KRW 630 Billion Hyundai Heavy 'Regular Wage' Lawsuit... Conclusion After 9 Years

The Key is the 'Principle of Good Faith'... 2013 Supreme Court "Past Wage Claims are Limited According to the 'Principle of Good Faith'"

[Asia Economy Reporter Baek Kyunghwan] The Supreme Court is set to deliver its final ruling on the lawsuit between Hyundai Heavy Industries and its labor union over whether regular bonuses should be included in the retroactive calculation of ordinary wages. This comes nine years after the lawsuit was filed in 2012 and is expected to significantly influence the determination of ordinary wages in other companies. The key issues are the scope of inclusion in ordinary wages and the recognition of the principle of good faith.

On the 16th, the Supreme Court's 3rd Division (Presiding Justice Kim Jae-hyung) will announce the verdict on the appeal in the wage claim lawsuit filed by 10 Hyundai Heavy Industries workers against the company.

In December 2012, 10 Hyundai Heavy Industries workers filed a lawsuit against the company, demanding that the entire 800% bonus?comprising a 700% regular bonus paid every even month and 100% bonuses for Lunar New Year and Chuseok?be included in the ordinary wage, and that the past three years be retroactively compensated.

They based their claim on the ordinary wage criteria established by the Supreme Court's full bench ruling in 2013, which includes three conditions: ▲ Regularity (paid regularly) ▲ Uniformity (paid to all workers meeting certain conditions) ▲ Fixity (paid regardless of performance or achievements). Accordingly, the retroactive ordinary wage amount to be paid to approximately 38,000 workers is 630 billion KRW. This amount covers 4 years and 6 months, calculated from the end of December 2009 to the end of May 2014.

The rulings in the first and second trials differed. In the first trial on February 2015, the entire 800% bonus was recognized as part of the ordinary wage. The retroactive wage was to be calculated based on the minimum standards of the Labor Standards Act, and the three-year retroactive claim was accepted.

The second trial court judged that if Hyundai Heavy Industries accepted the workers' demands, the company's survival could be threatened. Therefore, it ruled that the fixity of the 100% bonus paid during Lunar New Year and Chuseok among the 800% bonuses was not recognized, and thus it could not be included in the ordinary wage. The court also accepted the company's claim of good faith to reject the workers' demand for three years of retroactive pay.

The biggest variable in the Supreme Court's decision is the 'principle of good faith (Shinuisik).' Previously, in 2013, the Supreme Court's full bench established a precedent that bonuses meeting regularity, uniformity, and fixity should be included in ordinary wages, but also ruled that workers' claims for additional past wages could be limited under the civil law principle of good faith.

However, in August last year, the Supreme Court ruled in favor of workers in the ordinary wage lawsuits involving Kia Motors, and again in March in the Kumho Tire case. The court held that paying additional wages does not necessarily cause significant hardship to the company, and thus the principle of good faith should be applied strictly.

Meanwhile, the Supreme Court will also issue a ruling on the wage claim lawsuit filed by Hyundai Mipo Dockyard workers against the company on the same day. Hyundai Mipo Dockyard workers also filed a lawsuit in 2012, demanding that bonuses be included in the ordinary wage.