA), for promotion of stable labor relations.  

Of particular note is that if wage and collective bargaining are conducted separately, wages will directly and indirectly jump up as many financial matters are already included in collective bargaining agenda. Therefore, it is more desirable for companies to hold both wage and collective bargaining together every 2 years. If extending the period of effect for wage agreements is impossible due to deeply rooted labor practice, the company and union may be able to find some middle ground: both parties can agree to a 2 year gap between agreements while increasing employee wages according to seniority or considering the annual inflation rate and productivity growth in wage increases. 

Tip (2) Delete the clauses of automatic renewal or extension of collective bargaining agreements

Since the collective agreement is a type of contract, it becomes invalid when it expires. However, according to the TULRAA, the existing collective agreement remains valid for 3 months from its expiry date if the employer and the union have not yet concluded a new collective agreement, despite continuous negotiations.      

In order to avoid situations where there is no agreement in place once the previous one expires, trade unions have typically demanded an “automatic extension” clause for collective agreements. Such a clause will allow the existing collective agreement to be regarded as valid after it expires and until a new agreement is made. Unions sometimes request an “automatic renewal” clause such as “If neither party proposes renewal, termination, or modification of the existing collective agreement 30 days in advance of the expiry date, the agreement shall remain effective for another 2 years.”

There are worries that such “automatic renewal” or “automatic extension” clauses may prolong the outdated collective agreements in a rapidly changing social and economic environment. Therefore, when trade unions demand such clauses at the negotiating table, companies need to refuse. If there are already such clauses in the existing collective agreement, it is advisable to remove them from any new agreements. 

In workplaces that have automatic extension clauses in their collective agreements, the trade union may not be motivated to engage in sincere negotiation because the existing agreement is still in effect and the union does not really need a new one. In this case, management needs to terminate the existing agreement. The TULRAA stipulates that either party concerned may terminate the collective agreement by giving notice to the other party six months in advance even if the existing agreement specifically provides that it shall remain effective after its expiry date. Therefore, in such cases, an employer needs to take firm actions against the union by terminating the existing collective agreement. 

Tip (3) Refuse union demands for a supplementary agreement or re-negotiations against the “peace obligation” 

Trade unions are prohibited from staging industrial action to force modification or abolishment of a collective agreement regarding employee working conditions during the effective period of the agreement. This prohibition is known as the “peace obligation”. Although there is no specific provision regarding this obligation in the TULRAA, it is believed to be fundamental to the collective agreement’s primary purpose - creating order in the workplace. Trade unions are also required to prevent their members from engaging in industrial action against the peace obligation.

However, trade unions usually want room for supplementary agreements or re-negotiation in annexes to the collective agreement in order to nullify the union’s peace obligation and re-negotiate through unilateral notification during the effective period of the existing collective agreement. If supplementary bargaining or re-negotiation is allowed, the collective agreement’s primary function – maintaining peaceful labor relations – will be seriously undermined, and normal business activities will be severely hampered due to incessant requests for collective bargaining. 

Hence, employers should not allow any clauses permitting supplementary bargaining or unnecessary re-negotiation during the effective period of the collective agreement. In unavoidable circumstances, supplementary bargaining or re-negotiation needs to be clearly and firmly restricted to “special reasons” such as revision of the TULRAA or organizational changes of the company.