Redundancy dismissal system (South Korea)
정리해고제
The provision of South Korea's Labour Standards Act that allows an employer to dismiss workers on grounds of urgent managerial necessity; the statute calls it "dismissal for managerial reasons". It was introduced in 1998, during the currency crisis, through the IMF agreement's demand for labour market flexibility and the grand compromise of the Tripartite Commission, and it treats a transfer, takeover or merger of a business as an urgent managerial necessity. The employer must make every effort to avoid dismissals, select those dismissed by reasonable and fair criteria, and consult the union in advance.
In depth
When the ruling New Korea Party rammed through a labour law revision introducing it in December 1996, the Korean Confederation of Trade Unions answered with a general strike; the strikes of January 1997 were the first major event in the class struggle since 1987 and the first political strikes. The law was rewritten and the implementation of redundancy dismissals was deferred by two years.
The currency crisis of November 1997, when Korea requested IMF assistance, changed the situation. The IMF agreement of December 1997 included the condition that "labor market flexibility will be enhanced by easing dismissal restrictions under mergers and acquisitions and corporate restructuring". The Tripartite Commission, launched on 15 January 1998, agreed on 6 February to delete the two-year deferral and to allow dismissals under reasonable and fair criteria where there was an urgent managerial reason such as a transfer, acquisition or merger of a business. In return the legalisation of union political activity, the permission of teachers' unions and ₩5 trillion for unemployment measures were promised. Worker dispatch was introduced at the same time and came into force in July.
Article 24 of today's Labour Standards Act provides that "an employer who intends to dismiss workers for managerial reasons shall have an urgent managerial necessity; in this case a transfer, takeover or merger of a business to prevent deterioration of management is deemed an urgent managerial necessity". The employer must make every effort to avoid dismissals and select those dismissed by reasonable and fair criteria, without discrimination by sex; must notify the majority union or workers' representative at least 50 days before the planned dismissal and consult in good faith; and a dismissal meeting these requirements is deemed justified. If the employer hires for the same work within three years, dismissed workers who wish it must be re-employed first.
The first big test came at Hyundai Motor in 1998. When the company notified 1,538 workers of "employment adjustment", the union struck six times from 27 May, for 39 days in all, and after mediation by the government and ruling party the two sides agreed on 24 August to dismiss 277 for managerial reasons and place 1,261 on 18 months' unpaid leave. Within the labour movement the KCTU leadership that had accepted the compromise lost a vote of no confidence, and the new leadership withdrew from the commission. The press counted redundancy dismissal and worker dispatch as the representative measures of labour market flexibility, and after the crisis the idea of a job for life disappeared from Korean society.