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[Article] Comparative Case Study of Nature of Vouchers

2020.07.15

1.    Introduction 
 
The Supreme Court decided that “even in case an employer implemented an optional benefits system and continuously and regularly assigned to employees employee benefit points, which may be used by purchasing goods online on the websites for exclusive use of the employees based on collective agreements and rules of employment, these points are not to be deemed wages as defined under the Labor Standards Act, and thereby not ordinary wages.1  With that, the controversial issue of whether the vouchers are to be deemed wages or ordinary wages was resolved.  
 
The Supreme Court thereafter rendered a series of decisions which also held that “the employee benefit points which may be used by purchasing goods online on the websites for exclusive use of the employees are not to be deemed wages as defined under the Labor Standards Act and thereby not deemed ordinary wages” as to public entities, such as the National Health Insurance Service,2and private corporations, such as LG Electronics.3   
 
However, the Supreme Court recently held that the vouchers which a bus company (the “Bus Company”) provided its employees were to be deemed wages and ordinary wages, reversing the lower court’s decision (the “Bus Company” case).4   
 
This article will examine in detail the Bus Company case and the earlier cases on vouchers as to how they differ and why the Supreme Court reached the opposite conclusion.  
 
 
2. Overview of Bus Company Case 
 
A. Factual Background 
 
1) Bus Company agreed with the labor union to pay daily expenses of 10,000 KRW as miscellaneous expenses for gloves, beverage, cigarettes, etc. to all the drivers who were working at the time when the Bus Company was implementing installation of security cameras on the bus in March 1998.  
 
2) Bus Company and the union later in January 2012 entered into an agreement which stated that Bus Company would first pay daily expenses of 5,000 KRW as beverage expenses during the period of upgrading the camera system and then would provide vouchers for exclusive use at the company-managed store in the amount of 10,000 KRW which was equivalent to the miscellaneous expenses as reimbursement for the actual expenses after the completion of the upgrade on January 19, 2012.  
 
3) Pursuant to this agreement, Bus Company provided cash until January 18, 2012 and vouchers from January 19, 2012 to all the drivers working at Bus Company regardless of whether these cash or vouchers were actually used as expenses. There was no evidence that Bus Company decreased or did not provide the amount of the cash or vouchers on the ground that they were not actually used as expenses.  
 
4) The drivers who started work after January 19, 2012 were uniformly provided with vouchers in the amount of 10,000 KRW.  
 
B. Appellate Decision 
 
As to the amount of these expenses or vouchers, the appellate court held that (i) the expenses paid from February 1, 2011 to January 18, 2012 were to be deemed ordinary wages but that (ii) the amount equivalent to the vouchers provided after January 19, 2012 were not to be deemed ordinary wages on the ground that “they are to be deemed measures to provide the goods needed in provision of the services or employee benefits because they may be used at limited places, cannot be exchanged for cash, and are provided to fulfill the needs in driving the bus.” 
 
C. Supreme Court Decision 
 
In contrast to the appellate court, the Supreme Court held that the amount of the vouchers provided after January 19, 2012 was paid as a remuneration for the services provided by the drivers. The vouchers would be provided to the drivers as long as they provided the services on their working days, and the amount would differ depending on the number of working days. Since the vouchers were provided in a regular, uniform and fixed manner, the vouchers were deemed to be the ordinary wages. This would be the case notwithstanding that the vouchers were provided as the expense reimbursement and in the form of vouchers issued by the company. As to this part of the lower court’s decision on the vouchers, the Supreme Court reversed and remanded. 
 
 
3. Case Analysis  
 
A. Similarities between Employee Benefit Points and Vouchers 
 
1) The employee benefit points and the vouchers are similar in that they are both limited in terms of the places and purposes, as the points may be used on certain sites for certain goods only and the vouchers may be used at the store managed by the company for the goods at the store only.  
 
2) The employee benefit points and vouchers cannot be exchanged for cash even if the employees did not use them.  
 
3) The employee benefit points and vouchers both contribute to the welfare of the employees.  
 
B. Differences between Employee Benefit Points and Vouchers 
 
1) The employee benefit points were intended for establishing an employee benefit system reflecting the desires of the employees with relations to the benefit system other than wages. They were not intended to raise or preserve wages.5  On the other hand, the vouchers were different in terms of how they were introduced and how they evolved over time because they were a type of a compensation following the security camera installation and replacing the daily expenses which used to be paid in cash.  
 
2) While the employee benefit points were uniformly assigned at the beginning of the year to the employees regardless of the number of each employee’s working days, the vouchers were provided on the actual working days in proportion to the number of each employee’s working days only.  
 
3) While the employee benefit points were not assignable, the vouchers were assignable.  
 
4) Unlike the employee benefit points of which use were limited to a period of one year, the vouchers were seemingly without any limitation period (as the decision did not mention such period at all).  
 
C. Implications 
 
1) Neither the employee benefit points nor the vouchers are in cash. However, the fact that they are not provided in cash does not automatically negate their wage-like nature, as shown in the above case which recognized the wage-like nature.  
 
Article 43(1) of the Labor Standards Act provides that “if otherwise prescribed by statutes or by a collective agreement, wages may be paid by means other than currency.” That is, wages are not limited to cash. 
 
The Supreme Court held in the past that vouchers with a certain value were included in the ordinary wages if the vouchers were provided in a regular, uniform and fixed manner.6   The Supreme Court also held in a case, where the employer displayed various household products amounting to 100,000 KRW each, allowing the employees to select from them, and deducting any amount exceeding 100,000 KRW from the wage, the cost of the products in the amount of 100,000 KRW was deemed wages.7   
 
Therefore, the employee benefits which are not in cash are not automatically denied the wage-like nature.  
 
2) Focusing on the fact that the employees use points or vouchers to select and purchase certain products at designated places (whether online or at the store) and the employer later pays the cost, there is not much difference in the ways the employee benefit points and the vouchers function. However, the fact that the employees are able to select the products for which the employer later pays does not in itself deny the wage-like or ordinary wage-like nature. The above case considered (i) the history of the introduction of the non-cash benefits and (ii) the conditions for the benefits (e.g., whether the employees were required to provide actual work or whether the employee status was sufficient to obtain the benefits) in determining the wage-like nature of the benefits.  
 
3) It is advisable that the companies which provide the employee benefits by points or vouchers on certain websites review the legal nature of the employee benefits as wages because there may be risks of disputes on how to calculate the severance pay and statutory allowances.

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1) Supreme Court en banc Decision 2016da48785 dated August 22, 2019.

2) Supreme Court Decision 2017da230079 dated September 9, 2019.

3) Supreme Court Decision 2015da30886 dated September 10, 2019.

4) Supreme Court Decision 2016da7646 dated April 29, 2020.

5) See Supreme Court en banc Decision 2016da48785 dated August 22, 2019.

6) Supreme Court Decision 92da20316 dated May 27, 1993.

7) Supreme Court Decision 2003da54322, 54339 dated May 26, 2006.
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