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Newsletter | February 2016, Issue 1
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Labor & Employment
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Seoul High Court Denies Including Regular Bonus in Ordinary Wage
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On November 17, 2015, the Seoul High Court dismissed a claim brought by certain employees of Hyundai Motor Company (the “Company”) against the Company seeking to include their regular bonuses as part of their ordinary wage.
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Kim & Chang represented the Company in this case, and was able to obtain a favorable result.
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Court’s Decision & Rationale
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Here, the court held that the regular bonus at issue did not constitute ordinary wage, because the employees who worked fewer than 15 days during the base period were not eligible for the regular bonus.
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Further, the court reasoned that in determining whether a regular bonus is part of ordinary wage, the requirements for payment stated in the relevant internal regulation should be considered.
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According to the court, if the internal regulation was established pursuant to a Collective Bargaining Agreement ("CBA"), and the Company in fact complied with its payment requirements, those requirements would be valid. This would be so even if the CBA itself did not require that an employee work a minimum number of days (15 days) to be eligible for the regular bonus.
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Implications
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This reaffirmed the Supreme Court's decision that regular bonus, which requires an employee to work a minimum number of days, lacks the fixed element of ordinary wage.
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We expect this decision to affect the auto manufacturing industry and other related industries facing regular bonus and other ordinary wage issues.
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