What if retirement age is extended and wages are cut? ... Court says "Not discrimination"

Lawsuit by Korea Power Exchange Employees
Seoul Southern District Court Rules Against Plaintiffs

[Asia Economy Reporter Yoo Byung-don] A court ruling has determined that the wage peak system applied alongside the extension of the retirement age is not discriminatory. This decision came just one day after the Supreme Court ruled that reducing employee wages solely based on age without reasonable grounds in a retirement age maintenance-type wage peak system is unconstitutional.

The Civil Division 13 of the Seoul Southern District Court (Presiding Judge Hong Ki-chan) recently ruled against the plaintiffs in a lawsuit filed by Korea Power Exchange employees demanding unpaid wages due to the application of the wage peak system.

In July 2015, Korea Power Exchange extended the retirement age for employees from 58 to 60 years old, and for special contract employees from 56 to 60 years old, while revising employment regulations to introduce a wage peak system for the extended retirement age period. Accordingly, from 2016, the wage peak system was applied during the extended retirement period, reducing wages to 60% of the original amount.

The employees who filed the lawsuit argued, "We did not agree to the application of the wage peak system, and since we performed the same duties as before after its application, it violates the 'principle of non-discrimination' under the Act on Employment of Older Persons." They also claimed, "We had individual annual salary contracts with more favorable working conditions than the current ones before the wage peak system was introduced." They demanded the company pay the reduced wages due to the wage peak system along with delayed damages amounting to 50 million to 100 million KRW.

In response, Korea Power Exchange stated, "Since the conditions for the extended working period were newly established when extending the retirement age, the employment regulations were not changed to disadvantage employees," and added, "The system was introduced with the consent of the labor union representing the majority of all employees." They also denied the existence of the individual labor contracts claimed by the employees.

The court ruled, "It is difficult to view the change in employment regulations as unfavorable to employees," and dismissed all claims made by the plaintiffs.

The court further stated, "Even with the implementation of the wage peak system, employees receive their original wages until the existing retirement age, and severance pay is calculated based on the basic annual salary before the application of the wage peak system," adding, "This aligns with the purpose of the Act on Employment of Older Persons, which prohibits employment discrimination based on age without reasonable grounds and promotes older persons having jobs suited to their abilities."

Regarding the individual annual salary contracts claimed by the employees, the court explained, "The company's employee salary regulations state that 'annual salary contracts are not separately concluded, and all matters related to annual salary are governed by these regulations,' and 'individual annual salary contracts for employees subject to the annual salary system are not separately concluded but replaced by written notification of changes,'" concluding, "There is no evidence to support the plaintiffs' claims."

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