Disadvantageous Measures Defined in the Public Interest Whistleblower Protection Act... When Personnel Actions Are Taken at the Company Level, the Actor Is the 'Company'

Supreme Court Ruling in the Spotlight

[Supreme Court Ruling]

In the case where a disadvantageous measure stipulated in the Act on the Protection of Public Interest Whistleblowers is a personnel action at the company level, the Supreme Court's first ruling states that the person who took the disadvantageous measure and the person who has the authority and obligation to take protective measures according to the protection decision should, in principle, be regarded as the 'company' rather than the individual representative.

Supreme Court Special 3rd Division (Presiding Justice Ahn Cheol-sang), Case No. 2021Du50239 (Ruling on October 12, 2023)

[Photo by Beopryul Newspaper]

[Ruling Result]

In the lawsuit filed by Mr. A (represented by lawyers Han Jae-hwan, Lee Sang-seok, and Choi Yoon-seon of Law Firm Inwoo) against the Anti-Corruption and Civil Rights Commission to confirm the invalidity of the imposition of a coercive fine, the Supreme Court overturned and remanded the lower court’s ruling which had ruled against the plaintiff.

[Issues]

△ Whether the person who took the disadvantageous measure and the person who has the authority and obligation to take protective measures according to the defendant’s protection decision should be regarded as the company when the disadvantageous measure stipulated in the Act on the Protection of Public Interest Whistleblowers is a personnel action (legal act) at the company level △ Whether a protection decision demanding restoration measures, etc., against the current representative rather than the person who took the disadvantageous measure is automatically invalid

[Facts and Lower Courts]

Mr. B, a defendant auxiliary participant, reported the public interest violation by the major shareholder of Company D to the Anti-Corruption and Civil Rights Commission in November 2018. On November 30, 2018, Company D took personnel measures (disadvantageous measures) against Mr. B, consisting of suspension from position and standby transfer, under the name of Company D’s CEO Mr. C. From around December 10 of the same year, Mr. A effectively performed the duties of the company’s representative in place of Mr. C and is currently serving as an inside director and representative of Company D. The Anti-Corruption and Civil Rights Commission decided in February 2018, pursuant to Article 20(1) of the Act on the Protection of Public Interest Whistleblowers, to require Mr. A to cancel the suspension and standby transfer of Mr. B and take restoration measures (protection decision). However, when Mr. A did not comply with the protection decision, the Commission imposed a coercive fine of 20 million KRW on Mr. A in July of the same year. Mr. A then filed a lawsuit.

The first trial ruled in favor of the plaintiff, while the second trial ruled against the plaintiff.

[Supreme Court Judgment (Summary)]

"The representative of a stock company is not acting on behalf of the company but is an organ of the company that performs the company’s acts itself. The company realizes decisions made by decision-making bodies such as the general shareholders’ meeting or the board of directors through the representative, and the acts of the representative are the acts of the company. Therefore, if any act of the company constitutes a violation of administrative obligations, sanctions should, in principle, be imposed on the company to which the legal effects accrue.

When the disadvantageous measure stipulated in the Act on the Protection of Public Interest Whistleblowers is a personnel action at the company level, the person who took the disadvantageous measure and the person who has the authority and obligation to take protective measures according to the defendant’s protection decision should be regarded as the company. Whether an individual’s factual act, in which the representative personally exercised undue influence to lead the disadvantageous personnel action, constitutes a separate disadvantageous measure is a separate issue. A protection decision demanding restoration measures, etc., against the current representative rather than the person who took the disadvantageous measure is not only a serious defect violating an important part of the law but is also objectively clear.

In this case, the person who took the disadvantageous personnel measure is the company, not the individual representative, and the person who executed the disadvantageous measure as the company’s executive organ was the former representative Mr. C, not Mr. A. Therefore, the protection decision demanding restoration measures, etc., against Mr. A, who is not the person who took the disadvantageous measure, is a serious defect violating an important part of the law, objectively clear, and thus automatically invalid. Accordingly, the subsequent disposition based on the validity of the protection decision, i.e., this case’s disposition, is also invalid."

[Reference Provisions]

- Article 15(1) of the Act on the Protection of Public Interest Whistleblowers: No one shall take disadvantageous measures against public interest whistleblowers or others on the grounds of public interest reporting.

- Article 20(1) of the same Act: When the Anti-Corruption and Civil Rights Commission recognizes that the applicant has suffered disadvantageous measures (excluding disadvantageous measures corresponding to subparagraphs a and b of Article 2(6)) due to public interest reporting, it shall make a decision requiring the person who took the disadvantageous measures to take protective measures such as restoration, cancellation, or prohibition of the disadvantageous measures within a period of 30 days.

Park Soo-yeon, Legal Newspaper Reporter

※This article is based on content supplied by Law Times.