Extension of Working Age for Manual Workers and the Related Legal Impact
On February 21, 2019, the Supreme Court issued a ruling that extends the working age of ordinary manual workers from the current 60 to 65. The working age of manual workers went from 55 to 60 through another Supreme Court decision in 1989 and has remained there for the past 30 years. This most recent Supreme Court ruling in February 2019 will bring many changes to society.
In the immediate term, this change will use 65 years of age for calculating civil damage compensation for people who are not salaried workers such as the unemployed, minors, students, full-time housewives and general manual workers. However, considering that the working age of manual workers goes together with the statutory retirement age prescribed by the Elderly Employment Act , which was set at 60 years in 2013, extension of the working age for manual workers to 65 years will influence society in a great number of ways, in terms of not only changing compensation for damages, but also lending momentum to further extending the statutory retirement age. It is especially related to the low birth rate and societal aging in Korea. The proportion of the population aged 65 or older in Korea reached 14.3% in 2018, which makes the nation an “aged” society, and will reach 20% in 2025, when it will be considered a “super-aged” society.
II. Details of the Court Ruling regarding the Extended Working Age of Manual Workers
First of all, let us concretely examine the details of the Supreme Court's decision to extend working age for manual workers.
On August 9, 2015, a 5-year-old boy drowned in a swimming pool. The parents claimed compensation for civil damages for violation of the pool owner’s and safety manager’s obligation of care. When calculating compensation for damages in first and appellate trials, the courts applied the wages of city daily workers from the time their military service ended for 21 months after the victim would have become an adult, to the age of 60. However, after a public hearing on November 28, 2018, the Supreme Court ruled on February 21, 2019, that it was unable to maintain the case rulings that the working age of manual workers had been accepted until the age of 60, in terms of the actual practices of physical labor, and instead extended the working age of those who provide physical labor to 65 years.
2. Extension of working age for manual workers: effect on society
The Supreme Court’s ruling considers the changes in social and economic conditions in Korea, increased natural longevity, and institutional changes. In general, the decision on the maximum working age for a manual worker is determined by considering three things :
(i) biologically possible physical working age
(ii) the age at which manual labor is desired to work, and
(ii) to what extent a society can accept physical labor.
Using these standards, the Supreme Court specified the following seven items.
① At the time of the previous Supreme Court ruling (1989), the average life expectancy in the nation was 67.0 years for men and 75.3 years for women. In 2017, the average life expectancy for men was 79.7 years, and 85.7 years for women. ② At the time of the previous ruling (1989), the per capita GDP of Korea was USD 6,516, and had reached USD 30,000 by 2018. ③ At the time of the 1989 ruling, retirement age for railway, civil engineering, construction, and machine workers was mainly 58, but in 2013, this had been extended to 60 for most civil servants (including functional). In the private sector, the mandatory retirement age for all workers was set at 60 on January 1, 2017. According to a press release from the Ministry of Employment and Labor, the average retirement age of workplaces operating retirement age systems as of 2016 was 60.4 years. ④ According to OECD data, the actual retirement age is higher than the official retirement age in Korea. From 2011 to 2016, actual average retirement age was 72.0 years for men and 72.2 years for women, while the average among OECD members was 65.1 years for men and 63.6 years for women. Korea has the highest actual retirement age of all OECD member states. ⑤ The Employment Insurance Act applied to newly-hired persons under the age of 60 at the time of enactment on December 27, 1993, but also applies to those who have been employed or began self-employment at up to 60 years of age since its revision on June 4, 2013, while excluding those who are newly employed or began self-employment after reaching 60 years of age. ⑥ The age at which subscribers will receive national pension payments is gradually extending: to 61 years between 2013 and 2017, 62 years between 2018 and 2022, 63 years between 2023 and 2027, 64 years between 2028 and 2032, and 65 from 2033. As for government employees and teachers and staff at private schools, pension receiving age is 60 years until 2021, 61 years in 2022, 62 years in 2024, 63 years in 2027, 64 years in 2030 and 65 years in 2033. ⑦ Under the various social security laws, the age at which the nation must actively guarantee a livelihood is 65 years of age and older.
3. Supreme Court decision
The Supreme Court dismissed the existing view that the working age of persons who do ordinary manual labor or those who mainly use manual labor for their livelihood is 55 years old in the case of an experienced person in the Supreme Court (99daka16867). Since then, courts have maintained the view that the working life of physical labor must be 60 years old by the rule of law. However, as the socio-economic structure and living conditions of our country improved rapidly and the legal system improved, the basic views became more difficult to maintain because the circumstances that formed the basis for the above-mentioned empirical rules changed significantly. Now, as long as there are no special circumstances otherwise, it is reasonable to see that it is possible to work up to age 65.
III. Changes in the Legal Environment due to Extension of Working Age for Manual Workers
Damage caused by illegal acts includes direct damages, indirect damages and consolation money . Direct damage refers to illegal activities that result in medical expenses, nursing care costs, funeral expenses, repair of damaged vehicles, and other expenses for the victim. Indirect damages refer to gains that could have been realized if the illegal act had not been committed. These include lost earnings during the working period and lost severance pay. In this regard, compensation for higher automobile insurance premiums and compensation for civil damages due to work accidents are directly affected.
1. Automobile insurance damages
On May 1, 2019, the age limit for calculating compensation for damages was raised from 60 to 65 years. The contents of this report are as follows: (1) extended working age for death and disability, (2) consolation money calculation for death and disability, and (3) suspension allowance due to injuries.
For example, if a 35-year-old daily worker is killed in a traffic accident, he would theoretically have had 25 more years of work until his 60th birthday, losses of 277 million won would have to be compensated. However, in the future it will be 30 years, and 320 million won would have to be compensated. The loss of work due to an injury for a 62-year-old worker has been 0 won, but according to the revised law, it will be worth 14.5 million won.
Division Victim Present 60 years Changed 65 years Difference
Death 35 years 277 million won 320 million wo 250 million won
Injuries 62 years 0 won 145 million won 145 million won
2. Estimated civil damages for industrial workers
In the event that an employee dies from an industrial accident, the company refers compensation to industrial accident compensation insurance. However, if the company is deemed partly liable, such as for failing to have sufficient safety measures in place, which resulted in the death of the worker, the company shall be liable for civil damages in addition to industrial accident compensation for the surviving family. The extent of the civil damages shall be the loss of the victim whose death has a significant causal relationship with the company’s negligence, while the scope of damages recognized are categorized as direct damage, indirect damage and mental damage. In general, if a worker dies, compensation shall cover the sum of medical expenses, hospital expenses, negative expenses, lost work income (loss incurred from the time of death to the point of retirement) and a one-time retirement allowance (severance pay due to early retirement), and mental damage. Lost Labor earnings have used to be calculated up to the age of 60, but now will be calculated up to 65 years, which increases the amount of civil damage compensation.
As the working age of manual workers is raised to 65 years, insurance premiums are expected to increase along with the various compensation amounts, and discussions on extension of the statutory retirement age are expected to take off. Japan introduced a statutory retirement age to 60 in 1994, and 20 years later introduced a statutory retirement age to 65. In 2013, Korea introduced a retirement age of 60 through the Elderly Employment Act. Nevertheless, when national pension payments are gradually extending to 65 years and when the age of mandatory enrollment in employment insurance will also extend to 65 years, the extension of the statutory retirement age in Korea will be inevitable in the near future. Therefore, companies should abolish the seniority-based salary system, which is a factor in rising labor costs, and introduce job-based wage systems or wage peak systems that reflect the extended retirement period as a way to prepare for the extension of statutory retirement age.