A ruling from the Supreme Court has determined for the first time that funeral directors working under a contract with a funeral service provider are considered employees under the Labor Standards Act. However, it stated that severance pay cannot be claimed after three years from the date of termination.
The Supreme Court's Third Division (Chief Justice Roh Kyung-pil) overturned the second trial's ruling that said, 'the company does not have to pay severance' in the case filed by former funeral directors of Fried Life against the company, sending the case back to the Seoul High Court.
Fried Life terminated its contract with the funeral directors who filed the lawsuit around November 2015, after entering into a contract with them around 2008. Around this time, the company established a funeral service specializing under the name Hyundai Funeral Service. The funeral directors worked with Hyundai Funeral Service after terminating their contract with Fried Life.
The funeral directors filed a claim for severance pay against Fried Life and Hyundai Funeral Service in June 2021. They asserted that 'funeral directors are also employees entitled to severance pay.' They also noted that according to the Labor Standards Act, severance pay must be claimed within three years from the date of resignation, but since the company did not provide guidance on severance pay, the statute of limitations does not apply.
The first trial ruled that the funeral directors could not be considered employees. It determined that the funeral directors freely decided whether to work and did not receive specific instructions or supervision from the company regarding funeral procedures. It also noted that the company did not prevent the funeral directors from working at other business sites. Based on this judgment, the claim for severance pay was dismissed.
However, the second trial ruled that funeral directors are employees under the Labor Standards Act. It cited the Supreme Court's confirmation of the rulings from the first and second trials, which ordered Fried Life to pay severance to other funeral directors who filed claims against the company. At that time, the Supreme Court did not explicitly state in the ruling that funeral directors are employees, as it confirmed the second trial without further proceedings.
The second trial stated that the company must pay severance to the funeral directors who filed the claim three years after their departure. According to the Supreme Court's precedent, the statute of limitations does not apply if the debtor makes it impossible or difficult for the creditor to exercise their rights or to interrupt the statute of limitations. The judges noted, 'Funeral directors provided services for as little as two years and as long as seven years and five months, creating a significant need for the company to protect them, yet no notice or guidance was given regarding severance pay.'
The Supreme Court agreed that the second trial’s judgment that funeral directors are employees is correct. However, it determined that the company does not need to provide severance pay to funeral directors who left three years ago. The Supreme Court stated, 'By around 2017, when other funeral directors won the claim for severance pay in the first trial, these funeral directors should have been fully aware that their right to claim severance pay had arisen.' It further stated, 'There is little evidence to suggest that there were any obstacles to exercising the right to claim severance pay before the statute of limitations expired, and there are no circumstances to suggest a waiver of benefits even after the expiration of the statute of limitations.'