Is a Regular Bonus with Conditions Part of Average Wages?

Supreme Court En Banc Panel to Decide Key Ordinary Wage Cases

The Korean Supreme Court is set to address a critical issue affecting wage calculations, as three high-profile cases involving ordinary wages have been referred to its en banc panel. These cases raise significant questions about whether regular bonuses with specific conditions qualify as part of ordinary wages.

SeAH Steel Case: The Service Condition Debate

The SeAH Steel case challenges whether regular bonuses that are subject to "service requirement clauses" should be classified as ordinary wages. Under these clauses, bonuses are only paid to employees still employed on the payment date, excluding those who have left the company.

The Seoul High Court Decision 2017Na2025282 Decided on December 18, 2018 had ruled that such clauses are invalid, stating that bonuses should count as ordinary wages because employees earn them by completing prescribed work, regardless of their employment status on the payment date. This ruling contradicted a 2013 Supreme Court en banc Decision 2012Da89399 Decided on December 18, 2013 which had upheld the validity of service requirements, sparking controversy among employers.The case was referred to the en banc panel in 2020 due to its potential to overturn established precedent, but no final ruling has been made.

Hanwha Life Insurance and Hyundai Motor Cases

Two more wage-related disputes joined the en banc docket recently.

• Hanwha Life Insurance: Similar to SeAH Steel, this case questions the validity of a service requirement for regular bonuses. The Seoul High Court Decision 2018Na2037060 Decided on June 19, 2020 previously ruled the clause invalid, finding that employees should not lose bonuses earned through completed work merely because they were no longer employed on the payment date.

  
  

• Hyundai Motor Company: This case involves a bonus eligibility condition based on the number of workdays completed. The Seoul Central Provincial Court Decision 2022Na75299 Decided on October 12, 2023 had found in favor of Hyundai, stating that the condition rendered the bonus uncertain and excluded it from ordinary wages.

Broader Implications

The Supreme Court’s en banc panel typically handles cases with major social or legal implications, and its ruling on these cases is highly anticipated. If the Court upholds the lower courts’ decisions, it could overturn the 2013 precedent, significantly impacting businesses that rely on service or workday conditions for bonus eligibility.

This comprehensive review is expected to clarify the status of conditional bonuses and provide a definitive stance on their treatment in wage disputes, with far-reaching consequences for employers and employees alike.