Court: KT's 'Retirement Age Extension' Wage Peak System Is Valid... How Does It Differ from Supreme Court Precedents?

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[Asia Economy Reporter Kim Daehyun] A court ruling on the 16th upheld the validity of KT's wage peak system introduced in 2015, drawing attention to the difference from the Supreme Court ruling on the 26th of last month, which stated that the "retirement age-guaranteed (maintenance type) wage peak system," which cuts wages solely based on age, is invalid.

The Supreme Court panel that previously ruled the system invalid also emphasized that "not all wage peak systems are invalid" and presented criteria for judging the validity of wage peak systems. Accordingly, the panel that issued the valid ruling on this day also appears to have judged that KT's 'retirement age extension type' wage peak system meets the relevant conditions.

◆Current and Former KT Employees: "Retirement Age Extension and Wage Peak System Are Separate"... Court: "Cannot Be Judged Separately"

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

KT introduced the so-called 'retirement age extension type' wage peak system in March 2015 through labor-management agreement. It was a method of cutting wages by 10% annually starting from 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, some workers later filed lawsuits claiming that their wages were forcibly cut by 10-40% due to the wage peak system concluded behind closed doors, demanding the wages cut by the system.

These claims were not accepted in the first trial on this day. 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 cuts," 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 in workload or related matters."

Furthermore, the court added, "Even when comparing the circumstances of the retirement age extension and the implementation of the wage peak system, more wages were paid to workers in terms of total wage amount."

◆Difference from the Supreme Court Precedent Case? ... "Appropriate 'Compensation'"

The KT wage peak system subject to the ruling on this day corresponds to the 'retirement age extension type' wage peak system, which most companies adopted following the 2016 amendment of the Elderly Employment Act to extend the retirement age to 60 and restructure the wage system. This means reducing wages from a certain age in exchange for increasing the retirement age.

While wages are cut from a certain age, the method of guaranteeing employment until retirement age is called 'retirement age-guaranteed type,' and the method of reemploying for a certain period after retirement age is called 'employment extension type.'

The Korea Electronics Technology Institute, the defendant in the Supreme Court ruling on the 26th of last month, had a wage peak system that did not extend the existing retirement age despite its introduction, and the work content of employees aged 55 and older whose wages were cut did not change, nor were their targets set lower to reduce workload. This was the background for the Supreme Court's judgment that this constituted 'discrimination' by cutting wages solely based on age without reasonable grounds.

Along with the ruling, the Supreme Court presented criteria for judging the validity of wage peak systems, including ▲the legitimacy and necessity of the purpose of introduction ▲the extent and duration of actual wage reduction ▲the appropriateness of the target (compensation) measures ▲and whether the reduced funds were used for the intended purpose.

The panel that judged KT's wage peak system valid on this day also ruled that "the extension of the retirement age and the restructuring of the wage system should be viewed comprehensively and cannot be separated," and that appropriate compensation measures such as retirement age extension were provided to workers.

It was also added that KT had an urgent need to implement the wage peak system. In 2014, KT had an operating loss of 719.4 billion KRW and a net loss of 1.1419 trillion KRW, and it had to respond to the retirement age extension following the enactment of the Elderly Employment Act.

The ruling also considered that labor and management held six rounds of win-win consultations to discuss the specific details of the wage peak system and that the labor union obtained some concessions from the company regarding the wage reduction rate.

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