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 on September 26,2013, Case 2012da28813 (Denial of Employee Status of a Registered Executive) | |||||
| * Plaintiff, Appellant and Appellee: A
* Defendant, Appellant and Appellee: Company B 1. Facts: a. The plaintiff joined the defendant's Seoul office as the branch manager on August 16,1996, and worked continuously in Seoul until being appointed as a director at the general meeting of shareholders on June 30,1998. He was then registered as a director in the company's corporate registry and subsequently promoted through positions such as Managing Director and Executive Director, working until his retirement on December 31,2009, although he remained registered as a director and continued to receive compensation until March 29,2010. b. As a director of the defendant, the plaintiff participated in board meetings deciding crucial company matters. Even if unable to attend, he would sign the minutes after receiving reports on resolutions from employees. He also attended monthly settlement meetings and monthly team leader meetings held at the Busan headquarters, starting to chair the settlement meetings from 2005. c. As the sales team leader, the plaintiff was responsible for domestic and international sales at both the Seoul and Busan offices according to the company's 'organization and duty chart,' overseeing raw material purchases, internal coordination, sales policy formulation and implementation, and market trend analysis. He had broad authority in managing business operations, including hiring for the sales team, forecasting raw material needs for domestic and export sales, and approving daily sales reports, production requests, and shipping orders. d. On March 31,2003, the plaintiff received a settlement for his severance pay calculated according to the Labor Standards Act for the period from August 16,1996, to March 31,2003. From April 1,2003, his contract was changed to an annual salary agreement, with an agreement from 2004 onwards not to pay severance after the contract date. Consequently, his compensation was significantly increased from the average monthly wage of about 3 million KRW, receiving an annual salary of 60 million KRW in 2003 and 2004,7,8 million KRW in 2005, and nearly three times his previous salary at 108 million KRW from 2006 onwards. e. Company B's articles of association, Article 43, stipulate that the remuneration of directors and auditors is determined within the limits set by the resolution of the general meeting of shareholders, and the board of directors decides the payment method and amount, with severance pay governed by the executive retirement payment regulations following a shareholder meeting resolution. 2. Court Judgment: a. Under the Commercial Act, a director of a corporation is appointed through a resolution of the shareholders' meeting (Article 382, Paragraph 1 of the Commercial Act) and must be registered. Only a director who has been lawfully appointed through this procedure can exercise the authority specified by the Commercial Act, such as participating in decision-making for company operations as a member of the board of directors. Furthermore, a director of a corporation receives a certain delegation of administrative tasks from the company (Article 382, Paragraph 2 of the Commercial Act). Therefore, if a director, while performing duties as a director as stipulated by the Commercial Act, also takes on responsibilities for the company’s management, and the nature of the overall tasks does not simply consist of providing labor under the direction and supervision of the employer, the director is regarded as handling the delegated tasks. Moreover, when a director of a corporation receives a certain remuneration as determined by the articles of incorporation or a resolution of the shareholders' meeting, this is, in principle, based on Article 388 of the Commercial Act. Such remuneration cannot be considered as wages defined under the Labor Standards Act. Likewise, when a company pays retirement benefits to a director in accordance with its regulations, those benefits, in principle, are not the retirement benefits defined under the Labor Standards Act but are a type of compensation for the execution of delegated tasks during their tenure. Therefore, the fact that a director receives remuneration and retirement benefits should not alter the nature of the director's position. b. The plaintiff, as a director of the defendant company under the Commercial Act, has participated in key decision-making regarding the company's business operations through the board of directors and has handled business management tasks delegated within a certain scope. Particularly, even after reaching the retirement age for general employees, the plaintiff continued to be appointed as a director and processed business affairs while receiving remuneration as a director based on resolutions of the shareholders' meeting, which can be seen as distinctively different treatment compared to that of regular employees. Although there may have been instances where the plaintiff received instructions from the CEO while simultaneously serving as the head of the sales team, this does not mean that the plaintiff’s position as a registered director was merely nominal or formal. Furthermore, it is insufficient to conclude that the substance of the plaintiff’s entire duties was not to handle delegated tasks but rather to provide labor in a subordinate relationship with the aim of receiving wages. Therefore, while the plaintiff may have the right to claim severance pay as part of the remuneration for directors, as determined by the articles of incorporation or resolutions of the shareholders' meeting, this is separate from the claim for severance pay under the Labor Standards Act, which cannot be made on the premise that the plaintiff is a worker under the Labor Standards Act. |
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