Hanwha Ocean Retirees Lose First Trial in 'Severance Pay Lawsuit'... Court Rules "Bonuses Are Not Wages"

Hanwha Ocean (formerly Daewoo Shipbuilding & Marine Engineering) retirees lost the first trial in a lawsuit claiming that management performance bonuses should also be included in wages when calculating severance pay.

According to the legal community on the 1st, the Changwon District Court Civil Division 5 (Chief Judge Choi Yoon-jung) ruled against the plaintiffs in the severance pay lawsuit filed by about 970 Hanwha Ocean retirees against the company on the 20th of last month.

Previously, about 970 Hanwha Ocean retirees filed a lawsuit arguing that the management performance bonuses should be included in the average wage basis for severance pay, as the company had excluded these bonuses when calculating severance pay. They claimed that since management performance bonuses had been paid annually according to labor-management collective agreements, these bonuses should be included in the average wage.

On the other hand, Hanwha Ocean argued that management performance bonuses are merely distributions of business performance and do not constitute wages as compensation for labor.

The court sided with Hanwha Ocean. The court stated, “The management performance bonuses in this case are paid in connection with the occurrence or scale of operating profit or net income, and have the nature of distributing the business’s profits themselves,” adding, “These are the result of a combination of factors including the scale of capital from oneself or others, expenditure costs, and market conditions, beyond the provision of labor by employees, and the payment or rate of payment varies depending on the scale of operating profit or net income for the relevant year, making it difficult to predict the range.”

Furthermore, the court concluded, “Operating profit and net income, which form the basis of management performance bonuses, are elements influenced by the employer’s incidental and special circumstances and do not correspond proportionally to the quantity and quality of labor provided,” and “Ultimately, the payment of management performance bonuses depends on other uncertain conditions unrelated directly to the provision of labor, making it difficult to evaluate them as wages.”