Seoul Metro retirees win final ruling on regular bonuses as ordinary wages

Retired workers of Seoul Metro have won a final court victory in a lawsuit demanding that regular bonuses be counted as ordinary wages, requiring the company to recalculate various allowances and severance pay accordingly.

The case has become a landmark example of the Supreme Court reaffirming that conditional bonuses — paid only to employees who remain on the payroll on a designated date — still qualify as ordinary wages. Legal experts say the new standard, established after the Supreme Court's en banc ruling in December 2024 abolished the long-standing "fixedness" requirement for ordinary wages, is now being applied in rapid succession to similar disputes, placing a growing financial burden on companies.

The Supreme Court's Second Division, presided over by Justice Eom Sang-pil, on May 14 upheld a lower court order requiring Seoul Metro to pay a combined total of more than 500 million won ($362,000) to 154 former employees — salaried workers, pay-grade workers and contracted security personnel — who had sued the company over unpaid wages.

The court held that "an employee's continued employment is a natural prerequisite for providing the agreed-upon labor under a contract," and that "resignation merely terminates the employment relationship and is conceptually unrelated to the consideration for contracted labor." It further ruled that "the mere fact that payment of a given wage is conditioned on the employee being on the payroll at a specific point in time does not negate that wage's character as consideration for contracted labor or its status as ordinary wages."

The court also upheld the lower court's finding that long-service allowances, meal subsidies, work-support allowances, position-performance pay and seniority allowances all qualify as ordinary wages. It also ruled that unused annual leave carried over from 2016 into 2017 must be included in the average wage used to calculate severance pay.

The lawsuit was filed in September 2018 by workers who had retired from Seoul Metro — the successor to Seoul Metro Corp. — at the end of 2017. The plaintiffs argued that Seoul Metro had excluded conditional regular bonuses, payable only to employees still on the payroll on the payment date, from its ordinary wage calculations, and had then used those understated figures as the basis for computing allowances and severance pay.

The central issue was the "active-employment condition" attached to the regular bonuses. Seoul Metro argued the bonuses did not constitute ordinary wages because its internal rules stipulated they were payable only to workers currently employed at the time of payment.

In July 2020, the first-instance court sided partially with the plaintiffs but agreed with Seoul Metro that the regular bonuses fell outside ordinary wages because they were paid only to employees on the payroll at the time of disbursement. The court ordered the company to pay the retirees a combined total of more than 300 million won ($217,000).

The appellate court reversed that finding in December 2021, ruling that the regular bonuses did qualify as ordinary wages and raising the total award to more than 500 million won. The court noted that the bonuses were paid regularly and continuously at 200 percent of base salary, and that they were tied to the provision of labor rather than to any separate performance evaluation or achievement.

The case reached the Supreme Court in 2022. While the appeal was still pending, the Supreme Court issued its en banc ruling on Dec. 19, 2024, overhauling the criteria for recognizing ordinary wages and holding that conditional regular bonuses — including those tied to employment status on the payment date — must be counted as ordinary wages.

Until then, ordinary wage status had been determined by three criteria: regularity, uniformity and fixedness. The fixedness requirement held that payment must be guaranteed once an employee provides the agreed-upon labor, regardless of any additional conditions — a standard that had effectively disqualified regular bonuses paid only to current employees on the grounds that they lacked fixedness.

In that December 2024 en banc ruling, presided over by Justice Oh Kyung-mi, the Supreme Court found no legal basis for treating fixedness as a requirement for ordinary wages and overturned the precedent in cases brought by current and former employees of Hanwha Life Insurance and Hyundai Motor Co.

The Seoul Metro ruling follows directly from that en banc decision and stands as a leading example of the new ordinary-wage standard being applied in actual wage litigation involving employment-conditioned regular bonuses. Legal circles expect the ruling to influence ordinary-wage disputes not only at public institutions but across the private sector as well.