Senior workers flex muscles against KB, Citibank

Financial workers union members in their 50s raise their fists during a launch ceremony for the new union at the National Assembly in Seoul, Aug. 4. / Courtesy of the union

By Park Jae-hyuk

KB Kookmin Bank and Citibank Korea are facing lawsuits from dozens of employees in their 50s, who are urging the banks to end their “peak wage system” and compensate them for lost earnings after their salaries were reduced when the system was introduced, industry officials said Monday.

The legal action follows the ongoing lawsuits filed by older workers at two state-run banks ― the Korea Development Bank (KDB) and the Industrial Bank of Korea (IBK).

The Korea Exchange (KRX), Seoul Guarantee Insurance (SGI), the Korea Credit Guarantee Fund (KODIT) and the Korea Technology Finance Corporation (KOTEC) are expected to face similar litigation from workers in their 50s within the year.

Industry officials said other public and private financial firm workers are considering similar action.

Given that the Supreme Court ruled in favor of a state-run company worker in December last year, ordering the company to compensate him for the reduction in salary after the introduction of the peak wage system, the financial firm workers are seen as likely to win their lawsuits. The Moon Jae-in administration's labor-friendly policies are also weighing on the financial firms.

If the companies lose the lawsuits, this will cost them billions of won.

The peak wage system gradually reduced the salaries of workers aged between 55 and 57 until their retirement at the age of 60. This system was introduced as a way to get private and public enterprises to hire a larger number of new younger employees with their reduced payroll costs.

Some elderly workers at state-owned companies, however, have complained of the system, saying their salaries were reduced more than expected.

In April last year, 169 senior workers at KDB filed a lawsuit against the state-run lender to collectively get 600 million won ($506,000) back. IBK's 19 employees also sued their company in April this year for 137 million won.

In contrast, commercial banks have carried out voluntary retirements every year, so their employees had not taken similar actions until recently. Most of them left their companies, after receiving a huge amount in severance pay which included two to three years of salaries, their children's tuition fees and medical expenses.

Following the launch of the new union for financial workers in their 50s, however, calls to abolish the peak wage system have grown at commercial banks.

The new organization is comprised of 2,000 older workers from the KDB, IBK, KB Kookmin Bank, Citibank Korea, the KRX, SGI, KODIT and the KOTEC.

KB Kookmin Bank union leader Shim Sang-kyun, who was appointed the first leader of the new organization, said its members will guarantee the job stability of those in their 50s and 60s through the establishment of a financial foundation.

“The retirement age is guaranteed at 60 by law, but financial workers in their 50s are forced to receive halved salaries due to the illegal peak wage system,” he said.

The KB Kookmin Bank union is gathering workers who are willing to take part in the lawsuit against the system, which will be filed within this month at the earliest. The union expects more than 200 former and incumbent employees will participate in the litigation.

Citibank Korea's 24 workers will reportedly sue their company in September.

The IBK union, which has already taken a legal action, said it is considering filing a constitutional appeal against the peak wage system.