Ordinary Wage | Supreme Court Decision Holding That a Bonus Subject to an Attendance Rate Condition Also Constitutes an Ordinary Wage

The Seoul High Court accepted the Plaintiffs' arguments for the following reasons.

▶The Agreement on the Attendance Rate Condition Is Void

The court held that the collective bargaining agreement adding the attendance rate condition amounted, in substance, to an agreement to exclude the bonuses at issue from the ordinary wage, and that, as a provision that disadvantageously altered the working conditions and markedly lacked reasonableness, it was void.

▶The Condition of Continued Employment Is Not Recognized

Although the 2014 collective bargaining agreement included the phrase ‘payment only to those in service as of the payment date,’ the court determined that, in light of the actual state of wage payment and the interpretation of the phrase, it was difficult to find that a condition of continued employment was in substance attached to the bonuses at issue.

Accordingly, the lower court accepted the Plaintiffs' argument that the bonuses at issue constituted an ordinary wage and that the overtime work allowances and the like should therefore be recalculated.

Based on existing precedent (Supreme Court, Decision of August 25, 2011, 2011 Da 17076), the Supreme Court determined as follows.

▶The Criteria for Determining an Ordinary Wage

An ordinary wage means a wage set to be paid regularly and uniformly as consideration for contractual work.

Even if an attendance rate condition or a condition of continued employment is attached to that wage, where the condition is one that an employee who faithfully provides contractual work can ordinarily satisfy, the character of the wage as an ordinary wage is not denied.

In other words, the mere existence of a condition cannot lead to a conclusion that the wage is not an ordinary wage.

▶Abandonment of the Concept of ‘Fixedness’

The Supreme Court abandoned the concept of ‘fixedness,’ which it had previously regarded as a requirement of an ordinary wage.

The requirement that a wage ‘be paid on a fixed basis’ had no statutory basis, and the scope of the ordinary wage, a mandatory concept, should not be made to depend on a condition; for these and other reasons, the requirement was abandoned after eleven years.

The Court made clear that whether the wage in this case constitutes an ordinary wage should accordingly be determined by the presence or absence of its character as consideration for contractual work, its regularity, and its uniformity.

▶Application to the Bonuses at Issue

As applied to the bonuses at issue, the bonuses are paid regularly in installments at a fixed ratio of the base pay and the like, and the attendance rate condition falls within a range that an employee who faithfully provides contractual work can also satisfy.

The condition of continued employment likewise cannot in itself deny the character of the wage as an ordinary wage.

The Supreme Court therefore determined that, even though an attendance rate condition or a condition of continued employment is attached, the bonuses at issue constitute an ordinary wage paid regularly and uniformly as consideration for contractual work.

Although it was not legally appropriate for the lower court to reject the agreement solely on the ground that ‘the attendance rate condition is void,’ its conclusion that the bonuses at issue constitute an ordinary wage was correct, so the Defendant's final appeal was dismissed.

At Daeryun Law Firm LLP, attorneys experienced in numerous ordinary wage matters collaborate with the firm's affiliated certified labor consultants to provide the assistance set out below.

We present strategic solutions that address both legal principle and practical circumstances at once, including the interpretation of ordinary wages, diagnosis of wage systems, and responses to collective disputes.

▶Legal Advice on Whether a Conditional Bonus Constitutes an Ordinary Wage
We analyze, according to the latest precedents and statutory standards, whether a bonus that a company or an employee is paying or receiving constitutes an ordinary wage.

In particular, for conditional wages such as those subject to an attendance rate condition, a condition of continued employment, or a performance-pay form, we comprehensively review their regularity, uniformity, and character as consideration for contractual work, and provide a specific opinion on the determination of their ordinary wage character.

▶Review and Revision of Collective Bargaining Agreements and Rules of Employment
Where, as in this case, wage payment conditions are set through a collective bargaining agreement, we legally analyze whether those conditions may infringe the ordinary wage character or be regarded as a disadvantageous alteration.

We provide risk diagnosis as to whether the reasonableness requirement for a disadvantageous alteration of working conditions is met, as well as advice on revising the wording of the collective bargaining agreement.

We carry out consulting on revising rules of employment, salary contracts, collective bargaining agreements, and the like so that ordinary wage disputes may be prevented in advance.

▶Support With Recalculating the Ordinary Wage and Computing the Difference
Where the items included within the ordinary wage have been confirmed, we recalculate statutory allowances such as overtime, night, and holiday work allowances and annual leave allowances, and compute the difference.

We provide the data necessary for employees to calculate additional claim amounts and for employers to forecast and prepare for risks.

▶Response to Ordinary Wage Dispute Litigation
In civil and administrative litigation relating to ordinary wages, we carry out substantive litigation responses, including establishing litigation strategy, drafting complaints and answers, and organizing evidence and the facts.