Supreme Court: "It is wrong not to deduct previously paid allowances when calculating additional allowances"

The Supreme Court has ruled that it is wrong not to deduct already paid allowances when calculating additional allowances to be paid to workers.

According to the legal community on the 23rd, the Supreme Court's 3rd Division (Presiding Justice Ahn Cheol-sang) overturned the lower court's partial ruling in favor of the plaintiffs in the wage lawsuit filed by Mr. A and 22 others against Company B, and remanded the case to the Seoul High Court.

Supreme Court, Seocho-dong, Seoul.

Mr. A and others worked at a waste disposal company from 2004 to 2017 and received monthly payments evenly divided based on their labor contract, which included a basic wage for a 40-hour workweek plus various allowances calculated as 660 hours per year.

They had entered into a wage agreement in the form of an annual salary system, where the total annual salary was evenly divided into 12 monthly payments. The annual salary included items such as basic pay, overtime allowance, night shift allowance, and holiday allowance, and the salary amount was fixed in advance regardless of actual working hours.

In 2019, Mr. A and others filed a lawsuit against the company demanding additional allowances. They claimed that they arrived 30 minutes earlier than the designated working hours for handover and worked without any rest during the one-hour break, thus requesting additional overtime pay.

On the other hand, the company argued that since they had concluded a comprehensive wage agreement with the workers, they had no obligation to pay additional allowances. Although the labor contract was originally with Company C, Company B became the defendant after absorbing and merging Company C.

The key issue in the trial was whether the annual salary contract between Mr. A and others and the company could be considered a valid comprehensive wage agreement.

Mr. A and others argued that their work allowed for clear calculation of working hours, so the comprehensive wage agreement with the company was invalid. The company claimed that the wage agreement with Mr. A and others was a valid comprehensive wage agreement and that they had no obligation to pay additional allowances beyond the agreed wages. Furthermore, even if the comprehensive wage agreement was invalid, the company argued that since it did not instruct Mr. A and others to arrive 30 minutes early or work during break times, it was not obligated to pay additional allowances.

The first-instance court ruled in favor of the company. It found that the wage contract in the form of a comprehensive wage system was not disadvantageous to the workers and recognized the necessity and rationality of such wage payment methods.

However, the second-instance court's judgment differed. The appellate court found it difficult to regard the wage contract between Mr. A and others and the company as a comprehensive wage agreement.

The court cited that various allowances included in the annual salary were calculated by multiplying the agreed hourly wage by a fixed number of hours and premium rates, and that additional allowances were paid on top of the agreed overtime, night, and holiday allowances, with the payment amounts varying monthly.

Although Mr. A and others worked in shifts and during the major maintenance period (about 60 days per year when the incineration facility is completely shut down and waste intake is stopped), making working hours irregular, the court noted that actual working hours could be calculated based on work schedules showing shift hours.

The court stated, "Since it is not a case where it is difficult to accurately calculate the plaintiffs' actual working hours, there is no substantial need to conclude a comprehensive wage agreement."

The court ordered the company to pay the remaining amount of additional allowances claimed by the workers, excluding amounts for which the statute of limitations had expired, along with interest. Payments ranging from 1.3 million KRW to 3.28 million KRW per person, totaling about 49 million KRW, were approved.

The Supreme Court also agreed with the second-instance court's view that it was difficult to consider the comprehensive wage agreement as concluded. However, the court found an issue with the appellate court's failure to rule on the company's claim to deduct already paid allowances.

The court stated, "The defendant paid the plaintiffs allowances already for overtime, night, and holiday work in addition to the basic wage. Therefore, if the already paid allowances exceed the statutory allowances calculated based on the plaintiffs' actual working hours including additional work under the Labor Standards Act, the defendant has no obligation to pay additional wages for the extra work. If there is a shortfall, the defendant is only obligated to pay the difference to the plaintiffs."

Furthermore, the court pointed out, "The appellate court found that the defendant was obligated to pay wages for the additional working hours by multiplying the regular hourly wage but did not rule on the defendant's claim that already paid allowances should be deducted. This failure to rule on the facts asserted by the parties and the misunderstanding of the legal principles regarding statutory allowances under the Labor Standards Act affected the judgment and constitutes an error."

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