The Supreme Court of Korea has recently ruled that the maximum number of paid annual leave days granted to fixed-term employees (whose one-year employment contract has expired) is 11 days.

Article 60 (1) of the Labor Standards Act (the “LSA”) provides that employees who have worked for at least 80% of the year prior shall be granted 15 days of paid annual leave upon completing their first year of work, and for those employees who have worked for less than one year or who have worked for less than 80% of the year prior shall be granted one day of paid annual leave for each completed month of work under Article 60 (2).  In terms of fixed-term contract employees, the Ministry of Employment and Labor (the “MOEL”) has been interpreting these LSA provisions to mean that fixed-term employees whose one-year employment contract has expired are entitled to up to 26 days (15 days + 11 days) of paid annual leave and compensation for unused days of paid annual leave.

However, in a case where the number of paid annual leave days granted to an employee who worked as a fixed-term caregiver for the past one year was disputed, the Supreme Court ruled that the right to use paid annual leave under Article 60 (1) of the LSA should be deemed to accrue on the day following the completion of one year's employment from the previous year based on the premise that the employment relationship would be maintained in the following year.  Therefore, an employee whose employment contract was not renewed but rather terminated upon the expiration of the one-year term would not be eligible for the 15 days of paid annual leave under Article 60 (1) and thus cannot make a claim to be compensated for such days.  Accordingly, the employee can only be guaranteed up to 11 days of paid annual leave or compensation for unused days of paid annual leave under Article 60 (2) of the LSA (Supreme Court Decision No. 2021Da227100 rendered on October 14, 2021).

Although this decision was not rendered before the full panel of Supreme Court justices, it appears that the Supreme Court has substantially changed the conclusion of its previous ruling (Supreme Court Decision No. 2003Da48549, 48556 rendered on May 27, 2005), which held that the employee’s right to claim compensation for unused days of paid annual leave is irrelevant to whether or not the employee continues to be employed.

Due to this recent Supreme Court decision, workplaces that have guaranteed up to 26 days of paid annual leave in accordance with the interpretation by the MOEL are expected to adjust the number of eligible leave days and compensation therefor, which may lead to lawsuits being filed by employers trying to recoup what they have already paid to these employees in terms of paid annual leave compensation.

[Korean version]