[Ruling]
The Supreme Court has ruled that if the requirement of a "continuous one-month leave of absence," which is a condition for receiving employment retention subsidies under the Employment Insurance Act, is not met, the entire subsidy amount constitutes improper receipt?not just the portion corresponding to the actual days worked.
The Supreme Court’s Special Division 2 (Presiding Justice Oh Kyungmi) overturned the lower court’s decision and remanded the case to the Seoul High Court on May 15, in the appeal filed by Company A, which operated a movie theater, against the Ministry of Employment and Labor’s order to return the employment retention subsidy and the additional collection order (2024Du48893).
[Facts and Lower Court Proceedings]
Company A, citing a sharp drop in sales due to COVID-19 in March and April 2020, placed its employees on one-month leaves of absence and applied for employment retention subsidies from the Ministry of Employment and Labor, receiving a total of 30.24 million won. However, in November of the same year, the Ministry found that some employees had actually worked during their leave periods and issued an order to return 19.10 million won, along with an additional collection order for twice that amount, 38.20 million won.
In response, Company A filed a lawsuit, arguing that "the work was voluntary, and even if some work occurred, the overall leave plan was implemented," and that "it is unlawful to consider the entire leave allowance as improperly received."
The court of first instance found that "although it is acknowledged that some employees came to the theater and participated in training or remodeling work, this was voluntary and the number of working days is unclear," and ruled that "it cannot be seen as having received the subsidy by fraudulent means." The court further stated, "If more than half of the employment retention plan has been implemented, there is no reason for subsidy recovery, and since the defendant has not proven the number of working days or the specific extent of non-compliance, the return order is unlawful," and canceled the return order in its entirety. The court also ruled that "under the Employment Insurance Act, the additional collection must be proportional to the amount of improper receipt, and since the amount of improper receipt itself has not been clearly identified, it is not possible to calculate the additional collection," and canceled the additional collection order as well.
The appellate court also held that "for improper receipt to be recognized, the application must have induced a payment decision through false information, or the subsidy must have been received despite not meeting the payment requirements," and that "even if some employees worked, considering the overall leave plan and the payment details, it is difficult to regard the entire amount as improper receipt." Regarding the additional collection, the court maintained, "if the exact amount of improper receipt is not identified, it cannot be imposed," thus upholding the first instance decision.
[Key Issue]
If an employee subject to leave works during the employment retention period, should only the portion corresponding to the actual days worked be considered improper receipt, or should the entire subsidy be regarded as improperly received?
[Supreme Court Decision]
The Supreme Court took a different view. While the lower court held that if an employee worked during leave, the amount of improper receipt should be calculated in proportion to the number of days worked, the Supreme Court ruled that "if the requirement of a 'continuous one-month' leave is not met, the subsidy itself lacks the necessary qualification for payment, and therefore the entire subsidy constitutes improper receipt."
The bench explained, "The Employment Insurance Act stipulates that employment retention measures must involve 'granting leave of absence for one month or more,' and this must be 'continuous.' Therefore, it is not only the portion of the subsidy corresponding to the actual days worked that is considered improperly received, but the entire subsidy for that period is deemed an improper payment."
The Court further stated, "Nevertheless, the lower court determined that only the portion corresponding to the actual working days constituted 'amounts received by false or other improper means.' This misunderstanding of the law and failure to conduct the necessary examination affected the judgment," and remanded the case.
An Jaemyung, The Law Times Reporter
※This article is based on content supplied by Law Times.
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