Certain employers operating in Korea are required to have a Labor Management Council (LMC). The purpose of the LMC is to promote harmonious relations between companies and their employees by providing a consultative body utilised by both employees and the company.
We discuss the key requirements of an LMC below.
When must a company establish an LMC?
A LMC must be formed “in each business or workplace which is vested with the right to decide working conditions” where such workplace has at least 30 employees. Multiple LMCs may be established at very large enterprises with widely-dispersed working locations, or whose different divisions may handle work of such disparate character that the divisions can be seen to be wholly separate enterprises.
Key features of the LMC
The LMC must be composed of three to ten members representing the company (Company Members) and three to ten members representing the employees (Employee Members). There must be an equal number of Company Members and Employee Members (e.g. four Company Members and four Employee Members). Employee Members must be elected by the employees or appointed by the relevant union if there is a majority union active in the workplace.
The LMC must establish bylaws which contain prescribed terms and these must be submitted to the MOEL within fifteen days from the date of the establishment of the LMC.
There are three key functions of the LMC: consultation, passing resolutions and reporting. Further, a sub-committee of the LMC will be the grievance handling committee which plays a central role in receiving and considering employee grievances and implementing outcomes.
The LMC must hold regular meetings but may hold an extraordinary meeting if deemed necessary. LMC meetings must be open to all employees except where the LMC has made a resolution that the meeting not be open.
Failure by the company to submit LMC bylaws may result in an administrative fine of up to KRW 2 million. Failure by the company to hold LMC meetings every three months or failure to appoint members of a grievance handling committee may result in a criminal fine of up to KRW 2 million.
Fines may also be ordered where there is found to be:
- an obstruction, without justifiable reasons, by a person to the establishment of the LMC;
- a failure by a person, without justifiable reasons, to implement a resolution passed by the LMC; or
- a failure by a person, without justifiable reasons, to implement an arbitration decision by the LMC.
Further, a company which takes disadvantageous actions against any Employee Member or intervenes in or interferes with an election any Employee Members may be ordered to correct such actions, failing which, may result in a fine of up to KRW 5 million.
To ensure compliance, companies should consider whether they are required to have a LMC and if so, whether the LMC bylaws (or updated bylaws) have been submitted. Further, companies should ensure that LMC meetings are scheduled with the necessary regularity an in accordance with procedural requirements.
Not only are there penalties for interfering with the effective operation of the LMC, companies should seek to ensure that employees feel that their concerns can be heard through the LMC in order to facilitate harmonious labor relations.
Herbert Smith Freehills can assist you with achieving compliance. To discuss how, please contact Fatim Jumabhoy at email@example.com.
Written by Fatim Jumabhoy, Partner; and Lauren Lee, Associate