The Story Behind Korea’s Laws: Your Guide to Korea’s Legal Pulse
SEOUL, Feb. 6 (Korea Bizwire) — A landmark Supreme Court decision requiring Samsung Electronics to include certain performance incentives in the calculation of severance pay is triggering a new round of lawsuits, with former employees rushing to file claims before the statute of limitations expires.
According to legal sources on Thursday, 22 former Samsung Electronics employees recently filed suit at the Seoul Central District Court, seeking unpaid severance pay tied to so-called “TAI (Target Achievement Incentive),” a category of management performance bonuses.
The filings follow a Jan. 29 Supreme Court ruling that overturned lower court decisions and sent a case brought by 15 retirees back to the Suwon High Court. In that ruling, the justices held that Samsung’s target incentives — which are paid regularly under predetermined criteria — qualify as wages and must therefore be included in the average wage used to calculate severance pay.
Lower courts had previously sided with Samsung, finding that both target and performance incentives did not constitute direct compensation for labor. But the Supreme Court drew a distinction, concluding that target incentives, given their regular and standardized nature, carry the characteristics of ordinary wages.
View of employees commuting to Samsung Electronics’ Seocho headquarters (Yonhap)
The decision has opened the door to broader litigation. Under South Korean law, wage claims expire after three years, prompting labor groups to move quickly. The National Samsung Electronics Labor Union said it is preparing a collective lawsuit on behalf of retirees within the three-year window, as well as employees who switched from defined-benefit to defined-contribution retirement plans.
The union said even nonmembers will be allowed to participate in the lawsuit by registering through its website.
Similar severance pay disputes involving workers at SK hynix and HD Hyundai Heavy Industries are currently pending before the Supreme Court, suggesting the issue could reverberate across major conglomerates.
Park Chang-han, a lawyer at A-Pro Law Firm who represented the retirees in the successful Supreme Court appeal, said the ruling is likely to apply to other companies with comparable wage structures. He added that additional lawsuits are being prepared as consultations with workers continue.
For corporate Korea, the ruling signals a potential recalibration of compensation practices — and a reminder that bonus structures once considered discretionary may now carry lasting financial consequences.
M. H. Lee (mhlee@koreabizwire.com)
