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[Recent Court Case 2] In case rules of employment or collective agreements provide that bonuses are to be paid to the employees employed at the time of the payment only and that the bonuses are to be paid in proportion to the period of employment, the persons who were employed for some time but terminated at the time of the payment are not necessarily ineligible for the bonuses.

2020.04.29

[Case No. Supreme Court decision 2018da303417 dated April 29, 2020] 
 
The Supreme Court held that, if the rules of employment or collective agreements provide that regular bonuses are to be paid (i) to the employees employed as of the time of the bonus payment and (ii) in proportion to the period of employment, the persons who were employed for some time but not at the time of the bonus payment would not necessarily be ineligible for the bonuses. 
 
The collective agreement between a company (the “Company”) and the labor union comprising the employees of the Company provided that the Company would pay bonuses at 1200% in the amount equivalent to a sum of 30 days of basic wage and the allowances attached to certain senior positions (the “Bonuses”), provided that the Bonuses will be paid by 100% on each monthly salary payment date. 
 
The rules of employment stated that (i) the bonuses will be paid by 100% on the monthly salary payment date; (ii) no bonuses will be paid to the employees who are on leave of absence from work; and (iii) the bonuses will be paid for the employees who are employed as of the 20th day of the month. The rules of employment further provided that in case of the employees who were employed for less than the required number of days, the wages would be calculated and paid on a pro rata basis, provided that, this amount would be calculated based on the standard period of time of employment. 
 
On January 29, 2007, the Company dismissed the employment relationship with the plaintiffs. The dismissal became effective as of March 31, 2007. The Company then calculated and paid the Bonuses for the period of March 21, 2007 to March 31, 2007 to the plaintiffs who were dismissed and no longer employed on April 20, 2007. 
 
The Supreme Court held that the above provisions did not necessarily provide that the employees who were once employed but dismissed as of the 20th day of a month would be ineligible for the Bonuses because of the following reasons. 
 
(i) The Bonuses which were regularly and continuously paid at 1200% on a yearly basis pursuant to the collective agreement and rules of employment are deemed wages which are provided in consideration of the work performed by the employees. 
 
(ii) The rules of employment of the Company appear to provide that the Bonuses are to be calculated on a pro rata basis in proportion to the period of employment in view of the nature of the Bonuses as wages. 
 
(iii) The Company’s payment of the Bonuses to the plaintiffs in proportion to the number of days of work may be seen as an application of the above rules of employment. 
 
(iv) There is no material supporting whether the Company calculated and paid the Bonuses to any other employees who were dismissed before the 20th day of a month unlike the plaintiffs in this case. 
 
The Supreme Court therefore held that these circumstances and the labor union’s understanding of the conditions of payment of the Bonuses should be considered in finding whether the provisions at issue in this case should be interpreted as not requiring to pay the Bonuses to the employees who were once employed but no longer employed as of the 20th day of a month or to pay the Bonuses to these employees in the amount which is proportionate to the number of days of work they provided. The Supreme Court reversed and remanded.

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