We highlight the Supreme Court’s recent decision that recognized the validity of duly converting to an annual salary system (via obtaining majority employee consent to revise the company’s Rules of Employment) despite the existence of an employment contract based on the Hobong (i.e., salary step) system. (Supreme Court Decision 2020Da232136, January 13, 2022)
In this case, the employer and employee had agreed for the employee to receive his salary in accordance with the employer’s salary regulations without entering into a separate agreement on working conditions such as wage. The key issue here is whether an employer’s payment of salary under an existing Hobong system can be deemed an employment agreement even if it is later duly changed to an annual salary system after going through legitimate consent procedures.
The lower court recognized the existence of an employment agreement between the employer and the employee to pay wages based on the existing Hobong system, and ruled that the employer honor such agreement even if there was a subsequent lawful amendment to the Rules of Employment (“ROE”) (i.e., from the Hobong system to the annual salary system) based on collective consent.
However, while reversing and remanding the lower court’s decision that recognized the employer’s obligation to pay wages under the Hobong system, the Supreme Court also reaffirmed its basic principle (Supreme Court Decision 2018Da200709, November 14, 2019, etc.) that, even if collective consent regarding disadvantageous changes to the ROE was obtained, such disadvantageous changes cannot be deemed to take precedence over the existing working conditions specified in individual employment agreements that are more favorable to employees. The Court ruled that the above legal principle can be applied only to cases where an employee and an employer separately set forth working conditions in excess of the standard set forth in the ROE, and that working conditions specified in the ROE and other such internal regulations and policies should apply to an employee if the individual employment agreement is silent as to such specific working conditions.
In particular, since the above Supreme Court Decision 2018Da200709, the number of disputes over employment agreements that prevail over the ROE has been on the rise. This decision is meaningful because it has made it clear that for individual employment agreements to take precedence over the ROE on grounds that they set forth more favorable working conditions than the ROE, the individual employment agreements should in fact specifically and clearly set forth more favorable working conditions than the ROE.
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