Where a part of a business division is succeeded to a newly incorporated company due to a corporate division, the requirements for the succession of the labor relationship concerning the succeeded business to the newly incorporated company, and the case where the relevant worker may refuse the succession of the labor relationship.

Article 530-10 of the Commercial Act provides that a company established through division (hereinafter “newly established company”) succeeds to the rights and obligations of the divided company in accordance with the division plan. As such, labor relations of the divided company may be included in the subject of succession pursuant to the above provision. However, in light of the purport of the Constitution, which guarantees the freedom of occupation for workers, and the Labor Standards Act provides for the right to self-determination of workers with respect to working conditions (Article 4), prohibition of forced labor (Article 7), employer’s duty to specify working conditions (Article 17), prohibition of unfair dismissal (Article 23), or restriction on dismissal for managerial reasons (Article 24), the succession of labor relations pursuant to the division of a company is permissible only if such succession is legitimate, such as through the procedure for workers’ understanding and cooperation, and where a company seeks to succeed to employment relations with the newly incorporated company prior to the division’s understanding and succession of the details and succession of labor relations with the relevant company, the relevant labor union’s consent can be denied.

Article 530-10 of the Commercial Act, Article 15 of the Constitution, Articles 4, 7, 17, 23, and 24 of the Labor Standards Act

Mogin Pream Co., Ltd. (Law Firm Square, Attorneys Ahn Hong-han et al., Counsel for the defendant-appellant)

The Chairman of the National Labor Relations Commission

Intervenor joining the Defendant

Seoul High Court Decision 2010Nu21732 decided January 19, 201

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

Article 530-10 of the Commercial Act provides that a company established through division (hereinafter “newly established company”) shall succeed to the rights and obligations of the divided company in accordance with the division plan. As such, labor relations of the divided company may also be included in the subject of succession pursuant to the above provision. However, in light of the purport of the Constitution that guarantees the freedom to choose an occupation and that the Labor Standards Act stipulates the right to self-determination of workers with respect to working conditions (Article 4), the prohibition of forced labor (Article 7), the employer’s duty to specify working conditions (Article 17), the prohibition of unfair dismissal (Article 23), or restrictions on dismissal due to managerial reasons (Article 24), the succession of a labor relationship by division of a company shall be allowed only when it has procedural justification, such as going through the procedures for workers’ understanding and cooperation, and where it is used as a tool to escape the provisions of statutes and regulations for the protection of workers, such as restrictions on dismissal, the validity thereof shall be denied.

Therefore, in cases where a part of a business division succeeds to a newly incorporated company due to the division of a company which has engaged in two or more businesses, if the divided company explained the corporate division background, purpose and time, the scope and contents of the succeeded labor relationship, the outline and contents of the newly incorporated company, etc. and followed procedures for seeking understanding and cooperation before obtaining the approval of the general meeting of shareholders on the division plan, the labor relationship regarding the succeeded business shall be succeeded to the newly incorporated company even if the relevant worker did not obtain the consent of the relevant employee. Provided, That in special circumstances, such as where the division of the company is used as a means to dismiss the relevant employee while avoiding restrictions on dismissal under the Labor Standards Act, the relevant employee may refuse the succession of labor relations by expressing his/her opposing opinion within a reasonable period of time from the time when he/she received the notification of succession of labor relations or becomes aware

According to the reasoning of the judgment below and the evidence duly admitted by the court below, the plaintiff company established Hyundai B&P Co., Ltd. (hereinafter "former B&P") by dividing the legal entity's business sector from October 23, 2008 to March 2009. The intervenor joining the defendant (hereinafter "the intervenor") was in charge of inventory management at the ○○○○○○○○○○○○○○○○○○○○○○○ Team after joining the plaintiff company. The plaintiff company requested labor-management consultation with the labor union regarding the division of the company from October 23, 2008, but the labor union claimed that the labor union shall set the working conditions of the union members whose labor relationship is succeeded by Hyundai B&P as a collective agreement, and the plaintiff company did not proceed properly. The plaintiff company held around five months from around October 2008 to around March 2009 with respect to the necessity and method of division of the company and explanation on the company's business sector's business sector's employees succession and employment plan.

In light of the above facts in light of the legal principles as seen earlier, the Plaintiff Company demanded consultation with the labor union regarding the division of the instant company, and held an explanatory meeting on the division of the company against workers over a five-month period. Thus, barring special circumstances, such as that the division of the instant company would circumvent the restrictions on dismissal under the Labor Standards Act, the Intervenor’s labor relationship should be deemed succeeded to the Hyundai B&P regardless of whether the Intervenor raised an objection against the succession of the labor contract under the instant division, regardless of whether the Intervenor raised an objection against the succession of the labor contract.

Nevertheless, the lower court determined that the Intervenor’s labor relationship is not succeeded to Hyundai B&P, on the premise that the employee’s labor relationship does not succeed to the newly established company if the employee exercises the right to refuse to succeed to the labor relationship according to the instant company division, on the contrary that the employee’s labor relationship does not succeed to the newly established company. In so doing, the lower court erred by misapprehending the legal doctrine on the succession to the labor relationship due to the company division.

Therefore, without examining the remaining grounds of appeal by the Plaintiff, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Yong-deok (Presiding Justice)