Attorney Park Sam-geun of Yoon & Yang LLC recently told ChosunBiz this. With a tentative wage-bargaining agreement between labor and management at Samsung Electronics passing a union vote, the shape of future labor disputes could vary depending on how corporations design their bonus systems.
The tentative wage-bargaining agreement between labor and management at Samsung Electronics passed a union vote on the 27th. This effectively ended the general strike crisis for now. The agreement includes the creation of a special management performance bonus for the DS division, funding linked to business performance, and payment in company stock.
But the embers of conflict have not been fully extinguished. As the union's demanded "operating profit N%" bonus formula moved into the labor-management agreement, key issues have surfaced over whether the bonus is wages, whether it can be the subject of collective bargaining and industrial action, and where it clashes with the company's business judgment.
After SK hynix agreed to an operating-profit-linked bonus, similar demands have continued at major corporations such as Samsung Electronics, Kakao, and Samsung Biologics. If bonuses are recognized as part of the average wage or ordinary wage, they could affect the calculation of severance pay and statutory allowances. The Supreme Court reached different conclusions on the wage nature of Samsung Electronics' Target Achievement Incentive (TAI) and Overall Performance Incentive (OPI), noting that whether bonuses are included in the average wage can vary depending on how the system is designed and how payments are made.
Attorney Park worked at the Ministry of Employment and Labor (MOEL) and the Central Labor Relations Commission, then at Samsung Electronics and Samsung Electronics Service, and now advises corporations in the HR and labor group at Yoon & Yang LLC. The following is a Q&A with Attorney Park.
― How should the recently spotlighted demand for an "operating profit N% bonus" be viewed legally?
"It is hard to regard the demand to pay a set percentage of operating profit as a bonus as a wage demand straightaway. That is because it strongly has the character of a post hoc distribution of performance. Especially if, as in the Samsung Electronics agreement, it is paid in company stock and is conditioned on achieving operating profit and on management's decision-making, the room to view it as part of the average wage narrows.
From the standpoint of corporations, it is necessary to make clear that the bonus is not direct compensation for work performed but is determined by management performance and external factors."
― Is it different from a simple wage increase demand?
"If it is wages, it is of course a mandatory subject of bargaining. If the bonus is not wages, the union can argue it is a welfare-type payment. Welfare benefits also fall under working conditions, so a bargaining demand is possible.
However, an operating-profit-linked bonus differs in nature from general welfare benefits. It is large in scale and is connected to shareholder interests, research and development (R&D) investment, and future corporate value. It is hard to say it remains pure welfare, and it should be viewed as a new type of demand that includes business-management judgment."
― If it is a subject of collective bargaining, does that make a strike justified?
"Not necessarily. The legitimacy of a strike should be assessed based on whether mandatory bargaining items have reached an impasse. A demand to disclose the bonus formula is closer to a predicate fact for discussing how much to set the bonus at. It is difficult to see the disclosure of the formula itself as a working condition.
If a strike is launched solely because the formula was not disclosed, it may be difficult to receive legal protection. Disputes over a demand to pay money for which the right to receive has already arisen are, in principle, for the courts to decide."
― How does the Supreme Court's incentive ruling connect to issues of severance pay or statutory allowances?
"The Samsung Electronics Target Achievement Incentive and Overall Performance Incentive cases are, first of all, decisions about whether they are included in the average wage, which is the basis for calculating severance pay. They are not cases that directly ruled on whether bonuses are a subject of collective bargaining or whether a strike over bonus demands is justified.
However, the courts place importance on whether the bonus is compensation for work performed or is determined by external factors. If external factors and minimum conditions for payment are made clear, the room for inclusion in the average wage can be reduced."
― What is the most important point to be careful about when drafting an agreement?
"The best course is not to put bonus details into the collective agreement. If it must be included, the payment conditions should be designed so that they are determined by external factors.
For example, wording is needed that the decision on whether to pay and on the amount is made in consideration of overall circumstances such as the company's business performance, investment plans, and financial soundness. Conversely, phrases like "will pay" or "guarantees a minimum payout rate" can lead to disputes over a right to claim payment."
― What is the significance of paying in company stock?
"Under the Labor Standards Act, wages are, in principle, to be paid in currency. If the special performance bonus is not direct compensation for work performed but a distribution of performance, payment in company stock can be reasonable.
If a sale restriction is attached, it also has the effect of encouraging executives and employees to focus on long-term corporate value rather than short-term performance."
― How should a demand to disclose the bonus formula be viewed?
"Disclosing the bonus formula or the division-specific allocation criteria is closer to an issue of balance between labor and management than a legal issue. The basic structure of bonus calculation or key indicators can be explained. However, the specific formula can be protected as a trade secret. Ultimately, it should be judged at the bargaining table according to the company's particular circumstances."
― What principle should corporations establish first?
"Agreements that run counter to current law must not be made. On that premise, the company's future and shareholder interests, workers who are not union members, and even minority unions all need to be considered together.
In particular, many labor disputes are hard to resolve through legal theory alone. Treating the union not as an adversary but as an equal partner also reduces legal mistakes. Workers, too, should not look only at how much this year's bonus will be but should seek a reasonable solution by considering the company's competitiveness 10 or 20 years from now."
― What is Yoon & Yang LLC's strength?
"Yoon & Yang LLC can provide corporations with comprehensive solutions based on manpower in HR and labor that includes former senior government officials and experts in union activities."