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Newsletter | October 2016, Issue 3
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LABOR & EMPLOYMENT
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Recent Lower Court Ruling Regarding Discriminatory Treatment against Non-Fixed-Term Employees
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In Korea, discrimination against fixed-term employees and dispatched workers are specifically prohibited under the Act on the Protection of Dispatched Workers (the "Dispatch Act"), and the Act on the Protection, etc. of Fixed-Term and Part-Time Employees ("APFP"), respectively.
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In contrast, there is no corresponding provision or regulation that prohibits discrimination against "non-fixed-term employees," who, just like regular employees, are employees without a specified term, but unlike regular employees have different working terms and conditions, including wages.
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On June 10, 2016, the 13th Civil Division of the Seoul Southern District Court recognized various types of employment, such as non-fixed-term, fixed-term, and regular employees, as "social status" under Article 6 of the Labor Standards Act ("LSA"). Discrimination based on “social status” is one of the prohibited factors, and, the Court, in so recognizing, ruled in favor of the non-fixed-term employee plaintiffs. These plaintiffs claimed benefits that are only provided to regular employees of the defendant company, including housing/family allowance, meals, among other benefits.
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Details of the Case:
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The defendant company in this case classified its employees as general, annual salaried, and duty-based.
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The plaintiffs were: (i) employees who joined the defendant company as fixed-term employees, but then continued to renew their contracts until they converted to duty-based or annual salary-based employees; or (ii) those who joined as duty-based employees.
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Duty-based and annual salary-based employees are no different from regular employees in terms of job security, as they entered into "employment agreements without a specified term," but differed in terms of compensation (i.e., did not receive housing, family, or meal allowances).
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Article 6 of the LSA provides that "employers shall not discriminate based on nationality, religion or social status."
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The trial court held that since duty-based and annual salary-based employees cannot be assigned to other positions or be promoted like general employees, their employment type or work form is a type of "social status." Further, the trial court held that there was no "justifiable reason" for not providing housing, family, or meal allowances to such duty-based and annual salary-based employees, who do not differ from general employees in terms of their work scope or amount of work. Thus, the trial court held that the employment agreement with the duty-based and annual salary-based employees violated Article 6 of the LSA, thereby rendering it null and void.
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Accordingly, the defendant company was ordered to pay the plaintiffs the wage difference as unjust enrichment.
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Expected Impact:
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Given the lack of any Supreme Court precedent on point, it is difficult to assess whether the above ruling will be upheld in the higher courts. However, we believe the controversy regarding whether differences in working conditions based on employment type or work form (such as occupation, position, rank) within the company without justifiable reason can constitute a violation of Article 6 of the LSA.
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As such, companies that have employees with different working conditions from their regular employees should assess whether there is any unreasonable discriminatory treatment within the company, and consider improving the various personnel-related policies, regulations, and practices.
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