Supreme Court: "Even if Called Vice President, Employee Status Applies If No Preferential Pay or Treatment"

[Asia Economy Reporter Kim Hyung-min] The Supreme Court has ruled that if an executive at a company does not participate in management and works under the user's instructions with treatment similar to other employees, the company must regard them as a worker and pay severance pay.

The Supreme Court's First Division (Presiding Justice Kwon Soon-il) overturned the lower court's ruling that dismissed Mr. A's wage claim lawsuit against actuarial firm B and remanded the case to the Seoul Western District Court on the 22nd.

The court stated, "Even if a person is an executive of a company, if the position is formal and in reality they come to work daily, provide certain labor under the user's direction and supervision, and receive compensation, such an executive qualifies as a worker," adding, "Although Mr. A was called vice president, he did not receive preferential treatment in compensation or conditions compared to other actuaries."

It further noted, "Mr. A and other shareholder members received fixed salaries at similar levels with little variation rather than profit dividends based on performance," and "There is no evidence that shareholder members were substantially involved in decision-making regarding B's operations."

Mr. A joined B in 2003 as a freelance actuary and received his salary as business income.

He regularly came to the office at set times and received a fixed amount of salary on the same day each month. However, he was not enrolled in the four major social insurances. In 2006, Mr. A invested in B and became a member, and in 2014, B changed its organization from a limited liability company to a corporation.

Subsequently, Mr. A filed a lawsuit demanding severance pay of 65,775,000 KRW up to December 2015, claiming that although he was nominally a freelancer or executive, he was effectively the same as a regular employee.

The first trial court ruled in favor of Mr. A, stating, "Actuaries working as freelancers, including Mr. A, regularly commuted to the office and received fixed salaries on the 20th of each month," but also said, "Mr. A held the status of a member who acquired shares in the limited liability company for a certain period. Members of a limited liability company are not workers providing labor under a subordinate relationship," and ordered payment of about half the claimed amount, 33,691,140 KRW.

The second trial court judged that Mr. A worked as a manager from the beginning of his employment and was not a worker. It dismissed the claim, stating that Mr. A managed operations on behalf of the founder from 2005 and was closer to a shareholder member than a worker.

The court pointed out, "After the founder emigrated, Mr. A took over management and was called vice president," and "B paid employee salaries from the company account, while service fees for shareholder members were paid from a different account; Mr. A received service fees from the shareholder member account."

This content was produced with the assistance of AI translation services.