[Exclusive] 32 Retired Senior Employees File 1.6 Billion KRW Compensation Lawsuit Against Hyundai Motor Company

Thirty-two retired executives of Hyundai Motor Company have filed a lawsuit seeking damages worth approximately 1.6 billion KRW, claiming that Hyundai treated them unfairly in terms of wages and allowances by introducing a wage peak system through employment rules that apply only to executives, which constitutes a tort under civil law.

The lawsuit is expected to have significant repercussions as it was filed following the Supreme Court's plenary session ruling in May last year, which changed the previous stance held for 45 years by stating that employment rule changes cannot be made without the consent of workers due to social appropriateness.

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According to the legal community on the 3rd, the 32 retired Hyundai executives filed a damage claim lawsuit on December 29 last year at the Seoul Central District Court, arguing that "Hyundai Motor's violation of Article 94, Paragraph 1 of the Labor Standards Act and discriminatory acts against executive employees constitute a civil tort." They demanded payment of a wage difference of 20 million KRW due to the implementation of the wage peak system, a difference of 30 million KRW in annual and monthly leave allowances, and interest. The initial claim amount totals 1.6 billion KRW, and the amount is expected to increase later.

Previously, around 2004, Hyundai separately established so-called ‘executive employee employment rules’ that applied only to managerial-level employees and above. These employment rules contained provisions that treated the plaintiffs differently in various working conditions, and it is reported that many executives were discriminated against in several aspects under these rules. Hyundai introduced the wage peak system into the executive employee employment rules around 2015.

The plaintiffs argued that Hyundai discriminated against them solely because they were executive employees by ▲ separately establishing employment rules that apply only to executives, ▲ failing to obtain consent through collective decision-making methods of workers, and ▲ introducing the wage peak system a few years after establishing the executive employment rules, discriminating against the plaintiffs based on age without reasonable grounds. They claimed these actions constitute a ‘civil tort.’ They also argued that Hyundai should pay damages equivalent to the difference in wages and welfare benefits such as annual and monthly leave allowances calculated as if the separately established executive employment rules had not been applied.

Hyundai’s executive employee employment rules violate Article 94, Paragraph 1 of the Labor Standards Act, a mandatory provision requiring workers’ consent when changing employment rules to their disadvantage, rendering the rules invalid. Furthermore, paying lower wages than originally due despite no difference in actual job content through the wage peak system introduced under these rules also violates Article 4-4, Paragraph 1 of the Elderly Employment Act, another mandatory provision that prohibits wage discrimination based on age. Article 4-4, Paragraph 1 of the Elderly Employment Act bans wage discrimination on the grounds of age.

This lawsuit has attracted attention as it was filed after the Supreme Court’s plenary session ruling in May last year, which stated that changes to employment rules that disadvantage workers without the consent of the majority of workers are generally prohibited. Previously, the Supreme Court had issued multiple precedents recognizing the validity of changed employment rules without workers’ consent if there was ‘socially reasonable justification,’ but in May last year, it overturned the previous rulings after 45 years.

At that time, the Supreme Court ruled, "In cases where there is no collective consent from workers regarding changes to employment rules that are disadvantageous to them, it violates the proviso of Article 94, Paragraph 1 of the Labor Standards Act, and unless there are special circumstances suggesting abuse of collective consent rights by the workers, such changes have no effect."

Ryu Jae-yul, a lawyer from Law Firm Joongshim representing the plaintiffs, stated, “Since the Supreme Court confirmed that Hyundai did not obtain collective consent from workers as required by Article 94 of the Labor Standards Act regarding the executive employee employment rules, and since Article 94 includes criminal penalties for violations, the separate establishment of executive employee employment rules can be seen as discriminatory behavior.”

He added, “There is no problem legally viewing such acts as civil torts, and if judged as civil torts, the statute of limitations for damage claims can be extended up to 10 years, similar to cases of illegal dispatch. Considering the number of executives who have retired or are currently employed at Hyundai Motor, the impact of the lawsuit’s outcome is expected to be very significant.”

Hyundai Motor responded by saying, “We will have to wait for the court’s judgment.”

Meanwhile, in a similar lawsuit filed by other retired Hyundai executives claiming the return of unjust enrichment for similar reasons, the plaintiffs lost in the first trial but partially won in the second trial after adding wage claims. However, the Supreme Court remanded the case, and the remand trial is currently ongoing.

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