NA bill to guarantee labor succession following M&A

NA member Ok-Joo Song proposes a bill to protect workers from transfer of businesses

Strengthens labor-management council and specifies the workers’ right to refuse labor succession and right to object

Prepared to provide opportunity to relieve anxiety that arises from job instability…labor unions welcome the bill

A bill that guarantees the succession of labor relations in changing businesses such as mergers or business transfers is being promoted.

 

With the introduction of such a bill soon expected, eyes are on whether and how the pharmaceutical industry will also be affected by the bill.

 

In particular, the bill is expected to pull the brakes on the unilateral notifications given by multinational pharmaceutical companies that undergo frequent mergers and divisions.

 

Ok-Joo Song (Democratic Party of Korea), member of the Environment and Labor Committee of the National Assembly, submitted the ‘Act on the protection of workers changing business, etc.’ as a representative, which is the first bill to stipulate the succession of labor relations following changes in business, such as corporate spinoffs, merger, and changes in subcontractors.

 

Specifically, the business owner must undergo consultation processes with the labor representative before the change of business, and notify the workers subject to succession, and stipulates the worker's right to refuse succession and right to object.

 

Also, the bill contains measures to prevent the existing employment rules and working conditions from changing unfavorably with an individual worker’s consent during changing business and restricts layoffs from the change of business.

 

In the case where a change of business happens, the collective agreement made between the previous company and labor union is to be succeeded as well.

 

In particular, the bill stipulates the laws of labor succession and protection take precedence over other laws.

 

On the background for proposing such a bill, Song said, “There has been criticism that the current system lacks legal stability as the succession of labor relations left to the interpretation of the court.

 

The EU has guidelines on change of business that stipulate labor succession as a principle.

 

The proposed bill intends to provide significant protection to workers that may be left unstable due to changes in the workplace by stipulating the succession of labor relations following change of business.” The bill was proposed as a result of the group dismissal of cleaning workers that happened at the LG Twin Tower, however, it is expected to have a significant impact on the pharmaceutical industry as well.

 

In particular, multinational pharmaceutical companies have been seeing much labor-management conflict due to frequent mergers and split-ups.

 

For example, Pfizer spun off its off-patent business to a separate corporation, Pfizer Upjohn, and then combined with Mylan only 2 months after the division and renamed the company to Viatris.

 

MSD has also spun off its women’s health·off-patent drug·biosimilar business with Organon.

 

Takeda Pharmaceutical also acquired Shire and sold off its primary care business (chronic disease business) in the Asia-Pacific region.

 

In the process, many employees have suffered labor instability, worried that they might be notified to move to the spin-off or become subject to voluntary retirement due to redundancies.

 

Protests were led by labor unions opposing the unilateral decisions made by companies.

 

With mergers and divisions expected to continue at the global level, similar issues are expected to continue to arise.

 

The problem is that there is no law stipulating the succession of labor relations following changes of business under the current law and relies solely on case law precedents.

 

Workers have difficulty exercising their ‘right to refuse transfers,’ and in reality, cannot assert their rights to refuse relocation during labor negotiations.

 

If the bill is passed, the consultation process between the company and workers would play an important role in the sale or mergers of its businesses.

 

Labor consultant Kyung-Rak Kim of the Daesang Labor Law Firm said, “The bill will make it mandatory for the management to undergo a consultation procedure with worker representatives in advance in the process of making corporate changes such as mergers, business transfer, or divisions.

 

The bill stipulates the right to refuse succession or raise objections of workers in the process.

 

If the bill is passed as it is, it will be able to provide significant protection to workers in the process of corporations’ reckless business changes."