‘Wage Peak System’, Age Discrimination Issue... Supreme Court's First Ruling Today

1st and 2nd Instance Courts: "Violation of the 'Elderly Employment Act' Renders It Invalid... Employee Disadvantage Compensation Not Allowed"
If Lower Courts' Rulings Stand, Wage Peak System Invalid... Lawsuits for 'Wage Claims' Expected to Increase

[Asia Economy Reporter Heo Kyung-jun] On the 26th, the Supreme Court will issue a ruling on whether the ‘wage peak system,’ which reduces workers' wages while maintaining the retirement age through an agreement with the labor union, constitutes age discrimination prohibited by the Act on Employment of Older Persons. The ruling to be announced by the Supreme Court on this day will be the first precedent to determine the invalidity of the wage peak system. Depending on the Supreme Court's judgment, the wage peak system itself could be shaken, drawing concentrated attention from the economic and industrial sectors.

The Supreme Court’s First Division (Presiding Justice Noh Tae-ak) will hold a hearing on the appeal in a wage lawsuit filed by retiree A against a domestic research institute.

A joined the Electronics Components Research Institute in 1991 and took early retirement in 2014. The institute where A worked introduced a performance-based wage system (wage peak system) in January 2009 for employees aged 55 and older through an agreement with the labor union, and A became subject to it starting in 2011.

Accordingly, A filed a lawsuit claiming the wage difference until retirement, arguing that due to the wage peak system, his base salary was reduced by two ranks in position and 49 levels in competency grade. He claimed that the wage peak system is invalid as it constitutes age discrimination prohibited by the Act on Employment of Older Persons.

The trial focused on whether the age discrimination prohibition provision under the Act on Employment of Older Persons is a mandatory rule and whether the wage peak system violates this provision, rendering it invalid. Article 4-4 of the Act on Employment of Older Persons stipulates that employers shall not discriminate against workers based on age without reasonable grounds when paying wages, etc.

The first trial court held that the Act on Employment of Older Persons is a mandatory rule prohibiting discriminatory acts beyond exceptions. The court found that the institute’s wage peak system reduced the salaries of employees aged 55 and older, and even with measures such as early retirement systems or workload reductions, it could not compensate for the disadvantages to workers.

The first trial court pointed out, "It cannot be assumed that workers aged 55 and older lack performance," and "there is no reasonable ground to discriminate only against workers aged 55 and older." The second trial court also ruled that the wage peak system violates the mandatory provisions of the Act on Employment of Older Persons and is invalid.

If the Supreme Court upholds the lower courts’ rulings, it is highly likely that workers at workplaces that have introduced the wage peak system will file wage lawsuits one after another. However, since the statute of limitations for wage claims is three years, even if the Supreme Court maintains the lower courts’ rulings and workers file lawsuits, compensation will likely be limited to reduced wages within three years from the current point.

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