[Edaily Reporter Sung Gha-hyun ] The Supreme Court has ruled that the wage peak system implemented by LOTTE SHOPPING CO., LTD.(023530)—which obtained the consent of a majority of its employees through the company’s internal network—failed to meet procedural requirements. The Supreme Court held that even if a formal majority was achieved, it could not be considered collective consent if there were no substantive discussions or exchanges of opinions among the employees.

The Second Division of the Supreme Court (Presiding Justice Park Young-jae) overturned a second-instance ruling from last June in a wage claim lawsuit filed by LOTTE SHOPPING CO., LTD. employee A and others against the company. The second-instance ruling had dismissed the plaintiffs’ claim for wage reductions resulting from the wage peak system, and the Supreme Court remanded the case to the Seoul High Court.

In 2013, following an amendment to the Act on the Employment of Older Workers that required companies to extend the mandatory retirement age to 60 or older, LOTTE SHOPPING CO., LTD. decided to restructure its wage system. Consequently, after completing the procedure to amend its employment rules—which included the introduction of a wage peak system—the company extended the mandatory retirement age from 57 to 60 starting in 2016 and implemented the wage peak system, under which wages are reduced by 25–40% starting at age 58.

During this process, LOTTE SHOPPING CO., LTD. posted the proposed amendments on the company’s internal network and conducted a one-week consent procedure. As a result, it obtained consent from 3,857 employees, representing approximately 78% of the total workforce of 4,906. Under the Labor Standards Act, any change to employment rules that is disadvantageous to employees requires the consent of a labor union representing a majority of the workforce or the consent of a majority of the employees.

The employees argued that the wage peak system constituted a change in working conditions that was disadvantageous to them and was therefore invalid because the procedural requirement of collective consent from the employees had not been met. They also contended that while LOTTE SHOPPING CO., LTD.’s extension of the retirement age was merely the fulfillment of a mandatory obligation under the relevant legal amendments, discriminating against employees on the basis of age without reasonable cause was unfair.

The courts of first and second instance ruled in favor of LOTTE SHOPPING CO., LTD., stating that the amendment met the necessary requirements because a majority of employees had consented to the disadvantageous change.

However, the Supreme Court reached a different conclusion. The Supreme Court ruled that the lower courts had misinterpreted the law and remanded the case for retrial.

The Supreme Court emphasized that in the absence of a labor union organized by a majority of employees, the consent of a majority of employees must be obtained through meetings where employees exchange opinions—either at the workplace level or by organizational unit or department—without any intervention or interference from the employer. The Court found that LOTTE SHOPPING CO., LTD. had failed to substantially guarantee employees the opportunity to form a collective will by obtaining majority consent via the company’s internal computer network without following the proper procedures.

It also pointed out that the announcement on the internal computer network lacked a specific explanation of the wage peak system, and that the consent form merely presented a table listing the contents of the employment rules before and after the amendment in a side-by-side format. The Supreme Court explained, “It appears that it would have been difficult for employees to fully recognize that their expression of consent constituted the exercise of their right to consent to an unfavorable amendment to the employment rules.”

Taking these factors into account, the Supreme Court ruled, “Collective decision-making methods, such as exchanging opinions and compiling arguments for and against, must be employed,” adding, “Even if the number of employees who individually expressed their consent in this case formally exceeds half, it is difficult to view the aggregated result as representing the collective consent of a majority.”