Supreme Court: "Wages to be returned by labor-management agreement include all wages not yet due for payment"

Supreme Court, Seocho-dong, Seoul.

[Asia Economy Reporter Choi Seok-jin, Legal Affairs Specialist] The Supreme Court has ruled that when wages or long-service awards are agreed to be returned through labor-management agreements, the scope of return includes the full amount of wages or long-service awards whose payment dates fall after the labor-management agreement.

The Supreme Court has maintained the position that even if there is an agreement to reduce or return wages according to a labor-management agreement, wages that have already been concretely accrued at the time of the agreement cannot be reduced or exempted solely by the agreement and require the worker's consent. The criterion for determining whether wages have already accrued is the wage payment date.

The Supreme Court's Third Division (Presiding Justice Lee Heung-gu) announced on the 22nd that it has remanded the case to the Suwon High Court for retrial in the wage lawsuit filed by 113 retired workers including Mr. A against automobile parts company B, overturning the appellate court's partial ruling in favor of the plaintiffs.

Company B, facing ongoing management difficulties since 2016, reached a labor-management agreement on March 8, 2018, with the labor union, which included a provisional return of wages, welfare benefits, and bonuses.

After the agreement, the company sought to obtain 'wage return consent forms' from all employees, but the plaintiffs including Mr. A refused and filed a lawsuit after resigning, claiming unpaid wages, proceeds from employee stock sales, severance pay interest, and others.

The dispute in the trial centered on the scope of wages or long-service awards subject to return under the labor-management agreement.

Specifically, Company B calculated wages for the period from the 21st of the previous month to the 20th of the current month and paid wages on the 25th of each month. The issue was whether wages from February 21 to March 8, 2018?the date of the labor-management agreement?should also be returned.

Additionally, regarding long-service awards paid every five years (5, 10, 15 years) on the company’s anniversary, there was debate over whether the concrete claim for the award arises on the date the length of service required for the award is reached, or on the payment due date.

The first trial court ruled partially in favor of the plaintiffs, holding that the claim for long-service awards had not concretely arisen at the time of the labor-management agreement, and thus the wages subject to return included the long-service awards.

However, the appellate court overturned the first trial’s decision, ruling that if the service period for the award had already passed at the time of the labor-management agreement, the award was not subject to return under the agreement. It also concluded that wages accrued up to March 8, 2018, should be returned.

But the Supreme Court found the appellate court’s judgment to be incorrect.

The Supreme Court ruled that wages whose payment dates fall after March 8, 2018?the date of the labor-management agreement?as well as long-service awards whose payment due date (May 22, 2018) had not yet arrived, even if the service period had passed, are all subject to return.

The court stated, "Whether wages have concretely accrued and cannot be waived solely by collective agreements should be judged based on whether the payment date specified in the employment contract, work rules, or other regulations has arrived," and added, "The appellate court erred in its legal interpretation regarding the scope of allowances subject to return under the labor-management agreement, which affected its judgment."

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