Court Orders Payment of Unpaid Wages and Delayed Damages
Unclear Debt Repayment Ability... Cannot Receive if Bankruptcy Occurs
[Asia Economy Reporter Seongpil Cho] A former employee of Eastar Jet, which is undergoing corporate rehabilitation due to financial difficulties, won a lawsuit over unpaid wages. However, since Eastar Jet's ability to fulfill its debts remains uncertain, it is unlikely that the overdue wages will be easily paid.
According to the legal community on the 1st, Judge Park Yeon-ju of Civil Division 209 at the Seoul Central District Court ruled in favor of former Eastar Jet employee A in a wage lawsuit filed against the company. A claimed that during employment, they did not receive severance pay, annual leave allowance, and part of their salary, and filed a wage claim lawsuit against Eastar Jet amounting to approximately 36.2 million KRW. Eastar Jet did not respond to the lawsuit, and the court ordered the company to pay the unpaid wages along with delayed damages at an annual rate of 20%. Once this ruling is finalized, Eastar Jet must fulfill the debt.
Whether A will actually receive the overdue wages remains uncertain. A senior judge at the Bankruptcy Court stated, "If Eastar Jet succeeds in a sale during the rehabilitation process, it may be able to pay the overdue wages, but if rehabilitation fails and the case moves to bankruptcy proceedings, the right to repayment will disappear." Employees' unpaid wages are classified as public claims. Even under court supervision, these cannot be waived and must be paid with priority. From the acquirer's perspective, this means investing while bearing sunk costs. A legal insider said, "In Eastar Jet's case, an investment of about 100 billion KRW is required for acquisition. If no buyer willing to take on such a large risk appears, Eastar Jet will ultimately be declared bankrupt, and in that case, the overdue wages will not be paid."
Eastar Jet has not paid any wages to its employees since March last year. The total unpaid wages currently owed to employees are estimated to be in the hundreds of billions of KRW. If additional lawsuits continue, the likelihood of losing will increase, further increasing Eastar Jet's debt burden. Previously, Eastar Jet suspended operations in March last year due to financial difficulties compounded by the COVID-19 pandemic. Jeju Air, which had signed an acquisition agreement, declared its withdrawal from the acquisition in July last year. Eastar Jet attempted to sell the company again but failed, leading to the initiation of corporate rehabilitation (court receivership) proceedings.
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