Case Study: A Company Director's Overtime Pay Claim
Bongsoo Jung (Korean labor attorney, KangNam Labor Law Firm)

I. Introduction

The Employee began a lawsuit against the Company and visited the Gangnam Labor Office to claim the Company had violated the Labor Standards Act, and had not paid additional allowance for her overtime work.
There is a main item in this accusation: As the Employee’s job title as the managing director placed her in the “directors” group, the question is whether or not this high position is included in ‘persons to be excluded from the application of working hours, recess and holidays’ stipulated by the Labor Standards Act. Herein, I would like to look substantially into this point of dispute to confirm whether or not the Company had violated the Labor Standards Act.

II. Overtime Work Allowance for Managerial and Supervisory Positions

1. Current situation
The Employee claimed that she had never received any additional allowance for overtime or holiday work during her service period, and that she was entitled to additional allowances for overtime and holiday work for the past three years. The Employee requested the information of her office PC’s “on-and-off” data to check her working time as she had not recorded it in the related documents.
The Company responded that the Employee is not entitled to overtime work allowance or holiday work allowance due to her high position as the managing director, putting her in a managerial and supervisory position according to Article 63 of the LSA.

2. Related law, guideline and judicial ruling regarding overtime work allowance for personnel in managerial and supervisory positions
(1) Regulation of the LSA
Article 63 (Exceptions to Application) of the LSA regulates that the provisions regarding working hours, recess and holiday shall not apply to managerial and supervisory positions.

(2) Related guideline
‘The provisions of Chapter 4 and Chapter 5 as to working hours, recess, and holidays shall not apply to persons engaged in management and supervision’ (Article 63 (4ho) of the LSA and Article 34 of its Enforcement Decree). Here, ‘persons engaged in management and supervision’ refers to those in managerial positions in the decision-making process of working conditions. This position shall be determined collectively in consideration of whether the person participates in deciding labor management or has authority for supervision and control in labor management regardless of his/her formal designation, whether the person’s working hours are strictly regulated (such as time to arrive at and leave the workplace), whether the person receives a special allowance due to the position, etc.
Administrative guidelines explain, for those in the position of ‘section manager’ who are authorized to plan and implement general duties and detailed job assignments for their subordinates, and control their business trips, overtime, and vacations, even though the section manager did not receive a special allowance in accordance with that position, if the section manager has not been strictly regulated in time of arrival at and leaving the workplace, the section manager shall be considered as a person who is in line with the employer in determining working conditions and other forms of labor management (Guideline Kunjung-41, Mar 3, 2011).

(3) Judicial ruling
The Supreme Court (February 28, 1989, 88daka2974) ruled that working hours, recess and holidays stipulated by the Labor Standards Act do not apply to persons in a managerial and supervisory position in terms of deciding subordinates’ working conditions, and does not have their times of arrival at and leaving the workplace strictly regulated, and is managing his/her own working hours flexibly. Persons in this position cannot receive additional allowance for overtime work exceeding contractual working hours or holiday work according to the Labor Standards Act.
        
3. The Employer’s countermeasures
Even though the ‘managing director’ for the foreign company in this case has a considerably high position, it is not clear whether this high ranking person is working just as a manager, and not a department head which would place her in a managerial and supervisory position.
The Employee in this case is not a department head due to the combination of two departments, but has received the high salary of a director, twice the incentives of other employees, and her time of arrival at and leaving the workplace has not been strictly controlled as it has been for other employees. In consideration of these facts, the Gangnam Labor Office in charge of this case concluded that the Employee in this case is in a managerial and supervisory position and can be excluded from the provisions on working hours, recess and holiday provisions in Article 63 of the Labor Standards Act. In the end, as the Employee recognized that she could not receive a severance bonus from the Company, she withdrew the lawsuit and instead of resigning, took childcare leave.

III. Conclusion

The point of whether the managing director of a foreign company shall be entitled to an additional allowance for overtime work shall be determined collectively in consideration of not only the official designation of the employee as being in a high position but also the manager’s authority, observance of commuting time, and any special allowances assigned to the position. Through this evaluation, companies should prepare measures to avoid having to later deal with matters regarding overtime and holiday work for such a position.