[Sejong = E-Daily Reporter Cho Min-Jung ] As the government has clarified the scope of labor disputes, labor unions will no longer be able to call strikes over “N% performance-based bonuses” tied to operating profit. The government explained that such actions could infringe upon the rights and interests of third parties, such as the state and shareholders. The government determined that while Samsung Electronics is not required to negotiate with labor and management regarding the construction of its Honam semiconductor plant per se, it must do so if an objective relocation plan is confirmed.

According to government ministries on the 3rd, the Ministry of Employment and Labor announced the “Implementation Guidelines on the Scope of Labor Disputes, Including Management Performance Bonuses,” which specify the criteria for labor disputes under the “Yellow Envelope Act” (amended Labor Union Act). This move comes amid a recent flurry of demands from labor unions at major corporations, including Samsung Electronics, for N% performance-based bonuses. The guidelines clarify whether unions can go on strike over business management decisions such as performance-based bonuses, corporate investments (including the construction or relocation of factories), business divestitures or acquisitions, and the adoption of new technologies.

The Ministry of Employment and Labor determined that performance-based bonuses—for which a practice of consultation between labor and management has long been established—constitute a subject of mandatory collective bargaining. This means that companies must negotiate with unions regarding performance-based bonuses, which are paid as a certain percentage of annual salary or base pay to motivate employees and provide compensation.

The government drew a clear line, stating that “N% performance bonuses” linked to corporate profits are difficult to classify as mandatory bargaining items. This means companies are not required to negotiate with unions regarding “N% performance bonuses,” and conversely, unions cannot engage in labor disputes over such bonuses. The Ministry of Employment and Labor explained that using operating profit—which does not exclude taxes such as interest, corporate income tax, and dividends, nor shareholders’ share—as the source of performance-based bonuses could infringe upon the rights and interests of third parties, such as the state and investors (shareholders).

An official from the Ministry of Employment and Labor explained, “Existing collective bargaining agreements remain valid,” adding, “Labor and management can voluntarily negotiate demands for performance-based bonuses linked to corporate profits.” The official added, “Considering that corporate profits serve as the funding source for various management decisions—such as research and development (R&D), capital investment, and dividends—demanding that a certain percentage be pre-allocated as a source of performance bonuses could restrict the essential nature of freedom of business operations.”

The act of establishing a new factory as part of the Honam Semiconductor Mega Project is not, in itself, subject to labor disputes. The Ministry’s position is that the mere possibility of an impact on working conditions—such as layoffs—is insufficient grounds to classify it as a labor dispute. This effectively makes it difficult for the Samsung Electronics Inter-Company Union to pursue the establishment of the Honam factory as an agenda item for next year’s collective bargaining.

The examples cited by the Ministry of Employment and Labor as cases where changes in working conditions are objectively foreseeable include: △ Cases where specific plans or policies—such as mass layoffs—are being pursued or have been decided upon, and this has been confirmed between labor and management; △ Cases where objective evidence is available, such as internal documents circulated for review, public notices, or reports and consultation materials from the labor-management council; △ Cases where the company has officially announced decisions such as layoffs; and △ Cases where plans for layoffs or job reassignments are announced simultaneously with the establishment of a new factory. Unilateral assumptions, such as abstract remarks by management, are not recognized.

The Ministry of Employment and Labor explained that if a union fails to comply with these interpretive guidelines—such as by demanding an “N% performance bonus”—the ministry must actively recommend that the Labor Relations Commission issue a proposal that reflects a reasonable level of demand. Nevertheless, if the union proceeds with industrial action, its legitimacy will be determined based on Supreme Court precedents. A company’s refusal to negotiate on matters that are not subject to mandatory bargaining—such as an “N% performance bonus”—is not considered an unfair labor practice.