Section 1: Parties and Need for Remedy
Chapter 1: Employee
2. Determination of the Existence of Executive's and Internal Subcontractor[so-sa-jang]'s Employee Status under the Labor Standards Act
2.3 Representative Director
| Supreme Court Decision No. 2012DA98720, rendered on May 29, 2014 (Denial of Employee Status for CEO) | |||||
| Plaintiff and Appellant: A Defendant and Appellee: Company B Facts a. The plaintiff drafted a contract (hereinafter referred to as the "contract in question") under which the plaintiff was appointed as the CEO of the defendant, with the authority delegated by the then-CEO of the defendant, who was acting as an agent between the plaintiff and the defendant, and also served as the Director of ○○○○ International in charge of personnel affairs for the Asia-Pacific region and the regional manager for Hong Kong, Korea, China, and Singapore for ○○○○ International. b. The contract in question detailed the plaintiff's obligations as the CEO of the defendant, along with specific terms and conditions of employment. On the other hand, Article 29 of the defendant's Articles of Incorporation stipulates that "Compensation, bonuses, and other allowances for directors and auditors shall be paid in accordance with resolutions of the shareholders' meeting. The payment of retirement benefits to directors and auditors shall be made in accordance with the company's regulations adopted by resolutions of the shareholders' meeting." c. The plaintiff was appointed as a director of the defendant by a resolution of an extraordinary shareholders' meeting held on May 8, 2007, at 11:00 a.m., and as the CEO of the defendant by a resolution of the defendant's board of directors held on the same day at 1:00 p.m. d. Although the defendant adopted resolutions at its regular shareholders' meetings annually to determine the total amount of compensation for directors and auditors for the fiscal year, it did not adopt a separate regulation for payment of retirement benefits to directors as retirement benefit payment regulations under the employment rules by resolutions of the shareholders' meeting or resolutions regarding annual leave labor allowances. e. According to the defendant's audit report, in the plaintiff's first year of tenure, operating profit and net profit sharply decreased, and in the plaintiff's second year of tenure, the decrease in sales revenue during the plaintiff's tenure led to negative net sales. Consequently, the defendant dismissed the plaintiff. Judgment a. Unless there are special circumstances such as the CEO's position being merely formal or nominal and the CEO providing labor under specific and individual supervision and control of the actual manager and receiving compensation for the nature of labor itself, the CEO of a corporation, who represents the company externally and executes the company's business internally, is not considered an employee under the Labor Standards Act. b. The plaintiff, as the CEO of the defendant, represented the defendant externally and executed the defendant's business internally. Although the plaintiff reported to or obtained approval from the Chairman of ○○○○ International's Hong Kong-Korea-China-Singapore Operations Committee or Asia Operations Committee, who is also the largest shareholder of the defendant and a multinational corporation, this was merely abstract and indirect supervision and control to promote the efficiency of managing and operating various local subsidiaries including the defendant. Therefore, based on such circumstances alone, it is difficult to conclude that the plaintiff provided dependent labor under the specific supervision and control of the defendant or ○○○○ International's Asia Operations Committee. Hence, the plaintiff does not qualify as an employee under the Labor Standards Act. |
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