CONTENTS
- 1. Claim for a Stipulated Sum, a Case Concerning a Covenant to Repay Dispatch Costs
- 2. Claim for a Stipulated Sum, the Supreme Court's Determination
- - Issue 1. The Nature of the Dispatch
- - Issue 2. The Substance of the Repayment Amount
- - Conclusion of the Judgment
- 3. Claim for a Stipulated Sum, Daeryun's Assistance
- - Assistance by a Task Force of Attorneys Experienced in Labor and Civil Matters and Labor Attorneys
1. Claim for a Stipulated Sum, a Case Concerning a Covenant to Repay Dispatch Costs
This is a case concerning a claim for a stipulated sum involving a covenant to repay dispatch costs.
H Institute (hereinafter the "Institute") dispatched A, one of its employees, to International Organization E as an expert whose costs were borne by the dispatching institution, for the purpose of strengthening its international nuclear-energy-related work.
Before the dispatch, the Institute entered into a covenant with A providing that A was required to return to the Institute after the dispatch ended and perform mandatory service for a period twice the length of the dispatch period, and that, in the event of a violation, A had to repay the 304,000 euros (approximately 490 million won) the Institute had paid to International Organization E.
The Institute disbursed 304,000 euros in European Union currency for A's dispatch, in the name of budgetary support for International Organization E.
However, in July 2019, immediately after the dispatch ended, A notified the Institute of an intention to resign and did not return.
The Institute then filed a claim for a stipulated sum, dismissing A through disciplinary action on the ground that A had violated the mandatory service clause and seeking repayment of the dispatch costs.
The court of first instance granted the Institute's claim, but the appellate court and the Supreme Court reversed this and held that the repayment covenant was void as a violation of Article 20 of the Labor Standards Act.
2. Claim for a Stipulated Sum, the Supreme Court's Determination
The core issue in this claim for a stipulated sum was whether the repayment covenant relating to the overseas dispatch violated Article 20 of the Labor Standards Act.
Issue 1. The Nature of the Dispatch
One of the issues in this claim for a stipulated sum was whether the nature of the dispatch was training or the provision of labor.
The Supreme Court held that A's dispatch was not mere training or educational instruction but constituted the substantive provision of labor.
The following factors were presented as the bases for this conclusion.
-Nature of the work: A performed related specialized work at International Organization E, and this was evaluated not as mere training but as 'substantive labor for the employer's business purposes.'
-Clarity of purpose: The Institute dispatched A to carry out its business purposes, and this was determined to be a dispatch for the purpose of performing work.
-Relationship of direction and supervision: The Institute imposed on A obligations to submit monthly and quarterly reports as well as materials on an as-needed basis, and A complied by submitting reports, so that an employment relationship was maintained under continuous management and supervision.
Issue 2. The Substance of the Repayment Amount
One of the issues in this lawsuit was whether the substance of the repayment amount was educational expenses or wages.
Article 20 of the Labor Standards Act (Prohibition of Predetermined Indemnity) provides that "an employer may not enter into a contract that predetermines a penalty or an amount of damages for breach of an employment contract."
Under prior Supreme Court precedents, a covenant under which an employer is to be repaid actual expenses related to education and training, such as training costs, is valid, but a covenant to repay wages that have already been paid has been held void.
In this case, the Supreme Court found, for the following reasons, that the costs the Institute disbursed to International Organization E also substantively constituted consideration for labor.
-The amount was in the nature of compensation for substantive dispatched work rather than training costs
-It was an expense indispensably incurred for the performance of work, distinguishable from education and training
-The dispatched work was performed in the special working environment of long-term overseas service, and the expense already consumed as consideration for it was a cost to be borne by the employer
Accordingly, the court held that the repayment covenant in this case was ultimately a contract predetermining a penalty for breach of an employment contract and therefore violated Article 20 of the Labor Standards Act.
Conclusion of the Judgment
-Appellate court and Supreme Court: The covenant was void because it violated the provision prohibiting predetermined indemnity (Article 20 of the Labor Standards Act)
The Supreme Court ruled that "because the overseas dispatch constitutes substantive labor and the costs subject to repayment are also consideration for labor, a covenant requiring their repayment restricts the worker's freedom of occupational choice and violates the principle prohibiting predetermined indemnity," and it dismissed the Institute's final appeal on the claim for a stipulated sum.
3. Claim for a Stipulated Sum, Daeryun's Assistance
This case concerning a claim for a stipulated sum may be regarded as a precedent that established an important legal principle regarding the 'legality of a penalty covenant,' which is the matter most frequently contested in disputes over the repayment of a stipulated sum between a company and a worker.
It is expected to have significant practical influence in that it presented legal standards worth referring to in lawsuits seeking repayment of a stipulated sum that arise from employment contracts framed as overseas dispatch or education and training.
This judgment highlights the following practical points to review for both employers and workers.
▶Specifying the purpose of the dispatch
Clearly distinguish whether the purpose is education and training or the substantive performance of work, and reflect this in the contract
▶Distinguishing the nature of the disbursed costs
Specifically design whether the costs subject to repayment are education and training expenses or consideration for labor
▶Reviewing the penalty covenant
A covenant requiring a fixed-amount repayment upon failure to serve for a certain period may, in principle, be unlawful
▶Updating internal regulations
If the relevant regulations predetermine a uniform repayment, a legal review is needed to determine whether there is a possibility of violating the Labor Standards Act
Assistance by a Task Force of Attorneys Experienced in Labor and Civil Matters and Labor Attorneys
At Daeryun Law Firm LLP, attorneys with extensive practical experience in claims for a stipulated sum collaborate with labor attorneys belonging to the firm to proactively manage the legal risks of companies and individuals.
▶Practical advisory for companies
-Advance review of covenants and advisory on their design
Providing advisory on drafting contracts that minimize the possibility of future legal disputes by reflecting the standards for assessing the validity of covenants relating to overseas dispatch, training, and entrusted education
-Designing a distinction between dispatch for work and for training purposes
Where it is unclear whether the purpose of a dispatch is education or work, assessing whether labor is substantively provided and designing the covenant structure accordingly
-Reviewing the risks of existing covenants
Conducting a full review of whether already concluded covenants conflict with Article 20 of the Labor Standards Act and providing a risk analysis report
▶Litigation response and strategy for proof
-Representation in lawsuits seeking repayment of a stipulated sum
Securing work-performance records and analyzing the nature of the costs to prove the legality of the covenant a company concluded, and organizing the supporting evidence and providing representation
-Defense strategy from the worker's position
Where a worker is also subject to a claim for repayment of a stipulated sum, strategic litigation representation is available for asserting voidness, centering on the purpose of the dispatch and whether labor was substantively provided
