Supreme Court rules guaranteed hours bind overtime pay calculations

The Supreme Court on April 30 ruled that employers must calculate overtime and holiday pay based on guaranteed hours agreed upon in labor contracts, even when actual working time falls short of those figures.

The decision came in a civil case involving wage claims filed by bus drivers in Seoul against their transport companies. The court held that if labor and management agree to treat a specific duration as extended or holiday work regardless of actual hours, the employer cannot later contest the calculation by citing shorter actual work times.

This principle applies equally to night work allowances. When such an agreement exists, regular wages including bonuses must be recalculated using the guaranteed hours as the baseline for any unpaid allowances.

The case centered on a collective bargaining agreement between the Seoul Bus Workers Union and the Bus Transport Association establishing a two-shift system with a standard five-day, 40-hour workweek. The pact designated nine hours per weekday, including one hour of extended work, and five hours of extended work on alternating weeks as the basis for wage calculations.

Under this arrangement, companies paid extended work allowances for one hour on weekdays and five hours on extended workdays even when monthly actual hours did not reach the guaranteed threshold. Night work was presumed at two hours for morning shifts and three hours for afternoon shifts for allowance purposes.

Drivers sued claiming the difference in extended, night and weekly holiday allowances calculated on regular hourly wages that included bonuses. The Supreme Court determined that when parties agree to deem certain hours as extended or holiday work, the employer is barred from disputing the work time on grounds that actual hours were less than agreed.

The Supreme Court overturned the lower court's dismissal of claims for most plaintiffs, excluding 75 individuals, and remanded the case to the Seoul High Court. It rejected appeals filed by both the remaining drivers and the bus companies regarding other parts of the dispute.