Court: KT's 'Retirement Age Extension' Wage Peak System Not Age Discrimination... Valid

KT Former and Current Employees Lose First Trial in Lawsuit Challenging 'Retirement Age Extension' Wage Peak System
Court: "Retirement Age Extension Itself Is the Most Important Compensation Against Wage Reduction"

Seoul Central District Court, Seocho-dong, Seoul. Photo by Moon Honam munonam@

[Asia Economy Reporter Kim Daehyun] Over 1,300 KT workers filed a lawsuit claiming that the wage peak system introduced by the company in 2015 is invalid, but they were completely defeated in the first trial.

On the 26th of last month, the Supreme Court issued a precedent stating that cutting wages based solely on the 'age' of workers approaching retirement is wrong. In light of this, the recent ruling is interpreted as considering that KT introduced not only the wage peak system but also compensation measures such as 'retirement age extension.'

At 2 p.m. on the 16th, the Civil Division 48 of the Seoul Central District Court (Presiding Judge Lee Giseon) dismissed all claims of the plaintiffs in the first trial of the wage claim lawsuit filed by over 1,300 current and former KT employees against the company.

The court stated, "This case involves the implementation of the wage peak system linked to the extension of the retirement age, so the extension of the retirement age itself constitutes the most important compensation against wage reduction," and added, "It cannot be easily concluded that the wage peak system in this case constitutes age discrimination without reasonable grounds merely because there was no explicit reduction measure related to workload, etc." It also emphasized, "Even when comparing the circumstances of the retirement age extension and the implementation of the wage peak system, workers received higher total wages."

The court also ruled that the labor-management agreement for introducing the wage peak system in this case cannot be invalidated solely because the then union chairman did not obtain approval from the union general assembly during the introduction process.

Furthermore, "The obligation to reform the wage system lies not only with the employer but also with the union. This conclusion comes from interpretations explicitly stated in the law," the court explained, "Considering KT's management situation at the time, the subsequent re-election of the union chairman, the six rounds of win-win consultations held between labor and management to discuss the specifics of the wage peak system, and the fact that the union obtained some concessions from the company regarding the wage reduction rate."

The court stated, "The extension of the retirement age and the reform of the wage system must be viewed comprehensively and holistically and cannot be separated," and noted, "In 2014, KT's operating loss was 719.4 billion KRW, and the net loss for the period was 1.1419 trillion KRW." Citing these management circumstances, the court ruled that KT had an urgent need to implement the wage peak system in response to the extension of the retirement age under the Elderly Employment Promotion Act.

Earlier, in March 2015, KT agreed through labor-management negotiations to implement a wage peak system that reduced wages by 10% annually starting at age 56 in exchange for extending the retirement age. Accordingly, the wage peak system was implemented from January of the following year when the retirement age of 60 was legislated.

However, KT workers filed a lawsuit claiming that their wages were forcibly cut by 10-40% due to the wage peak system secretly concluded behind closed doors, demanding the wages cut by the system. The company, on the other hand, argued that workers actually benefited from the system's introduction and the retirement age extension.

Meanwhile, on the 26th of last month, the Supreme Court ruled that the 'retirement age guaranteed (maintenance type) wage peak system,' which cuts wages solely based on age without reasonable grounds, is invalid. The defendant in the Supreme Court ruling, Korea Electronics Technology Institute, neither extended the existing retirement age with the introduction of the wage peak system nor changed the job content or set lower target levels for employees aged 55 and over whose wages were cut, so their workload did not decrease, which was the basis for the judgment.

At the same time, the Supreme Court emphasized that not all wage peak systems are invalid, and presented criteria for judging the validity of wage peak systems, including ▲the legitimacy and necessity of the introduction purpose ▲the extent and duration of actual wage reduction ▲appropriateness of the target (compensation) measures ▲and whether the reduced funds were used for the intended purpose.

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