I. Introduction of Retirement Age System

The ‘Retirement Age System’ is a system whereby the employer-employee relationship is terminated when an employee reaches the appropriate retirement age as stipulated by the Rules of Employment or an employment contract, regardless of any intention on the part of the employee to renew the employment contract or his/her ability to work. Previously, Korean labor law regarding retirement age gave only a recommendation, not a compulsory stipulation, but a statutory retirement age system became effective in May of 2013. Accordingly, any retirement age system that had considered retirement age to be lower than 60 years of age became null and void, and retirement age automatically set to 60. In addition to this, a rank-based retirement age system is now considered justifiable if it was the result of a labor-management agreement, but with the introduction of the statutory retirement age system, any retirement age set at less than 60 years of age is now invalid. In situations where a company that did not previously have a retirement age regulation introduces one due to the introduction of the compulsory retirement age law, it is recognized that this can be a disadvantageous revision of working conditions, and such unilateral revision is invalid as well.
This revision includes both the introduction of the statutory retirement age and the necessary measures to revise the wage structure, but in actual practice, only the statutory regulation will be applied to companies. Because a revision of the wage structure could result in disadvantageous conditions, it requires agreement from the employee representative (or the representative of the labor union representing a majority of employees). Outlined below, I would like to review the legal considerations regarding the various applications: mainly the enactment of the statutory retirement age, the changes resulting from wage restructuring, and introduction of the wage-peak system.

(Before revision) Article 19 (Retirement Age)
When an employer sets a retirement age, he/she shall endeavor to set it at 60 years of age or older.
(After revision) Article 19 (Retirement Age)
① When an employer sets a retirement age, he/she shall set it at 60 years of age or older.
② Regardless of Subparagraph ①, in cases where the employer has previously set a retirement age at less than 60 years of age, his/her retirement age policy shall be regarded as having been set at 60 years of age.
Article 19-2 (Changing the Wage system, etc. due to Extension of the Retirement age)
① The employer of a business or workplace who extends the retirement age in accordance with Subparagraph ① of Article 19, and a labor union which is formed by the majority of all workers (or a person representing the majority of all workers if such a labor union does not exist) shall take the steps necessary to revise the wage system, etc. according to the conditions pertaining to the business or workplace concerned.
② The Ministry of Employment & Labor may provide necessary support (such as an employment support subsidy, etc., in accordance with the Presidential Decree) to an employer or the employees of a business or workplace that has implemented the required measures in accordance with Subparagraph ①.
③ The Ministry of Employment & Labor may provide necessary support (such as consultation for the revision of wage structures, etc., in accordance with the Presidential Decree) to an employer or the employees of a business or workplace which extends the retirement age to 60 years of age or above.
Addenda
This Act shall enter into force one year from the date of enforcement of its promulgation. Provided, that the revised rules of Article 19, Paragraph ① and of Article 19-2 shall enter into force in accordance with the following:
1. Businesses or workplaces with 300 or more full-time workers, public institutes in accordance with Article 4 of the Act on the Operation of Public Institutions, local public enterprises and local corporations under Articles 49 and 76 of the Local Public Enterprises Act - effective January 1, 2016.
2. Businesses or workplaces with fewer than 300 workers, national and local governments - effective January 1, 2017.


II. Applications of the statutory retirement age system

1. In cases where a company has a previously-established retirement age lower than the statutory retirement age:
Any retirement age that was previously established at lower than the statutory age of 60 years is null and void due to the enforcement of the statutory retirement age, and such invalid retirement age system will be revised so it is in accordance with the compulsory retirement age of 60 years. Accordingly, any such previous retirement age system that a company has stipulated in their regulations is null and void due to the introduction of the statutory retirement age, and that statutory retirement age shall become the company’s retirement age.
2. In cases where a company which did not previously have a retirement age establishes one due to the introduction of the statutory retirement age:
1) Judicial ruling (Supreme Court ruling on May 16, 1997, 96da2507): In a situation where a transportation company that did not have a regulation for retirement age established a retirement age, the company’s employees could have worked without any age restriction until such time as the company established a retirement age regulation. Once the company established the retirement age regulation, only those employees who passed a review committee could work past the retirement age. This introduction of a retirement age regulation is considered to be an unfavorable change in the working conditions, because it deprives employees of their existing rights and interests.
2) Judicial ruling (Busan District Court ruling on September 7, 2007, 2007gahap2704): The employees had worked continuously without any age limitation until the company established a new retirement age regulation. Because of the new retirement age regulation, employees who reached 60 years of age could continue to work as daily workers afterwards. Therefore, this new regulation of the retirement age deprives the employees of their rights and interests, and is considered to be a disadvantageous revision of working conditions.
3. In cases where a company continues to use employees after reaching retirement age:
If an employee has continued to work with the employer’s implied consent after reaching retirement age, the employer cannot terminate employment just because the employee has exceeded the retirement age unless there are special circumstances. When re-employing retirees after their retirement age, the expiration of their contract period is: if the contract period is fixed, the expiration of such contract period is reason to terminate employment; and if the contract period is not fixed, it is possible to dismiss the employee only when there is a justifiable reason for the dismissal.
4. In cases where the company has a rank-based retirement age system under the statutory retirement age system:
If the retirement age can be regulated differently in accordance with title or rank within the workplace, and if the company has established reasonable criteria regarding work characteristics, content, and type of work that the employees provide, the company can then regulate the retirement age by rank (rank-based retirement age system) or as tenure-based employment that cannot be renewed (the tenure-based retirement age system) (Supreme Court ruling on April 9, 1991, 90da16245). The company can also implement two retirement age systems at the same time: a general retirement