Is the 'Wage Peak System Invalid' Based on Age... Can Reduced Wages Be Reclaimed?

'Wage Cuts Based Solely on Age Are Illegal' Supreme Court Ruling Fallout
Effectiveness May Vary Depending on Issues Like 'Retirement Age Extension'

Advertisement for the Senior Employment Incentive on the exterior monitor of the Seoul Employment and Labor Office in Jung-gu, Seoul. / Yonhap News

[Asia Economy Reporter Kang Juhee] Recently, the Supreme Court ruled that the "wage peak system," which reduces wages solely based on age without reasonable grounds, is invalid, leading to a surge in inquiries about whether the deducted wages can be reclaimed.

To conclude, not all workers subjected to the wage peak system can recover the deducted wages. The application of the wage peak system with extended retirement age does not constitute discrimination even if wages are reduced. Therefore, the validity of the wage peak system may be judged differently depending on individual cases such as contract conditions.

On the 26th, the Supreme Court ruled that the wage peak system, which reduces wages solely based on the worker's age, constitutes age discrimination and is invalid. The Supreme Court also presented specific criteria for determining the validity of the wage peak system. The Supreme Court stated that ▲the appropriateness of the purpose of introduction, ▲the degree of disadvantage suffered by the affected workers, ▲and whether appropriate measures have been introduced regarding the wage reduction should be considered.

After the Supreme Court ruling, the Ministry of Employment and Labor explained, "As the Supreme Court also clarified, the validity of the wage peak system implemented by other companies may be judged differently depending on whether the judgment criteria are met," and "The Supreme Court ruling states that the 'prohibition of age discrimination in recruitment, hiring, wages, etc., under the Act on Employment of Older Persons' is a mandatory provision, so any content contrary to this is invalid." In fact, on the 27th, the day after the Supreme Court ruling, the Seoul Southern District Court issued a first-instance ruling recognizing the validity of a wage peak system introduced by extending the retirement age.

However, this ruling is expected to have a considerable impact on the field as it invalidates the wage peak system based solely on age and presents certain criteria for judgment. After the ruling, online communities frequently used by office workers have seen a surge in posts inquiring whether they can recover unpaid wages, drawing significant attention.

Nonetheless, since the recognition of the wage peak system's validity may vary depending on contract conditions such as retirement age extension, not all workers are likely to receive the deducted wages. Additionally, under the Labor Standards Act, the statute of limitations for wage claims is three years, so claims for wages older than three years may not be accepted. However, some speculate that if claims for damages due to illegal acts are accepted, the statute of limitations could be extended to ten years.

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