Supreme Court rules unpaid wages lost if claim not filed by deadline

The Supreme Court ruled on February 12 that workers holding priority claims for unpaid wages and retirement benefits lose their right to receive proceeds from a public auction if they fail to file a distribution request by the statutory deadline.

In a dispute over real estate owned by a corporation, the court held that employees could not be treated as having made a valid claim after the period ended, even though the Korea Asset Management Corp. failed to notify them of the requirement. The ruling clarifies that under the former National Tax Collection Act, priority wage creditors must request distribution by the end of the period to qualify, regardless of whether they received guidance from tax authorities.

The case involved workers who did not submit requests before the deadline and received no payment when a bank with a lower-priority mortgage claim was paid fifth in line. The workers sued the bank for the return of unjustly gained profits, arguing the auction procedure was illegal due to the lack of notification.

The court stated that an administrative disposition remains valid unless its flaws are so major and obvious that the act is considered void from the outset. Consequently, money distributed based on such a disposition does not immediately constitute unjust enrichment simply because the process was flawed.

The Supreme Court found the lower court erred in assuming the workers had made legitimate claims and ordering the bank to return the funds without first determining if the procedural error rendered the entire distribution void.