Notable Court Cases and Administrative Interpretations This Month

▶ Inclusion of “On-Leave” Employees in the Criteria for Bonus Payout

- Supreme Court Case 2024Da259443

On October 8, 2024, the Supreme Court ruled that if a collective agreement specifies bonus eligibility for “currently employed” individuals, this also applies to employees on leave, meaning that an employee on medical leave is still eligible for the bonus.

Case Summary:

• The employee (plaintiff) argued that the phrase “currently employed” under the collective agreement refers to “those who remain affiliated with the company,” and thus should include employees on leave.
• The employer (defendant) countered that “currently employed” should be interpreted as those actively working as of the pay date, thereby excluding those on leave.
• The lower court ruled that, based on the interpretation of the term “currently employed” across several provisions within the collective agreement, employees on leave should not be excluded from bonus eligibility. It noted that if only those who worked on the pay date were eligible, this could create fairness issues among employees and lead to an unfair interpretation of the explicit terms to the detriment of the employee.
• The Supreme Court upheld this view.

Implication: Employers would be well advised to review their collective agreements to see how bonus calculations (and other provisions) affect employees on leave. In the absence of explicit language in collective agreements or work rules to the contrary, these provisions are likely to be interpreted as inclusive of employees on leave. Where the company’s intent differs, it may be advisable to clearly articulate this in the relevant policies and agreements.

▶ Discriminatory Treatment of Employees Who Filed Wage Lawsuits as Unfair Labor Practice

- Seoul Administrative Court Case 2022GuHap79404/79497

On October 25, 2024, the Seoul Administrative Court ruled that an employer who discriminated in wage payments against employees who had filed a claim for ordinary wages has committed an unfair labor practice involving both discriminatory treatment and interference in union activities.

Case Summary:

• In a lawsuit concerning the inclusion of specific allowances as ordinary wages against Company A, the Supreme Court ruled in favor of the unionized employees, recognizing certain allowances, including performance-based pay, as part of ordinary wages. The Court ordered Company A to pay the resulting unpaid wages. Similar lawsuits followed, each involving different claim periods.
• Following the Supreme Court's final ruling, non-union employees also requested that Company A include certain allowances in their ordinary wages and pay any resulting unpaid wages. In response, Company A implemented a differential payment approach based on lawsuit participation. Employees who had not filed a lawsuit were paid for the entire wage claim period affected by multiple lawsuits (e.g., 10 years), while employees who had filed a lawsuit received payments only for the specific periods they had claimed in their individual cases. As a result, employees who did not participate in the lawsuits received unpaid wages for the full period, whereas participating employees were limited to the specific periods they had claimed.
• The metalworkers’ union filed a complaint with the Labor Relations Commission, asserting that this differential payment approach constituted an unfair labor practice, both as unfavorable treatment and interference with union activities. The Local Labor Relations Commission found that Company A’s actions did not constitute unfair labor practices. However, the Central Labor Relations Commission partially upheld the complaint, concluding that while unfavorable treatment was not established, there was interference with union activities.
• The Seoul Administrative Court later determined that Company A's differential wage payments reflected an intent to interfere with union activities. The court concluded that this approach constituted an unfair labor practice both in terms of interference with union activities and unfavorable treatment, as it effectively penalized union members for engaging in lawful union activities.

Implication: This ruling indicates that, even where each lawsuit was individually filed by employees rather than by the union itself, differential wage payments based on participation in union-led litigation could still constitute an unfair labor practice if legally recognized as an intent to influence union activities. Discrimination based on involvement in union-driven lawsuits—regardless of union membership or the fact that individual employees were the plaintiffs—may be interpreted as unfavorable treatment and interference with union activities.

If upheld on appeal, this decision would signal that differential treatment in wage payments based on lawsuit participation may indeed be classified as an unfair labor practice, thereby exposing the company to potential penalties under the Trade Union and Labor Relations Adjustment Act, including imprisonment of up to two years or fines up to 20 million KRW, in addition to possible civil claims for damages. We will continue to monitor this case closely for any developments on appeal.

▶ Consideration of Paid Status on Weekly Holidays in Cases of Absence on Public Holidays

- Ministry of Employment and Labor Opinion 4-0586

On October 8, 2024, the Ministry of Employment and Labor clarified that absence on a public holiday during the workweek does not disqualify an employee from being considered as “present” for weekly paid holidays, ensuring their inclusion under Article 55, Paragraph 1 of the Labor Standards Act.

Implication: Under Korean law, weekly paid holidays are granted only when an employee has worked all designated workdays. This opinion confirms that, if a public holiday falls within the workweek, an employee’s absence on that day does not constitute absenteeism, as it is a non-working day. As such, employers must still pay the weekly holiday allowance if employees worked all other designated days. Employers who do not pay the weekly holiday allowance may face wage arrears and potential criminal charges. However, foreign-invested companies and domestic returnee companies operating in free economic zones may handle weekly holidays as unpaid according to the Special Act on Designation and Management of Free Economic Zones.

Labor and Government Trends

1. National Assembly Concern about Delays in Implementation of Court Rulings on Illegal Subcontracting

During the 2024 National Assembly audit, concerns were raised about delays in enforcing court rulings on illegal subcontracting cases—situations where workers, although formally hired by subcontractors, are recognized as direct employees of the principal company due to unlawful work arrangements.

Representative Lee Yong-woo of the opposition Democratic Party highlighted that many subcontracted workers continue to face these conditions without resolution, despite favorable court rulings, and urged the Ministry of Employment and Labor to expedite enforcement.

For example, even after a court decision confirming that 184 subcontracted workers at KEPCO should be treated as direct employees, these workers were instead laid off without further recourse. Similarly, Hyundai Steel’s Suncheon plant has not complied with court orders to directly employ subcontracted workers, and Hyundai Steel has even faced criminal charges for failing to follow corrective orders from the regional labor office.

While some enforcement actions have been taken—such as the criminal charges against Hyundai Steel—significant delays in implementing these rulings persist. Labor unions and advocacy groups have intensified their calls for stronger government oversight and accountability to ensure full enforcement of court decisions on illegal subcontracting practices.

2. Prison Sentence for Primary Contractor CEO in Fatal Construction Site Collapse

In a construction site collapse that resulted in the deaths of two migrant workers, the CEO of the primary contractor, Barun Construction, received a two-year prison sentence under the Serious Accident Punishment Act and the Occupational Safety and Health Act. The subcontractor’s site manager received a suspended sentence of 18 months, with three years of probation. The primary contractor failed to fulfill safety management duties and had prior violations under the Occupational Safety and Health Act.

This marks the fourth prison sentence under the Serious Accident Punishment Act. Given the trend of imposing heavier penalties for serious accidents, future cases may yield even stricter sentences regardless of settlement with victims’ families.

3. Arrest Warrant Requested for Education Service Company CEO Over Wage Arrears

The Seoul Regional Employment and Labor Office has requested an arrest warrant for the CEO of an education service company on charges of violating the Labor Standards Act. The CEO allegedly defaulted on approximately KRW 190 million in wages and retirement benefits owed to 58 employees since October 2007. After fleeing to the United States for 16 years, the CEO returned to Korea last year, only to attempt another escape before being apprehended.

During the investigation, the CEO denied most allegations, and the Seoul Labor Office, citing the scale of wage arrears and misappropriation of company funds, requested a pretrial detention warrant on October 10. The Seoul Labor Office has reasserted its strong stance on wage arrears as a serious offense, affirming its commitment to pursue and hold intentionally non-compliant employers accountable.