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[Recent Court Case 3] Determination as to whether employee’s claim for additional legal allowance causes managerial difficulty on employer in breach of principles of good faith shall be made in a careful and strict manner

2020.02.13

[Case No. Supreme Court decision 2019da21262 dated February 13, 2020] 
 
The Supreme Court affirmed that determining whether the employee’s claim for additional legal allowance was in breach of principles of good faith on the ground of such claim threatening the existence of the company, etc., should be carefully and strictly made because determining whether the principles of good faith should prevail over the mandatory provisions regulating the employment relations required full consideration of the legislative intent of the Labor Standards Act to guarantee and improve basic livelihood of employees by setting the minimum standards of the working conditions. 
 
The plaintiff argued that the bonus the plaintiff had been receiving was fixed wage which was paid in consideration of the labor in a regular, uniform and continuous manner and should be included in calculating the ordinary wage to claim the unpaid allowance and damage for delay. In response, the defendant argued that the plaintiff’s claim for the unpaid allowance by including the bonus in the ordinary wage as opposed to the agreement to set the wage based on the presumption in the collective agreement and wage agreement that the bonus did not fall under the ordinary wage was in breach of the principles of good faith and fair dealing. 
 
The lower court determined that the plaintiff’s claim was not in breach of the principles of good faith because it could not be concluded that the payment of the unpaid allowance to the plaintiff added significant risks on the current state of management or additionally threatened the state of the company in view of the following circumstances. 
 
(i) Other than the unpaid allowance claimed by the plaintiff, the right to claim for the other unpaid legal allowance appeared to have expired in terms of the statute of limitations. 
 
(ii) The unpaid legal allowance recognized in this case was merely 1.2% of the sales in 2018 and 0.39% of the assets as of June 30, 2019, and 0.27% of the liabilities with little impact on the management. 
 
(iii) Although the employer was in the rehabilitation procedures, the reason the employer reached the rehabilitation appeared to be the accumulated operating loss by the impossibility of or delay in collection of international receivables and decrease of sales. There was no evidence to support that it was owing to the increase of the labor costs of the employees or otherwise the responsibility of the employees. 
 
(iv) The plaintiff was exercising the right recognized by the Labor Standards Act, which is the mandatory law, and it was unlikely that the plaintiff’s claim was in breach of justice and fairness to the extent that was grave and clear considering that the work produced from the extended, nighttime, and holiday work which formed the basis of the legal allowance was already enjoyed by the employer. 
 
The Supreme Court deemed that the lower court’s decision was justified, and dismissed the defendant’s appeal.

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