Section 1: Parties and Need for Remedy
Chapter 1: Employees
2. Determination of the Existence of Executive's and Internal Subcontractor[so-sa-jang]'s Employee Status under the Labor Standards Act
2.1 Registered Executive
| Supreme Court Decision No. 2012DA28813, rendered on September 26, 2013 (Denial of Employee Status for Registered Director) | |||||
| Plaintiff and Cross-Appellant: A Defendant and Cross-Appellee: Company B Factual Background a. The plaintiff was employed as the manager of the Seoul office branch of the defendant on August 16, 1996, and subsequently, at a shareholders' meeting held on June 30, 1998, was appointed as a director and registered as such in the defendant's corporate registry. Later, the plaintiff was promoted to executive director while concurrently holding the position of team leader, and then to managing director, until resigning on December 31, 2009. However, the plaintiff's registration as a director remained in effect until March 29, 2010, and compensation was received until that date. b. As a director, the plaintiff participated in board meetings where important company matters were decided. Even when unable to attend, the plaintiff received reports on resolutions from employees and subsequently affixed their signature to the minutes of board meetings. Additionally, the plaintiff attended monthly financial meetings held at the defendant's Busan headquarters and chaired financial meetings starting from 2005. c. In the capacity of team leader, the plaintiff oversaw both domestic and international sales operations, handled tasks such as raw material procurement and internal organizational coordination, formulated and implemented sales policies, monitored market trends, and exercised relatively broad authority in approving various managerial tasks. d. Upon resigning on March 31, 2003, the plaintiff received a mid-term settlement of severance pay calculated according to the Labor Standards Act, followed by a switch to annual salary contracts from April 1, 2003. Under the annual salary contracts from 2004 onwards, it was agreed that no severance pay would be provided after the contract date. Consequently, the plaintiff received significantly increased remuneration, with annual salaries of 60 million won in 2003, 78 million won in 2005, and nearly triple the previous amount, 108 million won annually, from 2006 onwards. e. The defendant's articles of incorporation, Article 43, stipulate that compensation for directors and auditors shall be determined by the board of directors within the limits set by shareholders' resolution, and retirement benefits shall be paid according to the resolution of the general meeting of shareholders. f. The defendant's personnel management regulations categorize employees into grades ranging from Grade 1 to Grade 6, including positions such as section chief, deputy section chief, manager, assistant manager, team leader, and staff. Directors are not included among the company's employees in the personnel regulations, and while the company's employment rules set the retirement age for employees at 55 for department heads and above and 50 for others, the defendant continued to appoint the plaintiff as a director after the age of 55 in 2006 and entered into annual salary contracts as mentioned above. Judgment a. According to the Commercial Act, directors of a joint-stock company are appointed through a resolution of the general meeting of shareholders and must be registered. A duly appointed director under this procedure is authorized to participate in decisions regarding the execution of the company's affairs through the board of directors. Therefore, a director who exercises delegated duties on behalf of the company, in addition to fulfilling the role of a director as defined by the Commercial Act, cannot be considered to be providing labor merely under the direction and supervision of the employer unless the substance of the entire task assigned to them amounts to providing certain labor under the employer's command. Moreover, if a director of a joint-stock company receives certain remuneration in accordance with the articles of incorporation or resolutions of the general meeting of shareholders, such remuneration is generally based on the provisions of Article 388 of the Commercial Act and cannot be considered wages as defined by the Labor Standards Act. Furthermore, if a company pays retirement benefits to a director based on company regulations, such retirement benefits are, in principle, a form of compensation for delegated duties during employment rather than retirement benefits as defined by the Labor Standards Act. Therefore, it cannot be argued that the plaintiff's position should be viewed differently based on the circumstances of their compensation and retirement benefits. b. The plaintiff, in their capacity as a director of the defendant company, participated in key decision-making regarding the execution of the company's affairs through the board of directors and was delegated certain managerial responsibilities within a specific scope of business operations. Especially, even after surpassing the general retirement age for employees, the plaintiff continued to be appointed as a director, received compensation based on resolutions of the general meeting of shareholders, and received significantly different treatment from ordinary employees, indicating a clear distinction. Despite occasionally receiving instructions from the CEO while sharing responsibilities as a team leader, it is insufficient to argue that the plaintiff's title or position as a director was merely formal or nominal, or that the plaintiff's overall duties involved providing labor under a dependent relationship for the purpose of wages. Given these considerations, it can be concluded that while the plaintiff could potentially claim retirement benefits as part of their compensation as a director in accordance with the articles of incorporation or resolutions of the general meeting of shareholders, the plaintiff cannot claim retirement benefits defined by the Labor Standards Act based on the assumption of being an employee under the Labor Standards Act. |
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