The Supreme Court ruled that the "internal evaluation pay" that the Seoul Facilities Corporation, a city-affiliated public corporation, pays to employees does not constitute ordinary wages and therefore must not be included when calculating statutory allowances and severance pay.
The Supreme Court's First Division (Presiding Justice Shin Suk-hee) on the 16th upheld the lower court's ruling that internal evaluation pay does not constitute ordinary wages in the final appeal of a wage claim lawsuit filed by A, the representative of the Seoul Facilities Corporation labor union, against management.
The Seoul Facilities Corporation is a local public corporation that manages and operates facilities owned by the Seoul Metropolitan Government. A total of 2,163 former and current employees argued that the "internal evaluation pay" among the evaluation pays the corporation provides is included in ordinary wages and filed a lawsuit seeking additional payment of statutory allowances, such as overtime, night, and holiday pay, and severance pay.
The corporation paid performance bonuses divided into incentive evaluation pay and internal evaluation pay. Incentive evaluation pay is paid by subdividing grades based on the results of management evaluations (grades from A to E) by external agencies such as the Ministry of the Interior and Safety and on each employee's work performance.
Internal evaluation pay is determined by the organization's own internal standards regardless of the management evaluation results. It is paid differentially according to department-by-department and individual job performance evaluations. The payment rate or criteria are not fixed under the work rules. Based on the results of management evaluations conducted by the Seoul Metropolitan Government and budget formulation standards, the corporation paid 100% or 75% of one month's salary (monthly remuneration) as internal evaluation pay.
The first and second trials found that internal evaluation pay does not constitute ordinary wages. The first trial court said, "It cannot be seen that the payment criteria were fixed uniformly each year," and noted, "If certain reasons exist, the payment of internal evaluation pay to employees of the corporation is itself restricted." The second trial court said, "At the time the plaintiffs provided labor, it cannot be viewed as confirmed whether the internal evaluation pay to be paid the following year would be paid."
After losing on appeal, 2,162 plaintiffs, except for A, the union representative, abandoned their appeals. The Supreme Court dismissed the appeal, saying the internal evaluation pay does not constitute ordinary wages. The court said, "The internal evaluation pay rate is determined by budget formulation standards of local governments, which can vary each year, and by the decision of the head of the organization (the corporation's president)," adding, "The lower court's determination that it is difficult to see that a minimum payment is guaranteed is justified."