Supreme Court of Korea Rules SK hynix Management Performance Bonus Is Not Wages; Retirees Lose Case

[Financial News] Former SK hynix employees filed a lawsuit demanding that their management performance bonuses be reflected in their severance pay, but they ultimately lost in the final appeal.
Applying the same legal principles, the Supreme Court of Korea had ruled last month in a case brought by former Samsung Electronics employees that target incentives must be included in severance pay. However, it found that SK hynix’s management performance bonus, given its characteristics, is difficult to recognize as compensation for work.
On the 12th, the First Petty Bench of the Supreme Court of Korea, presided over by Justice Ma Yong-joo, upheld the lower court’s decision against two former SK hynix employees in their lawsuit seeking additional severance pay from the company.
The Supreme Court of Korea held that it is difficult to conclude that SK hynix was obligated to pay the management performance bonus under its work rules, collective agreements, or established labor practices, and therefore it could not be recognized as remuneration for labor.
The plaintiffs argued that SK hynix should have included management performance bonuses such as the productivity incentive (PI) and profit-sharing bonus (PS) in the calculation of the average wage used to determine severance pay, and in January 2019 they sued to claim unpaid amounts.
The average wage is calculated by dividing the total amount of wages paid during the three months prior to retirement by the total number of days in that period. Employers must set up a system under which they pay severance equal to at least 30 days of the average wage for each year of service. As the average wage increases, severance pay also rises.
Both the first and second instance courts sided with the company, ruling that SK hynix’s management performance bonus does not constitute "compensation for work."


kyu0705@fnnews.com Kim Dong-gyu Reporter