How Far Is the Samsung Electronics Performance Bonus Strike Legal? A Precedent-Based Analysis

Recent Supreme Court Rulings Highlight Performance Bonus Issues

TAI Recognized as Wages, OPI Excluded

External Factors Like Market Conditions Outweigh Labor Contribution

Labor-Management Agreements Valid Only Year by Year


Semiconductor Profits Driven by AI Supercycle

Lack of Wage Nature Limits Scope for Labor Disputes

Yellow Envelope Act Emerges as a Variable for Strike Legitimacy

Regarding the planned general strike over performance bonuses by the labor union at Samsung Electronics, the legal community is focusing on the procedural legitimacy of the action. This is because the union's demands have expanded beyond improving working conditions to include the distribution of excess corporate profits and areas of managerial decision-making as subjects of labor disputes. The clearest guidelines from the judiciary on performance bonus disputes are found in a series of recent Supreme Court rulings. In decisions handed down in January and February, the Supreme Court confirmed that “management performance bonuses are not wages, which are compensation for work performed” in lawsuits filed by retirees from Samsung Electronics and SK hynix, respectively.

According to the legal community on May 19, in the lawsuit over severance pay against Samsung Electronics, the Supreme Court recognized the ‘Target Achievement Incentive (TAI)’—which is paid depending on employees’ achievement of performance goals such as sales results—as compensation for work performed, classifying it as wages. However, the court denied the wage nature of the ‘Over-Profit Incentive (OPI)’, which is paid in connection with corporate profitability and other factors. The court reasoned that whether and to what extent economic value added is generated by the company is not closely related to the provision of labor, and is instead more heavily influenced by market conditions beyond the employees’ control.

The same legal reasoning was applied in the subsequent SK hynix lawsuit. The Supreme Court ruled that SK hynix’s management performance bonuses are also determined not only by the provision of labor, but also by external factors such as the company’s capital, market conditions, and managerial judgment. Therefore, such bonuses cannot be regarded as compensation directly corresponding to the amount or quality of work. The court specifically clarified that even if performance bonuses have been paid based on long-term labor-management agreements, their validity is limited to the relevant year only.

These precedents now serve as the core argument for Samsung Electronics’ management in countering the union’s demands. The management has stated that it will provide a ‘special award’ at the highest level if the company achieves the top industry position, but continues to reject the union’s proposals to formalize performance bonuses or abolish payment caps. This is because the moment a fixed ratio is stipulated in the collective agreement, management’s discretion in business operations would be infringed upon, and performance bonuses would become a “fixed payment obligation”—in other words, wages.

Currently, the prevailing view is that Samsung Electronics’ massive operating profits are primarily the result of external factors, namely the semiconductor “supercycle” driven by the boom in the artificial intelligence (AI) industry. According to Article 2, Clause 5 of the Trade Union and Labor Relations Adjustment Act, a labor dispute is defined as a state of conflict arising from disagreement over the determination of working conditions. Legal experts point out that demanding the distribution and institutionalization of management performance bonuses—which the Supreme Court has ruled do not constitute wages—and even resorting to a general strike over the issue, falls outside the scope of a legitimate labor dispute under current law.

However, there are also claims that the legitimacy of the strike could be secured under the so-called “Yellow Envelope Act” (Trade Union and Labor Relations Adjustment Act Amendments to Articles 2 and 3) currently in force. As the Yellow Envelope Act expands the scope of labor disputes to include “business management decisions that affect working conditions,” it is interpreted that union demands or strikes concerning management’s criteria for calculating performance bonuses or securing related resources could also be recognized as legitimate.

Jisoon Park, Professor at Korea University School of Law, emphasized, “Deciding whether to allocate company profits first to new R&D investment, factory expansion, or other uses is a matter of management’s strategic decision-making. If the union demands that these allocations be fixed, it could infringe upon management rights. Management performance bonuses should fall within the authority of the company’s highest decision-making bodies, such as the board of directors and the general meeting of shareholders, and from the outset should not be subject to negotiation or industrial action.”

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