Recent Court Decisions on Annual Leave and Proposals for Improvement
Bongsoo Jung / KangNam Labor Law Firm

The purpose of annual paid leave is to guarantee sufficient paid leave to workers who are exhausted from long-term work so they can recover their physical and mental health and enjoy a cultural life. Monetary compensation is applied only in exceptional cases where annual leave is not available. As Supreme Court rulings have been made based on the purpose of such annual leave, existing rulings are currently being revised to reflect this.
The Supreme Court ruling on October 14, 2021 (2021 da 227100) ruled that the annual leave days for one-year fixed-term workers amounted to 11 days, not 26. Even in the case of retirees, the Supreme Court ruling on June 28, 2018 (2016 da 48297) ruled that, in cases where the calculation period of annual leave is from January 1 to December 31 of each year, if the retirement date is December 31, there was no annual leave allowance owing in the following year

1. A case related to annual leave of retirees

Workers were hired by the Uijeongbu City Facility Management Corporation and retired as street cleaners. In the employment rules it is stipulated that retirement “shall be the last day of December of the year in which the person turns 61.” In accordance with the provisions of the collective agreement, 20 days of special paid leave were used for those eligible for mandatory retirement, and the mandatory retirement was on December 31st. The workers said, “The last day of December of the year in which we turned 61 was a special leave period, so the actual retirement date should be considered as January 1 of the following year. The employer is obliged to pay the workers the allowance for the unused annual leave due to their retirement on January 1st, since annual leave was accrued in the year they turned 61 years of age.”
Regarding this, the first and second trials agreed to the workers’ legal claims, but the Supreme Court ruled “The employment rules set the retirement age as the end of December when they turn 61. The retirement age is reached on December 31, when the person turns 61, and the employment relationship is naturally terminated. Therefore, workers cannot acquire the right to annual leave in return for work in the year in which they turn 61. Therefore, it cannot be seen that their retirement date is postponed to January 1 of the following year.”

2. A case related to annual leave of fixed-term workers
A worker used 15 days of annual leave while working as a caregiver at an aged care welfare facility for one year from August 1, 2017 to July 31, 2018. On May 5, 2018, the Ministry of Employment and Labor distributed the guideline for the revised Labor Standards Act as it related to the expansion of the annual leave guarantee for workers with less than one year of employment. The guideline stated “If the contract period of a one-year fixed-term worker expires, an unused annual leave allowance of up to 26 days must be paid.”
The worker submitted a complaint to the Chungbu Regional Labor Office stating that he had not been paid 11 days' annual leave allowance. With the guidance of the labor inspector, the employer paid 717,150 won to the worker as an annual leave allowance for 11 days.
Later, the employer stated that the information that up to 26 days of annual leave would be granted to workers who signed a one-year fixed-term employment contract was incorrect. Since the worker used all the annual leave granted to him, he could not receive annual leave pay. The employer claimed that the worker is obligated to return the overpaid allowance because the employer paid the additional 11 days' annual leave allowance based on the erroneous guidance of the labor inspector.
In response, the lower court (the second trial) recognized the claim of the employer and issued an order for the worker to pay back the overpaid amount. The worker then appealed to the Supreme Court. The Supreme Court ruled “The right to use annual leave or the right to claim annual leave allowance naturally arises when an employee provides work while meeting the attendance rate in the previous year, and is equivalent to the consideration for work for one year in the preceding year, not the year in which the annual leave is to be used. Paid annual leave as stipulated in Article 60 (1) of the Labor Standards Act is granted to workers who have worked at least 80% of one year, and the worker does not use annual leave within one year after acquiring the right to annual leave, or retires before one year has elapsed. In the event that annual leave can no longer be used due to reasons attributable to the employer, the worker can claim an annual leave allowance, which is a wage corresponding to the number of days of annual leave. However, the right to use a 2nd year’s annual leave shall be deemed to occur on the day following completion of work for one year of the preceding year, unless otherwise specified. If the employment relationship is terminated due to retirement before then, no annual leave allowance may be claimed as compensation for the right to use annual leave.” Therefore, it was determined that workers who signed a one-year fixed-term employment contract were granted up to 11 days of annual leave.

3. Excerpts From the Current Annual Leave and Suggestions for Improvement

Annual paid leave is a paid leave granted to recover bodies and minds which have been exhausted from long-term work and 15 days are granted to workers who have worked more than 80% of the year. In addition, one additional day is added every 3 years, and the maximum granted is up to 25 days. If an employee does not use annual leave within one year after acquiring the right to it, or retires before one year has elapsed, he/she may claim annual leave allowance (a wage equivalent to the number of days of annual leave) from the employer. According to the annual leave regulations of the Labor Standards Act which were changed in 2018, the amount of annual leave accrued for one year is 11 days, with one paid leave day per month. At the end of the first year, 15 days are generated on the premise of continuous service and will be used for one year.
If an employee works for one full year and quits the next day, he can claim 11 annual leave days and 15 annual leave days on the premise of the last full year of work. This may be somewhat of a violation of the principle of equity. There are differences in the paid allowance when an employee leaves the company on a specific day, because of annual paid leave that occurs based on the previous year's work. Therefore, it is often the case that a worker has determined his/her resignation date based upon the days of additional annual leave to be granted. As a way to solve this problem, a method of calculating the current annual leave system in proportion to the length of service may be proposed. For example, 11 days are granted for the first year of service, and 15 annual leave days accrued in the second year are guaranteed to be used continuously or in installments. However, if the employee resigns in the middle of the second year, quarterly deductions can be made proportionally. I think this would be helpful in improving the existing method of granting annual leave.
I think that the precedent for the retirees in 2018 on annual leave and the precedent for the one-year fixed-term worker are reasonable judgments in line with the purpose of guaranteeing annual leave. I believe that the purpose of annual leave is to guarantee sufficient paid leave to recover bodies and minds exhausted from long-term work, but not as a simple monetary compensation.
Unfortunately however, the fact that the number of days of annual leave varies greatly may violate the principle of equity and may be a reason for workers to adjust their resignation date. Therefore, in improving annual leave, I think it would be better if paid leave were guaranteed in an equitable way in proportion to the length of the relative labor service, regardless of what actual point in time the individual resigns.