Recent Supreme Court decision on retirees' right to expect re-employment

5 July 2023 3 min read

At a glance

A recent Supreme Court ruling reviewed a case that raised the question of whether an employee, who reached the company’s retirement age after filing a lawsuit for wrongful termination, could seek back pay, including the period after retirement, on the grounds that he had the right to expect re-employment after retirement.

This article has been reproduced with the permission of the authors Weon Jung Kim, Ki Young Kim, Paul Cho and Hoin Lee at Kim & Chang.

The Supreme Court recently reviewed a case that raised the question of whether an employee, who reached the company’s retirement age after filing a lawsuit for wrongful termination, could seek back pay, including the period after retirement, on the grounds that he had the right to expect re-employment after retirement. The Supreme Court ruled that the plaintiff had the right to expect re-employment as a fixed-term employee after retirement under the particular circumstances of the case. Accordingly, by affirming the lower court’s decision, the Supreme Court held that the plaintiff should be paid the amount equivalent to his wages that he would have been paid if he were rehired as a fixed-term employee after retirement (Supreme Court Decision No. 2018Da275925 rendered on 1 June 2023).

In this case, there was no provision concerning rehiring of retirees as fixed-term employees in the collective bargaining agreement, rules of employment, or employment agreements. Nevertheless, the Supreme Court accepted the plaintiff’s argument that all employees who reached the company’s retirement age still had the right to expect re-employment as fixed-term employees on the grounds that:

The company introduced a system under which retirees were re-employed as fixed-term employees; and
All of such employees were re-employed as fixed-term employees without exception.

Previously, courts have rendered conflicting decisions depending on the specific factual details of each case as to whether a retiree could have the right to expect re-employment. In one case, the Seoul High Court denied a retiree’s right to expect re-employment on the basis that “Under the relevant provisions in the rules of employment or collective bargaining agreement, the company has discretionary authority to re-employ employees who have retired upon reaching the company’s retirement age, if deemed necessary, and is thus not required to re-employ retirees. Therefore, it cannot be deemed that an employee who has reached his / her retirement age has the right to demand that the company enter into an employment contract” (Seoul High Court Decision No. 2015Nu35125 rendered on 7 October 2015, which became final after no appeal was filed). On the other hand, in a case where a collective bargaining agreement provided that a retiree will be re-employed upon satisfaction of certain requirements (i.e. eligibility review), the Seoul High Court acknowledged the retiree’s right to expect re-employment (Seoul High Court Decision No. 2018Na2030830 rendered on 3 May 2019, which became final by dismissal of the appeal).

The above Supreme Court decision has established precedent by explicitly ruling that the right to expect re-employment can be recognised based on the practice of re-employment after retirement, even if there is no explicit provision on re-employment after retirement in the company regulations. Accordingly, it is expected that the right to expect re-employment after retirement may be more broadly recognised.

Recently, the labour federations have consistently demanded that companies extend their respective retirement age limits, and many companies are considering hiring retirees as fixed-term employees for a certain period of time as an alternative to an extension of the retirement age. If companies selectively re-employ some retirees as fixed-term employees, depending on the specific circumstances of each case, disputes may arise in light of the Supreme Court’s decision. Therefore, in order to minimise the aforementioned risk, a company that is considering re-employment of retirees in the future needs to clearly establish its regulations on re-employment, including eligibility criteria.