Supreme Court Again Overturns and Remands Unfair Profit Lawsuit Related to Promotion Corruption at Nong-eochon Gongsa

The Korea Rural Community Corporation's lawsuit demanding the return of unjust enrichment from employees who were dismissed or discharged due to involvement in a promotion corruption scandal has been overturned and remanded by the Supreme Court for the second time.

The reason was that the High Court, which handled the retrial, did not follow the Supreme Court's remand instructions in the previous appeal.

Supreme Court, Seocho-dong, Seoul.

According to the legal community on the 16th, the Supreme Court's First Division (Presiding Justice Seo Kyunghwan) overturned the lower court's ruling in the appeal of the unjust enrichment lawsuit filed by the Korea Rural Community Corporation against three former employees and sent the case back to the Gwangju High Court.

First, the court cited Supreme Court precedents, stating, "A court that receives a case remanded from the appellate court is bound by the factual and legal determinations made by the appellate court as grounds for reversal, unless new claims or evidence are submitted during the post-remand trial process that change the factual basis for the binding judgment."

The court explained, "It is clear that the reason for reversal in the remand judgment was that the lower court before the remand failed to compare the actual tasks performed by each defendant before and after promotion to determine whether the value of each labor was substantially different. However, after the remand, the lower court dismissed the plaintiff's claim by comparing the average difficulty of various tasks possible at the pre-promotion rank with the average difficulty of various tasks possible at the post-promotion rank without comparing the specific tasks actually performed by the defendants before and after promotion, and found it insufficient to recognize the job value as equal."

It continued, "Ultimately, the lower court's judgment after the remand, which assessed the value of labor provided before and after promotion by a different standard than the reason for reversal in the remand judgment, is considered contrary to the binding effect of the remand judgment. Therefore, the lower court's ruling contains an error in misunderstanding the legal principle regarding the binding effect of the remand judgment," it stated.

The Korea Rural Community Corporation had outsourced the creation and grading of promotion exam questions to an external company from 2003 to 2011. In December 2013, it was revealed that some employees had received exam questions and answers from the company for a previously conducted promotion exam and paid for them.

In January 2014, the Chungnam Provincial Police Agency notified that 62 employees of the corporation, including the defendants, were involved in such fraudulent activities during the promotion exam.

Subsequently, the corporation imposed disciplinary actions such as dismissal and discharge on the defendants according to personnel regulations and canceled their promotion appointments. It then filed lawsuits against 24 employees involved in the corruption, demanding the return of salary increases, annual allowances, incentives, and other benefits received due to the promotions as unjust enrichment.

The first and second trials rejected the Korea Rural Community Corporation's claims, reasoning that the promoted employees performed changed duties according to their promotions and received salaries as compensation, so it could not be considered unjust enrichment.

The first trial court stated, "The defendants performed the relevant duties as Grade 3 employees from the date of promotion until the cancellation of promotion on February 14, 2014. It is reasonable to consider the monetary value of the labor provided by the defendants to the plaintiff as equivalent to the total labor compensation that a Grade 3 employee without disqualification for promotion in the plaintiff's organization would receive for performing the same duties over the same period. Even if the defendants were promoted by fraudulent means and the promotion orders are invalid, since the defendants performed the duties as Grade 3 employees and received salaries from the plaintiff, it cannot be considered that the defendants obtained unjust benefits from the plaintiff's property 'without legal cause' or that the plaintiff suffered any damage as a result," it ruled.

However, in August 2022, the Supreme Court overturned the second trial ruling, finding it erroneous, and sent the case back to the Gwangju High Court.

At that time, the court stated, "If a promotion order is invalid but the employee continues to work under the assumption that the promotion order is valid and performs duties according to the promoted rank, and if there is a difference in duties performed before and after promotion and wages are paid as compensation for the duties performed at the promoted rank, the wages received by the employee are compensation for the labor provided, so the employee cannot be considered to have gained a substantial benefit, and the employer cannot claim unjust enrichment for that."

It added, "However, if there is no difference in the duties performed according to the ranks before and after promotion and the value of labor provided after promotion is not substantially different from before promotion, but wages increased solely due to the rank increase, the employee can be considered to have gained a benefit equivalent to the wage increase, and since the promotion is invalid, that benefit was paid to the employee without legal cause and must be returned to the employer as unjust enrichment."

The court further ruled, "Whether there is a substantial difference in the value of labor provided before and after promotion should be judged by comprehensively and objectively evaluating various factors such as the form of labor provided, the content of duties performed, the presence or absence of differences in assignments, and the degree of authority and responsibility according to rank."

Finally, the court stated, "The lower court should have examined whether there is a distinction in the duties performed by the defendants according to their ranks before and after promotion, and whether the value of labor provided differs substantially due to performing duties different from those performed at the previous rank after promotion, and then determined whether the salary increase in this case constitutes unjust enrichment," adding, "Nevertheless, the lower court failed to properly examine this and ruled that the salary increase was compensation for performing duties according to the promotion and thus belonged to the defendants."

The Supreme Court's requirement was to compare the specific duties performed by the promoted employees before and after promotion.

However, the Gwangju High Court's retrial compared the average difficulty of various tasks possible at the pre-promotion and post-promotion ranks rather than the actual tasks performed by the promoted employees. It then dismissed the Korea Rural Community Corporation's claim again, reasoning that there was a substantial difference in job value.

At that time, the court considered it reasonable to calculate and compare averages, taking into account that the salaries received by the promoted employees were inseparably mixed between parts paid according to the job and parts paid according to job competency, and that even for the same job, the specific tasks performed vary.

The court concluded, "Based solely on the evidence submitted by the plaintiff, it is insufficient to recognize that the job values of the tasks performed by the defendants before and after promotion are equal, and there is no other evidence to recognize this. Therefore, absent special circumstances, the salary increase in this case can only be seen as inseparably mixed between job-based pay increases and competency-based pay increases, and it cannot be said that unjust enrichment is established for the salary increase in this case because the existence and scope of competency-based pay increases clearly distinguishable from job-based pay increases have not been specifically proven."

However, the Supreme Court ruled that this retrial judgment was illegal as it did not follow the purpose of the Supreme Court's remand and overturned and remanded the case again.

The Supreme Court's ruling pointed out that judging the average difficulty of tasks at the pre-promotion and post-promotion ranks as different without comparing the specific tasks performed by the defendants before and after promotion violates the "binding effect of the remand judgment."

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