[edit] Supreme Court Decision 2001Da25184 delivered on October 23, 2001 [Retirement Allowance]

【Main Issue】

If an employer sets off its claim against an employee against any wages claim held by the employee with the consent of the employee, whether such set-off is in violation of the main text of Article 42(1) of the Labor Standards Act which provides for the principle of the full payment of wages (negative with qualification)

【Summary of Decision】

The main text of Article 42(1) of the Labor Standards Act provides that the "payment of wages shall be directly made in full to the employees in currency". The purpose of declaring what is called the principle of the full payment of wages is to ensure that wages be paid in full to the employees by prohibiting any employer's unilateral deduction from the wages, in order that the employees' economic lives can be protected and should not be threatened. Hence, no employer may unilaterally set off its claim against an employee against any wages claim held by the employee. However, if an employer sets off its claim against an employee against any wages claim held by the employee with the consent of the employee, in case where there exist reasonable and objective reasons sufficient to recognize that such consent has been made based on the employee's free will, it is deemed that such set-off is not in violation of the main text of Article 42(1) of the Labor Standards Act. However, in light of the purpose and the intent of the principle of the full payment of wages, any judgment on whether the consent has been made based on the employee's free will should be rendered strictly and carefully.

【Reference Provisions】 Article 42(1) of the Labor Standards Act, and Article 492 of the Civil Code

Article 42 of the Labor Standards Act (Payment of Wages) (1) The payment of wages shall be directly made in full to the employees in currency: Provided, That if otherwise prescribed by Acts and subordinate statutes or by a collective agreement, the wages may partially be reduced or may be paid by means other than currency.

(2) <omitted>

【Plaintiff, Appellee】 Plaintiff

【Defendant, Appellant】 Onsan Agricultural Cooperative Federation (Choi Chang-sik, Counsel for defendant-appellant)

【Court of First Instance】 Woolsan District Court Judgment 99Gadan778 delivered on July 20, 2000

【Court of Second Instance】 Woolsan District Court Judgment 2000Na2863 delivered on March 29, 2001

【Disposition】 The Judgment of the court below shall be reversed and the case shall be remanded to the Appellate Division of the Woolsan District Court.

【Reasoning】1. Based on the evidence presented, the court below acknowledged that the plaintiff's retirement allowance arising out of his retirement was 104,517,917 won excluding any and all taxes, and that the defendant remitted the above amount to the plaintiff's account.

Then, in determining with respect to the defendant's argument that it had paid the total amount of the plaintiff's retirement allowance by the above remittance, the court below acknowledged the following facts based on the evidence presented: Between 1988 and 1991, while the plaintiff was employed as the defendant's Manager of the Branch Office, the plaintiff had each of five persons including non-party Yang Ok-chool borrow 500 million won as a loan in violation of the defendant's Regulations on Duties which provided that no person could borrow in excess of 300 million won; the above five persons failed to repay the loan, and the defendant sustained damage in the aggregate amount of 34,718,615 won; as a result, at or around 10:30 on July 31, 1997, the defendant updated the account for the loan as if the principal and the interest of the loan had been fully repaid; and, at or around 18:00 on the same day, the defendant remitted 104,517,917 won to the plaintiff's bank account as the retirement allowance for the plaintiff, and subsequently drew out the deposit using the seal delivered by the plaintiff to the defendant, treating the principal and the interest of the loan in the amount of 34,718,615 won as the repayment to the defendant by the plaintiff.

Based on the foregoing facts, the court below concluded that the above amount could not be deemed to have been directly paid to the plaintiff because the defendant drew out and used the sum including 34,718,615 won before the plaintiff ever had a chance to manage or dispose of such amount for himself after the defendant had remitted 104,517,917 won to the plaintiff's bank account. Accordingly, the court below was in support of the decision of the court of the first instance, rejecting the defendant's argument and ordering the defendant to pay the above amount to the plaintiff.

2. A. The main text of Article 42(1) of the Labor Standards Act provides hat the "payment of wages shall be directly made in full to the employees in currency." The purpose of declaring what is called the principle of the full payment of wages is to ensure that the wages be paid in full to the employees by prohibiting employers from making unilateral deductions from the employees' wages, in order that the employees' economic lives can be protected and should not be threatened. Hence, it is prohibited that an employer unilaterally sets off its claim against an employee against any wages claim held by the employee. However, if an employer sets off its claim against an employee against a wages claim held by the employee with the consent of the employee, in case where there exist reasonable and objective reasons sufficient to recognize that such consent has been made based on the employee's free will, it should be deemed that such set-off is not in violation of the main text of Article 42(1) of the Labor Standards Act. However, in light of the purpose and the intent of the principle of the full payment of wages, any judgment as to whether the consent has been made based on the employee's free will should be rendered strictly and carefully.

B. In this case, the plaintiff argues that the defendant's employees forged a withdrawal request form and withdrew 34,718,615 won(The plaintiff accused certain employees of the forging private document. However, the plaintiff was arrested and prosecuted for false accusation). On the other hand, the defendant argues that it prepared the withdrawal request form and withdrew the sum including 34,718,615 won from the plaintiff's bank account, upon obtaining the consent to the withdrawal of the sum from the plaintiff. Thus, the court below should have confirmed whether the defendant actually obtained the plaintiff's consent to the withdrawal of the sum from the plaintiff's bank account. Then, if it was found that the defendant had obtained the plaintiff's consent, the court below should have deliberated and determined whether the consent of the plaintiff was effective, that is, whether 'there existed reasonable and objective reasons sufficient to recognize that such consent was made based on the plaintiff's free will.' Nevertheless, the court below did not deliberate or consider such matters, and simply concluded that the plaintiff withdrew and used 34,718,615 won before the plaintiff had an opportunity to manage or dispose of such amount for himself after the retirement allowance had been remitted to the plaintiff's bank account. Consequently, the court below determined to reject the defendant's argument on the ground that the above amount could not be deemed to have been directly paid to the plaintiff. However, the judgment of the court below has a reversible error in the matters of law because it did not deliberate all the facts and circumstances or it misunderstood the legal principle regarding the effectiveness of the set-off agreement on retirement allowance.

3. Accordingly, we hereby reverse the court below's judgment and remand the case to the court below.

It is so ordered per Disposition.

Justices Yoo Ji-dam (Presiding Justice)

Suh Sung

Bae Ki-won

Park Jae-yoon (Justice in charge)

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