South Korea's Supreme Court has ruled that performance bonuses paid by LX Glass (formerly Hankuk Glass Industries) cannot be considered wages given as compensation for labor. The court found that net profit, the basis for calculating the bonuses, has no close connection to the provision of labor.
According to legal circles on the 22nd, the Supreme Court's First Division (presiding Justice Shin Sook-hee) recently overturned a lower court ruling that had recognized performance bonuses as wages in a lawsuit filed by 36 employees including Mr. Kang against the company, remanding the case to the Seoul High Court.
Under its collective bargaining agreement, LX Glass paid tiered performance bonuses to employees when net profit exceeded 3 billion won. However, when calculating retirement pension contributions for employees enrolled in defined contribution (DC) pension plans, the company excluded performance bonuses from total annual wages. The employees filed suit demanding the company pay additional contributions to their pension accounts, arguing that performance bonuses constitute wages.
Both the first and second instance courts sided with the employees, recognizing conditional bonuses, company-paid health insurance premiums, and performance bonuses as compensation for labor. However, the Supreme Court reversed the lower court ruling. The court determined that net profit, the criterion for the performance bonuses, has no close connection to the provision of labor and is affected by various factors beyond workers' control. The Supreme Court stated, "Net profit is structurally determined by other factors such as the company's capital, expenditure scale, market conditions, and management decisions."