Court: "Labor-Management Agreement on Work Hour Reduction Invalid for Taxi Drivers Not Receiving Minimum Wage"

[Asia Economy Reporter Kim Daehyun] The court ruled that the agreement between taxi drivers who did not receive the minimum wage and the company to reduce working hours is invalid, and that unpaid minimum wages and severance pay must be additionally paid accordingly.

According to the legal community on the 18th, Judge In Hyeongjun of the Civil Division 72 at the Seoul Central District Court recently ruled in favor of the plaintiffs in the first trial of a wage claim lawsuit worth about 35 million won filed by six taxi drivers including Song against the company.

On October 4th last year, a passenger is loading luggage into a taxi at the Seoul Station taxi stand. Photo by Mun Ho-nam munonam@

Previously, the taxi drivers received wages in the form of a fixed daily quota system. They received a certain fixed salary from the company, paid a certain amount of transportation revenue as a quota, and the remaining transportation revenue, called excess transportation revenue, was kept by the taxi drivers.

However, in December 2007, with the revision of the Minimum Wage Act, a special provision was introduced that excluded wages based on production from the scope of wages included in the minimum wage for taxi drivers. The company and the labor union agreed to gradually reduce the prescribed working hours, and the working hours were reduced to 6 hours and 40 minutes per day in 2013-2014, 6 hours per day in 2015, and 5 hours per day the following year.

However, the taxi drivers including Mr. Song claimed, "We received wages below the minimum wage," and demanded, "The company must pay unpaid minimum wages, night work allowances, severance pay, etc. for this."

The company argued, "Although Seoul taxi fares increased due to the special provision, the company bore the fuel costs. While the actual working hours and driving distances of the taxi drivers decreased, their income increased," and "Since the working pattern and driving time changed and the prescribed working hours were reduced by labor-management agreement, the reduction agreement cannot be regarded as an illegal act."

The first trial cited the 2019 Supreme Court plenary session ruling stating, "If the setting of prescribed working hours is merely formal or intended to cleverly evade mandatory labor laws, the validity of the agreement can be denied," and ruled in favor of Mr. Song.

Judge In pointed out, "The agreement to reduce the prescribed working hours in this case was intended to avoid the fixed salary excluding wages based on production falling below the minimum wage due to the implementation of the special provision, and was changed to outwardly increase the hourly fixed salary calculated based on the prescribed working hours."

He added, "Although the minimum hourly wage sharply increased from 2013 to 2017, the fixed salary of taxi drivers did not change significantly, and the quota was rather increased at the time of the 2017 wage agreement. Therefore, the defendant seems to have formally reduced the prescribed working hours to avoid violating the Minimum Wage Act in response to the continuous rise in the minimum hourly wage while maintaining the fixed daily quota system for stable management."

Judge In also said, "Even if the taxi drivers' transportation revenue increases, they practically try to operate as much as possible within dispatch time to receive more performance pay," and "It cannot be concluded that there was a significant change in actual working hours, as the prescribed working hours under the wage agreement seem insufficient to pay the quota."

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