The Supreme Court has recently rendered a significant decision in a case concerning discrimination and ordinary wage issues. In fact, the Supreme Court upheld the lower court’s judgment that contract workers who were deemed to have entered into indefinite-term employment contracts (“indefinite-term contract employees”) were not subjected to discriminatory treatment compared to regular employees. However, in the same ruling, the Supreme Court found the lower court’s decision—that various allowances tied to the condition that an employee must be employed on the day of payment to receive a wage item (the so-called “incumbency requirement”) were not considered ordinary wages—to be unlawful.
In this case, the plaintiffs argued that (i) various allowances, such as technical qualification allowances, vehicle maintenance allowances, and meal allowances, should be recognized as ordinary wages; and (ii) that working terms and conditions applicable to regular employees should also be equally applied to indefinite-term contract employees, pursuant to the Act on the Protection, etc., of Fixed-Term and Part-Time Employees.
On behalf of the client, Kim & Chang countered that (i) each of the various allowances mentioned above did not meet the requirements for compensation for prescribed work, fixedness, etc., and thus did not constitute ordinary wages, and (ii) even if the plaintiffs were indefinite-term contract employees, they could not be subject to the same working terms and conditions as regular employees unless they performed work at the same level as such regular employees.
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Key Points of the Supreme Court’s Decision
The Supreme Court has previously held that, unless otherwise stipulated, the rules of employment and other employment regulations applicable to regular employees must be equally applied to indefinite-term contract employees who engage in the same or similar work (Supreme Court Decision 2015Da254873, rendered on December 24, 2019).
Notwithstanding such precedents, we argued before the court that (i) the perfunctory provisions of the rules of employment cannot be applied to indefinite-term contract employees without any special justification, and (ii) indefinite-term contract employees cannot be regarded as employees engaged in the same or similar work as regular employees, particularly considering aspects such as recruitment qualifications and procedures, as well as the quantity and quality of work. The Supreme Court recognized our argument, affirming the lower court’s decision that there was no discrimination against indefinite-term contract employees in terms of working conditions such as promotion and wages.
However, the Supreme Court overturned the lower court’s ruling that the various allowances tied to the incumbency requirement should be excluded from the calculation of ordinary wage. This aligns with the Supreme Court’s en banc decision of December 19, 2024, which held that bonuses paid on a regular basis, such as holiday bonuses, may qualify as ordinary wages if they constitute a significant portion of total compensation. Notably, the Supreme Court’s ruling this time can be interpreted to mean that even if the allowances with the incumbency requirement do not constitute a large percentage of the total compensation, they still have the potential to qualify as ordinary wages.
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Implication of the Supreme Court’s Decision
This Supreme Court decision is significant because it requires contract workers to prove not only that their work is of the same or similar value as that of regular employees but also that they actually performed the same or similar duties in specific positions held by regular employees in order to claim wages equivalent to those of regular employees as to those specific positions. Additionally, this decision can be interpreted to rule that allowances tied to the incumbency requirement are likely to qualify as ordinary wages, unless exceptional circumstances exist, such as failing to meet the requirement for compensation as to prescribed work.
In this regard, workplaces facing disputes over discrimination or ordinary wage issues involving indefinite-term contract employees should proactively and closely review the implications of this decision.
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[Korean Version]
