Key Points and Implications of Recent Court Judgment on Legitimacy of Employee Representative

The Seoul High Court recently rendered a decision on the legitimacy of the employee representative under the Labor Standards Act (“LSA”) and how to treat mandatory closing days of large distribution facilities (Seoul High Court Decision 2023Na2035761, February 2, 2024, the “Decision”).

Since 2012, Company A has reached an agreement each year with its “company-wide employee representative” on substitute holidays. Pursuant to this agreement, Company A’s employees have been substituting paid holidays with mandatory closing days under the Distribution Industry Development Act (“DIDA”) and vice versa. For substitute holidays to be valid, the LSA requires an agreement with an employee representative who has been elected for the purpose. Certain employees of Company A filed a claim for unpaid holiday allowances, arguing that the substitute holiday agreement with the company-wide employee representative is null and void, as it does not satisfy the substitute holiday requirement under the LSA. The Seoul High Court, however, dismissed the plaintiffs’ claims, stating that substitute holiday agreements with the “company-wide employee representative” are in fact valid and binding.

Holding on Whether the “Company-Wide Employee Representative” Is a Legitimate Employee Representative Under the LSA

The “company-wide employee representative” at Company A is elected at a general meeting of the employee representatives of all of Company A’s retail locations. The plaintiffs argued that the “company-wide employee representative” was not a legitimate employee representative under the LSA because he/she was not elected through a direct election of the relevant employees. The Seoul High Court, however, held that a direct election is not the only form of election that grants legitimacy to the employee representative and found that the method of electing the “company-wide employee representative” described above is sufficient to make the “company-wide employee representative” a legitimate employee representative under the LSA.

Holding on Whether Mandatory Closing Days Under DIDA are Holidays Under the LSA

The plaintiffs argued that mandatory closing days under the DIDA should be considered as holidays under the LSA and further argued that, as a result, the agreement to replace mandatory closing days under the DIDA with paid holidays should be null and void as it is an agreement to replace a holiday with a holiday. However, the Seoul High Court held that the mandatory closing days under the DIDA are neither holidays agreed-upon by the labor and the management nor statutory holidays and concluded that the mandatory closing days under the DIDA should not be considered as holidays under the LSA.

The LSA does not set forth the specific criteria for determining the legitimacy of an employee representative and there have not been any clear precedents on this issue. This has led to a lot of confusion over the legitimacy of an employee representative. This decision is significant in that it establishes the legitimacy that an employee representative should have under the LSA and the specific bases of the determination. This was also the first decision to clarify the legal characteristics of mandatory closing days under the DIDA and will serve as an important standard in managing the work schedules of business places subject to mandatory closing days under the DIDA.

[Korean Version]

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