"Excessive Wage Reduction Makes Wage Peak System Invalid" Worker Loses Appeal in Second Trial... Why?

Workers at KB Credit Information lost the appeal in a lawsuit against the company, claiming that the wage peak system with excessive wage cuts is invalid. The court acknowledged the economic losses workers would incur due to the wage peak system but overturned the first trial ruling, recognizing its necessity and validity.

Seoul Central District Court, Seocho-gu, Seoul. Photo by Kang Jin-hyeong

According to the legal community on the 9th, the Seoul High Court Civil Division 1-3 (Presiding Judges Lee Eun-hye, Lee Jun-young, Lee Yang-hee) overturned the first trial ruling and ruled against the plaintiffs in the second trial of a wage and severance pay claim lawsuit filed by four current and former employees of KB Credit Information against the company.

Previously, in February 2016, KB Credit Information signed a collective agreement with the labor union to extend the retirement age from 58 to 60 years old, while introducing a wage peak system that reduces wages starting at age 55. The system stipulated paying 45-70% of the previous year's salary depending on performance. The employees claimed the system was invalid due to significant wage cuts without compensation and demanded the difference in wages and severance pay before the application.

The first trial sided with the workers. The court judged that the wage cuts were excessively large and that the company did not take sufficient measures to compensate for the disadvantages.

However, the second trial ruling differed. The court stated, "The wage peak system in this case is recognized as necessary and reasonable in terms of the purpose, background, and legality of the procedure." It added, "Although it includes economic losses or disadvantages for elderly workers, the extent is not excessively unreasonable to be considered lacking rationality."

Furthermore, the court explained, "Most of the wage peak system subjects, including the plaintiffs, performed tasks with significantly lower intensity and difficulty compared to their previous duties." It also noted, "The company made efforts to minimize disadvantages, such as allowing employees who were subject to the defined benefit pension plan before becoming subject to the wage peak system to join the defined contribution pension plan."

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