In a case where Company A participated in the “Juvenile Work Experience Program” project implemented by the Ministry of Employment and Labor and entered into an agreement on the support for youth internship with Company B, which is entrusted with the business affairs by the Ministry of Employment and Labor, and employment of an intern, and Company B 30,000,000 won for the actual agreed wage of KRW 1,50,000,000,000 for 1,500,000,000 won for 1,50,0000 won for each person, and Company B filed a lawsuit against Company A seeking a return of the subsidy, the case holding that Company B’s claim for a return of subsidy under the Convention against Company A is subject to civil procedure as it seeks liability for nonperformance on the ground of a breach of duty stipulated in the Convention, and that the entire amount of subsidy paid by Company B by submitting a false agreement on internship, etc. with Company B, which is subject to return pursuant to the Convention.

In a case where Company A participated in the “Juvenile Work Experience” project implemented by the Ministry of Employment and Labor and entered into an agreement for youth internship support with Company B, which is entrusted with the business affairs by the Ministry of Employment and Labor, and Company A 30,000 won for 1.5 million won for 1.5 million won for each applicant, and Company B filed a lawsuit for the return of the subsidies against Company A, the case holding that Company B’s application for the payment of subsidies under public law and other unlawful methods under Article 33-2(1)1 of the former Act on the Management of Subsidies (amended by Act No. 13931, Jan. 28, 2016) should be deemed as an exercise of the duty to request the payment of subsidies by fraudulent or other unlawful methods, and thus, Company A’s act of claiming the payment of subsidies by fraudulent methods to the pertinent 30,000 won for 1.5 million won for 1.5 million won for each applicant’s 1.5 million won for 1.5 billion won for each applicant’s employment contract should be deemed as an exercise of the duty of public authority.

Article 25 of the Framework Act on Employment Policy, Articles 25(1)3 and 35(1) of the Employment Insurance Act, Article 36(1)3 and (2) of the former Enforcement Decree of the Employment Insurance Act (Amended by Presidential Decree No. 23467, Dec. 30, 201); Article 33-2(1)1 (see current Article 33(1)1) and (3) (see current Article 33(1)2) of the former Act on the Management of Subsidies (Amended by Act No. 13931, Jan. 28, 2016)

Professional Bank Co., Ltd. (Law Firm Young-gu et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 200Na14484 decided May 1, 200

Seoul Central District Court Decision 2017Na84169 Decided May 30, 2018

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

1. Case summary and key issue

A. According to the reasoning of the lower judgment, the following facts are revealed.

(1) Based on Article 25 of the Framework Act on Employment Policy and Article 25(1) of the Employment Insurance Act, the Ministry of Employment and Labor implements a “youth employment internship system” project that provides unemployed youth with experience in working as an intern in a small and medium enterprise. The purpose is to provide opportunities to develop job abilities and work experience, and to promote employment for regular workers who are suitable for aptitude and experience.

(2) According to the “Guidelines for the Implementation of the Youth Work Finding System” (hereinafter “instant Guidelines”) established and announced by the Ministry of Employment and Labor as a matter necessary for the implementation of the said business, an operating agency that is entrusted with the business operation by the Ministry of Employment and Labor shall enter into an internship support agreement with the implementing company (Article 2-1). In the event that the implementing company applies for or receives government subsidies in violation of the instant guidelines and the internship support agreement, or where there are substantial circumstances where it is difficult for the implementing company to achieve the purpose of the internship business by fraudulent or other unlawful means, the pertinent internship support agreement may be terminated. In the event that the implementing company fails to implement the internship support agreement, etc., the executing company may request termination thereof and terminate it under mutual agreement (Articles 2-2 and 2-4).

(3) The Plaintiff is an institution entrusted by the Ministry of Employment and Labor with the duties of youth employment internship. Meanwhile, since 2009, the Defendant participated in the youth employment internship project as an executor company and entered into an agreement on the support of youth employment (hereinafter “instant agreement”) with the Plaintiff every year from 2013 to 2013. According to the instant agreement, where the Defendant was unjustly paid subsidies in violation of the instant guidelines and agreement, it shall return the subsidies to the local government office upon the order of return or the Plaintiff’s request (Article 9). However, the Defendant, despite the actual contractual wage of 300,000,000 won for the 1.5 million,00,000 won per capita, was 1.50,000 won for each of the 1.5 million,00,000 won for each of the instant subsidies (hereinafter “instant subsidies”).

(4) On December 20, 2013, the Plaintiff demanded the Defendant to return the instant subsidy amounting to KRW 50,987,530, which was the part of the year 2012 and the year 2013, which was the part of the instant subsidy. On August 3, 2015, the Plaintiff filed the instant lawsuit against the Defendant seeking payment of KRW 47,654,210, which was not the three-year extinctive prescription of the instant subsidy.

B. The key issue of the instant case is (i) whether the claim for return of the instant subsidy is subject to civil litigation; (ii) whether the scope of return is limited to the portion exceeding the “amount normally payable if the Defendant did not use unlawful means,” or whether the “total amount of subsidies received by the Defendant using unlawful means.”

2. As to the legal nature of the claim for return of the subsidy of this case (ground of appeal No. 1)

A. (1) According to the Employment Insurance Act and subordinate statutes, the Minister of Employment and Labor may subsidize expenses incurred in providing employment assistance to a person deemed capable of providing employment assistance programs in order to stabilize and promote employment of the insured workers, etc., within budgetary limits. Accordingly, the Minister of Employment and Labor shall publicly notify the type and content of the business in question, the scope of the insured workers, etc. eligible for the support, the details and level of the support, the method of application, etc. in advance (Article 25(1)3 of the Employment Insurance Act and Article 36(1)3 and (2) of the former Enforcement Decree of the Employment Insurance Act (amended by Presidential Decree No. 23467, Dec. 30, 201; hereinafter “Enforcement Decree of the Employment Insurance Act”). The Minister of Employment and Labor may order the person who received or intends to receive the support for employment security and vocational skills development programs by fraud or other improper means to return the subsidized amount to the person who received or intends to receive the support by fraud

(2) According to the former Subsidy Management Act (amended by Act No. 13931, Jan. 28, 2016; hereinafter “former Subsidy Act”), the head of a central government agency, a subsidy program operator, or an indirect subsidy program operator shall order a subsidy recipient to return all or part of the subsidy that he/she has received by fraud or other improper means within a given period (Article 33-2(1)1). If a subsidy program operator is the head of a central government agency or a local government, if the subsidy recipient fails to return by the given period, the subsidy recipient may be collected in the same manner as national or local taxes are collected (Article 33-2(3)).

B. We examine the contents, structure, legislative intent, etc. of the above provisions.

Based on the Employment Insurance Act, the Plaintiff is a juristic person entrusted with affairs concerning the youth internship program by the Seoul Local Labor Office, and the Defendant is a subsidy recipient under the Subsidy Act. The instant agreement is part of the elements of public law as a contract concluded between the Plaintiff and the Defendant, who is a subsidy recipient, with respect to the subsidy support. However, since Article 33-2(3) of the former Subsidy Act reserves for compulsory collection of the subsidy subject to the order to return only when the subsidy recipient is the head of a central government agency or the head of a local government, even if the Plaintiff demands the return of the subsidy recipient, it may not be forced to collect the subsidy if the subsidy recipient fails to comply with the order. Accordingly, the Plaintiff’s expression of intent to return the subsidy received by false application or other unlawful means pursuant to the instant guideline or Article 33-2(1)1 of the former Subsidy Act should be deemed not “a public authority order to return” as an exercise of its superior position, but as a contract based on an equal status of a party. Moreover, the Plaintiff’s claim for the refund of the subsidy and the scope of obligations in civil procedure.

C. In the same purport, the lower court determined that the Plaintiff could claim the return of the subsidy unjustly paid to the Defendant by means of civil procedure. In so determining, the lower court did not err by misapprehending the legal doctrine on the jurisdiction over the claim for return of subsidy under the instant agreement, contrary to what is alleged in

3. As to the scope of return of the instant subsidy (Ground of appeal No. 2)

A. The instant agreement provides that if the Defendant received subsidies unfairly in violation of the instant guidelines and the instant agreement, it shall return the subsidies at the request of the local government office or the Plaintiff (Article 10(1)), and that matters not specified in the agreement shall be governed by relevant statutes, guidelines, and other reasonable standards under social norms (Article 16) and did not specify the scope of return.

However, according to the instant guidelines incorporated into the contract content between the Plaintiff and the Defendant pursuant to Article 16 of the instant Convention, a implementing company’s submission of a false internship agreement in which wages are unfasible while filing an application for a subsidy constitutes “cases of applying for a subsidy by false or other unlawful means” (Article 3-2). In cases where the operating institution confirms that there was a false or other unlawful act at the stage of examination by receiving and examining the internship agreement, etc. from the implementing company, the relevant application shall not be paid even if part of the relevant application (Article 3-4). Therefore, in cases where the operating institution did not understand the circumstances that the implementing company submitted a false internship agreement, and paid the relevant subsidy, the total amount of the subsidy received by the implementing company as the relevant application shall be deemed to be subject to return to the operating institution.

B. In the same purport, the lower court determined that the entire amount of subsidies received by the Defendant by submitting a false internship agreement, etc. that the Defendant paid to the Plaintiff was eligible for return to the Plaintiff pursuant to the instant agreement. In so determining, the lower court did not err by misapprehending the legal doctrine on the scope of subsidies to be returned pursuant to the instant agreement, contrary to what

4. Conclusion

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Park Jung-hwa (Presiding Justice)