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DE RUEHUL #0548/01 0480504
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P 170504Z FEB 06
FM AMEMBASSY SEOUL
TO RUEHC/SECSTATE WASHDC PRIORITY 6052
INFO RUEHBJ/AMEMBASSY BEIJING 0094
RUEHKO/AMEMBASSY TOKYO 0174
RHMFISS/COMUSKOREA J2 SEOUL KOR
RHMFIUU/COMUSKOREA SCJS SEOUL KOR
RUEHC/DEPT OF LABOR WASHINGTON DC
RHMFISS/COMUSKOREA J5 SEOUL KOR
RUCPDOC/DEPT OF COMMERCE WASHDC 1343

UNCLAS SEOUL 000548 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/K AND EB/TPP/BTA 
PASS USTR FOR CUTLER AND KI 
 
E.O. 12958: N/A 
TAGS: ECON ELAB ETRD KS PGOV
SUBJECT: LABOR SNAPSHOT: THE ISSUES 
 
REF: A. SEOUL 507 
 
     ¶B. 05 SEOUL 637 
     ¶C. 05 SEOUL 1669 
     ¶D. 05 SEOUL 2042 
 
SENSITIVE BUT UNCLASSIFIED -- PLEASE HANDLE ACCORDINGLY 
 
SUMMARY AND INTRODUCTION 
------------------------ 
 
¶1.  (SBU) This is the second of three cables (Ref A is the 
first) that describe ROK labor-management relations in 
anticipation of upcoming U.S.-ROK Free Trade Agreement 
negotiations.  This report focuses on the two main issues 
that have dominated industrial relations debate over the past 
year:  "irregular" workers and labor reform.  Korea's biggest 
challenge has been how to address ROK's sizable population of 
contract, temporary and part-time employees.  It is a matter 
of concern not just for the workers themselves, who may make 
up over half of the workforce and generally earn far less 
than regular workers, but also for unions, who depend on 
regular workers for their membership rolls, and for 
employers, who depend on temporary workers to cope with the 
ROK's comparitively expensive and inflexible labor market. 
The government's legislative solution has stalled in the 
National Assembly and managed to alienate both labor and 
management.  A labor reform "roadmap" has been the other main 
topic of discussion.  In circulation since 2003, the roadmap 
contains provisions that would further align Korean law with 
international standards and ameliorate the impact of major 
labor law changes that will come into effect in January 2007. 
 Organized labor, however, opposes the roadmap as a blueprint 
for "arbitrary corporatism."  END SUMMARY. 
 
IRREGULAR WORKERS 
----------------- 
 
¶2.  (SBU) A significant portion of the ROK labor force is 
comprised of contract workers, temporary employees, part-time 
employees, temp agency personnel, and other "irregular" 
workers.  Employers have increasingly turned to this 
workforce to avoid the high costs associated with regular 
personnel.  Employers point out that laying off workers in 
the ROK, relative to other countries, is extremely expensive. 
 As a result, employers hire temporary workers to maintain a 
labor force they can adjust according to ever-changing 
product and business trends.  According to Ministry of Labor 
statistics released in October 2005, Korea had 5.48 million 
nonregular workers, who made up 36.6 percent of the 
workforce.  Labor and other groups claimed that the number 
could even be as high as 60 percent.  Irregular workers 
generally enjoyed fewer benefits, had lower job security, and 
received lower wages than regular workers performing 
comparable work.  According to an August 2005 Korea Labor 
Institute study, irregular workers earned 70 percent of the 
salaries earned by regular workers. 
 
¶3.  (SBU) In 2004, the Ministry of Labor introduced 
legislation to increase labor market flexibility and address 
irregular worker discrimination and related problems (Ref B). 
 This government plan would prohibit discrimination and grant 
regular worker benefits, including termination protections, 
to irregular workers who have been employed for at least 
three years.  The proposal would also change the law 
regulating temporary workers that work for employment 
agencies ("dispatch workers").  Such employees currently 
represent less than 1 percent of the labor force, are able to 
work in only 26 industries, and are primarily clerical. 
Under the new law, all industries except for the 
construction, hospital, marine, "dangerous industries," and 
any other sectors designated by presidential decree would be 
allowed to use dispatch workers. 
 
¶4.  (SBU) Strongly objecting to the proposal, organized labor 
argues that the law would allow firms to increase the 
employment of irregular workers and further institutionalize 
their presence in the workforce.  Labor unions have already 
organized numerous demonstrations and strikes over this issue 
(Ref C) and have promised many more if the bill is passed 
into law.  Employers have also been critical.  The American 
Chamber of Commerce, for instance, faulted the proposal for 
insufficiently addressing the workplace flexibility issue, 
which pushed employers to hire temporary workers in the first 
place.  In a February 13 press conference, Lee Soo-young, 
Chairman of the Korea Employers' Federation, warned that if 
the government went too far toward protecting irregular 
workers without increasing workplace flexibility, there could 
be "strikes by management."  He explained that more and more 
South Korean companies would quietly move their plants to 
China, India, Bangladesh and other countries with lower labor 
costs. 
 
¶5.  (SBU) Thus, lacking any real base of public support, the 
bill has had a tortured history.  The ruling Uri Party tried 
to pass it in February 2005, but Democratic Labor Party (DLP) 
representatives physically blockaded the National Assembly 
committee chamber until they secured an agreement to postpone 
its consideration until April 2005.  In April, the Labor and 
Environment Committee initiated a three-way dialogue to 
review the legislation.  Later that month, the National Human 
Rights Commission (NHRC), which has the authority to issue 
non-binding opinions on matters relating to human rights, 
declared that the bill did not provide sufficient protection 
for irregular workers and proposed that the bill include 
provisions that required equal pay for equal work and a 
limitation on the types of work for which contract laborers 
could be hired (Ref D).  The nation's two umbrella trade 
federations -- the Korean Confederation of Trade Unions 
(KCTU) and the Federation of Korean Trade Unions (FKTU) -- 
quickly endorsed the NHRC position, which the MOL and 
business groups found unacceptable, and negotiations in the 
National Assembly broke down.  Nevertheless, the government 
has said it was committed to passing the legislation by 
February 2006. 
 
ROADMAP FOR INDUSTRIAL RELATIONS REFORM: BACKGROUND 
--------------------------------------------- ------ 
 
¶6.  (SBU) The passionate debate over irregular workers may be 
just a prelude to a larger battle over a long-pending labor 
reform plan.  In 2003, MOL charged a committee of experts 
with the daunting tasks of resolving outstanding labor 
relations issues and helping the ROK meet international labor 
standards.  That committee produced the "Initiative on the 
Advancement of the Labor Relations Law and Systems," or the 
"roadmap," which MOL passed to the Korean Tripartite 
Commission (KTC) for review.  Without significant alteration, 
the KTC handed the roadmap back to MOL in September 2005. 
 
¶7.  (SBU) At the time, MOL said it would submit the roadmap 
to the National Assembly for passage in February 2006.  While 
the government's timeline now appears somewhat unrealistic, 
the ROKG has an interest in expeditiously passing the roadmap 
into law because it would resolve several areas about which 
the OECD has expressed concern (septel).  (NOTE:  The OECD 
now expects a report on the results of the roadmap 
legislation in the spring of 2007.  END NOTE.).  Further, 
imminent labor law changes in the ROK are likely to force the 
roadmap to the center of public attention.  In particular, 
according to the Trade Union and Labor Relations Adjustment 
Act (TULRAA), the current practice of employers paying the 
wages of full-time union workers will be prohibited beginning 
in January 2007.  Also in January 2007, the current 
prohibition on multiple unions at the enterprise level will 
end.  As Korea's current law does not designate the means for 
determining the collective bargaining representative among 
the multiple unions, many expect inter-union conflict and 
widespread confusion on both sides of the bargaining table. 
 
¶8.  (SBU) The roadmap includes measures that would help 
mitigate the impact of both these changes.  Organized labor, 
however, objects to the roadmap as being too pro-management. 
In the words of the KCTU, the "aim of the roadmap is not the 
improvement of industrial relations but institutionalization 
of neoliberal policies."  To the KCTU, the roadmap is but a 
"blueprint that enforces arbitrary corporatism." 
 
MAJOR ROADMAP REFORMS 
--------------------- 
 
¶9.  (SBU) Wages for full-time union workers:  It is current 
practice in the ROK for employers to pay the salaries of 
full-time union workers, even if those "employees" work 
exclusively at union headquarters.  Experts believe that over 
6,000 union officials are paid in this manner.  In an effort 
to decrease union dependency on corporate financing and 
increase union transparency and accountability, the National 
Assembly in the 1997 TULRAA prohibited employers from paying 
full-time union workers.  The law included a grace period 
that delayed implementation until 2002.  The ROKG in 2001 
provided an additional five-year grace period, which expires 
in January 2007.  As recognized when the two grace periods 
were put in place, if this change is not properly managed, it 
could deliver a devastating blow to union financing.  The 
roadmap would allow wage support for a limited number of 
full-time union workers, based on the size of the union. 
 
¶10.  (SBU) Multiple unions at the enterprise level:  Pursuant 
to another TULRAA provision that has been twice delayed, 
multiple unions will be permitted at the enterprise level 
starting from 2007.  However, how to unify the bargaining 
channels remains a contentious issue.  Labor insists that it 
is a matter for labor and management to decide on a 
case-by-case basis.  Employers argue that government should 
decide the issue in order to avoid confusion.  The roadmap 
states that unions should have a designated period of time to 
determine a collective bargaining agent.  If the unions fail 
to unify the bargaining channels within that period, the 
right to bargain collectively would either be given to the 
union that has the majority of workers as members or, if 
there is no such union, to the union that garners the 
majority of votes from workers.  An alternative solution 
would be to form a collective bargaining team in proportion 
to the number of union members. 
 
¶11.  (SBU) Union shop:  According to 2002 research, over 40 
percent of collective bargaining agreements state that if 
members of a trade union account for more than two-thirds of 
all workers, the remaining workers must join the union. 
These provisions will be untenable after enterprise-level 
union pluralism begins in 2007.  Under the roadmap, union 
shop provisions would be either abolished, or maintained on 
condition that workers who apply to, or organize, other 
unions not be subjected to personal disadvantages. 
 
¶12.  (SBU) Employee notification of layoffs:  Current law 
provides that workers' representatives must be notified 60 
days prior to redundancy dismissals made for managerial 
reasons.  The roadmap provides that the consultation period 
for employment adjustment would be set differently according 
to the scale and ratio of dismissals, with a 60-day limit. 
In addition, conditions for employment adjustment would be 
eased or lifted for companies declaring bankruptcy. 
 
¶13.  (SBU) Union status for the unemployed:  The unemployed 
are not considered "workers" under current law and are 
therefore not allowed to join unions.  Under the roadmap, 
unemployed persons may join industrial-level unions, but not 
enterprise-level unions.  Specific qualifications at the 
industrial level would be determined by the unions 
themselves. 
 
¶14.  (SBU) Bargaining and industrial action:  In addition to 
"working conditions," which are already a mandatory subject 
of collective bargaining, issues such as lump sum deduction 
of union fees, union activity during worktime guarantees, and 
grievance procedures would also be mandatory bargaining 
issues. 
 
¶15.  (SBU) Term limit for collective bargaining agreements: 
Presently, the maximum term for collective bargaining 
agreements is two years.  Under the roadmap, the terms of the 
agreement would be set by the parties.  However, in case of 
an agreement that exceeds three years, the agreement may be 
terminated after three years upon six months' notice of 
either party. 
 
¶16.  (SBU) Third-party intervention:  The roadmap would 
abolish the current law's requirement that any third party 
that wants to support bargaining or an industrial action must 
first report to the government. 
 
¶17.  (SBU) Replacement work:  Current law authorizes 
businesses to use only existing workers for replacement work. 
 In cases of legal strikes in public businesses, the roadmap 
would permit replacement work through new recruitment and 
subcontracting. 
 
¶18.  (SBU) Essential public businesses:  The current 
restrictions on the right of workers at essential public 
businesses would be eliminated.  Instead, there would be a 
regulation that public sector businesses must maintain a 
minimum level of service while on strike.  Workers subject to 
the minimum service requirement would be ordered to return to 
duty. 
 
¶19.  (SBU) Mediation:  The prohibition on industrial action 
during mediation would be extended from 30 days to 60 days. 
VERSHBOW