In cases where the Korea Workers' Compensation and Welfare Service pays part of the wages for the last three months and the retirement allowances for the last three years as a substitute payment to workers under the Wage Claim Guarantee Act, and exercises vicariously the claims such as the wages of the workers corresponding thereto, the order of dividend among the claims such as the remaining wages of the workers entitled to the top priority payment and the claims subrogated by the

In a case where a person who has a legitimate interest to repay part of the right to collateral security on behalf of the debtor makes a substitute payment for the debtor, the obligee shall have the right to preferential payment against the subrogated person, even though he/she is legally entitled to the claim and the right to collateral held by the previous obligee, within the scope of the amount discharged by the subrogated. This legal doctrine applies to a case where the Korea Workers' Compensation and Welfare Service pays part of the wages for the last three months with the right to preferential repayment and the retirement allowances for the last three years and exercises by subrogation the rights such as wages of the workers corresponding thereto in lieu of the rights of subrogation, even if the Korea Workers' Compensation and Welfare Service pays it as a substitute payment, the obligee shall have the right to preferential payment as to the claims such as the remainder of wages of the workers who have the right to preferential repayment. If it is interpreted that a claim on behalf of the Corporation, such as the remainder of wages, has the right to preferential payment in the same order on the ground that the legal nature of the payment is identical, the Corporation shall also receive part of the substitute payment paid by the workers, and thus it comes unreasonable to the extent of protecting substitute payment.

Articles 1, 7, and 8 of the Wage Claim Guarantee Act; Article 38(2) of the Labor Standards Act; Article 481, 482, and 483 of the Civil Act

Supreme Court Decision 2001Da53929 Decided July 26, 2002 (Gong2002Ha, 2040) Supreme Court Decision 2001Da2426 Decided June 25, 2004 (Gong2004Ha, 1216) Supreme Court Decision 2009Da57545, 5752 Decided November 26, 2009 (Gong2010Sang, 26)

Plaintiff 1 and 45 others (Attorney Go Jae-chul, Counsel for the plaintiff-appellant)

Korea Labor Welfare Corporation

Gwangju High Court ( Jeju) Decision 2007Na974 Decided January 18, 2008

The judgment below is reversed, and the case is remanded to the Gwangju High Court.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

The Wage Claim Guarantee Act (hereinafter “Act”) was established for the purpose of contributing to the stabilization of workers’ livelihood by taking measures to guarantee the payment of wages, retirement allowances, etc. (hereinafter “wages, etc.”) to retired workers without receiving them due to business fluctuations, industrial restructuring changes, etc. (Article 1 of the Act). For this purpose, the Defendant entrusted with the authority of the Minister of Employment and Labor pursuant to Article 27 of the Act and Article 24(2) of the Enforcement Decree of the Act shall, upon receiving a claim for the payment of unpaid wages, etc. from the employee, pay the unpaid wages, etc. on behalf of the employer (Article 7 of the Act), notwithstanding Article 469 of the Civil Act on the repayment of a third party. In the event of a substitute payment, the Defendant subrogated the relevant employee’s claim, such as wages, etc. against the relevant employer to the extent of the amount paid (Article 8(1) of the Act), and preferential payment rights recognized as the employee’s wage claims continue as a matter of course (Article 8(2) of the Act).

On the other hand, in case where a person who has a legitimate interest in repayment by subrogation for a part of the secured obligation on behalf of the debtor, the subrogated person shall naturally acquire the previous creditor's claims and the right to collateral within the scope of the amount of performance performed by him, but in this case the creditor shall have preferential right to payment against the subrogated person (see Supreme Court Decisions 2001Da53929, Jul. 26, 2002; 2001Da2426, Jun. 25, 2004, etc.).

The above legal doctrine ought to be applied to cases where the Defendant pays a portion of the wages for the last three months and the retirement allowances for the last three years as substitute payment, and exercises by subrogation the employees’ rights such as wages, etc. corresponding thereto, and thus, it is deemed that the Defendant has the right to preferential payment regarding the employees’ remainder of wages and other claims subrogated by the Defendant. If it is interpreted that the employee should receive dividends in the same order on the grounds that the legal nature of the employee’s remainder of the claims such as wages and other claims subrogated by the Defendant is the same, if the employee receives dividends after he/she received a substitute payment from the Defendant in the first place, the Defendant would recover part of the substitute payment that the Defendant received from the employee in the same order and then receive from the employee in the first place, and the scope of protection of the employee would vary depending on the time of substitute payment, as well as would be unreasonable in order to contribute to the stability of the workers’ livelihood through prompt receipt of substitute payment.

According to the reasoning of the judgment of the court below, the defendant paid part of the wages, etc. entitled to preferential payment to the plaintiffs as substitute payment, and participated in the distribution procedure of this case by subrogation of the relevant claims, and the plaintiffs participated in the distribution procedure of this case with the remaining wage claims. In light of the aforementioned legal principles, the plaintiffs have preferential payment right against the defendant in the distribution procedure of this case.

Nevertheless, the court below dismissed the plaintiffs' claims on the ground that the claims such as the plaintiffs' remaining wages are identical to the defendant's subrogated claims and their legal nature. In so determining, the court below erred by misapprehending the legal principles on subrogation as prescribed by Article 8 of the Act, which affected the conclusion of the judgment.

Therefore, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Yang Chang-soo (Presiding Justice)