Yellow Envelope Bill and Creating a Virtuous Cycle
Sung-Jun AHN, Labor Attorney (KangNam Labor Law Firm)

In a National Assembly where the opposition holds the majority, the revised Labor Union Act (nicknamed the "Yellow Envelope Bill") was passed by the ruling Democratic Party on August 24. It was approved by the Cabinet on September 2 and will take effect six months after its promulgation. The main points are as follows.

Expansion of the employer definition : An employer newly includes "a person in a position to have substantial and specific control over a worker's working conditions, even if they are not a direct party to the labor contract.

Expansion of union membership eligibility : The existing rule that a union is not recognized if it allows non-workers to join has been removed. This guarantees the right to organize for various types of workers, such as gig workers (independent contractors) and platform workers.

Expansion of the scope of labor disputes : A dispute is newly also defined as a labor dispute if it arises from a disagreement over "business decisions affecting working conditions" or from an employer's clear violation of a collective bargaining agreement.

Limitation on damage claims : Employers cannot claim damages from a union or its members for losses incurred "due to collective bargaining, a labor dispute, or other union activities under the Labor Union Act (which is interpreted as 'in compliance with the Labor Union Act').

Immunity for illegal acts : A union or its members are not liable for damages if they "unavoidably caused harm to the employer to defend the interests of the union or workers against the employer's illegal acts.

Reduction of liability ratio : Even if a court recognizes a worker's liability for damages, it shall determine the percentage of responsibility based on factors like "the worker's status and role in the union, their level of involvement in the dispute, and their degree of contribution to the damage.

Reduction based on economic situation : The court can reduce the amount of damages by considering the liable party's "economic status, family obligations, ensuring a minimum living standard, and survival.

Immunity for guarantors : A guarantor is no longer liable for "damages caused by a labor dispute.

Prohibition of abusing the right to claim damages : Employers cannot file a claim for damages "with the purpose of endangering the existence of the union, hindering its operations, or obstructing union members' activities.

Compared to the previous law, this act contains many provisions that favor unions and workers. It is understandable that management, especially foreign-invested companies, are concerned about legal uncertainty and potential risks.

Labor's Perspective :

Even with the law's enforcement, labor worries that if the expanded definition of "employer" and the limits on damages are not properly applied in practice, the law's original intent could be undermined.

In the long history of labor-management conflict in Korea, workers have seen reckless lawsuits and asset seizures during strikes as the main reason for suppressing legitimate labor disputes. The historical experience of paying off damages with donations collected in a "yellow envelope" during cases like Ssangyong Motor and Hanjin Heavy Industries was the direct catalyst for this law.

Management's Perspective :

Management fears that the expanded definition of "employer" will cause a surge in costs and administrative burdens for prime contractors, who will have to negotiate with numerous subcontracted unions. They also predict that the wider scope of labor disputes and limits on damages will lead to more and longer strikes, and that the resulting production disruptions will increase business uncertainty.

Management views union strikes as a threat to a company's survival. They argue that damage claims are a minimal means to protect corporate property rights. They also oppose the inclusion of "business decisions" as a subject of labor disputes, seeing it as an infringement on their management rights.



Foreign-Invested Companies' Perspective :

Their biggest concern is "legal uncertainty." They believe the expanded definition of "employer" and the limits on damages, which are not common in their home countries, make the investment environment in Korea unpredictable. They warn that production disruptions and investment losses from strikes could lead to re-evaluation by global headquarters and a withdrawal of investment.

Foreign-invested companies are highly sensitive to labor regulations that differ from those in their home countries. As past cases like the rumors of GM Korea's withdrawal show, unstable labor relations have always been a critical factor in their investment decisions.

The distrust among labor, management, and foreign-invested companies does not stem from this bill alone. It is a product of Korea's unique industrialization process and rigid labor-management relations that have persisted since the establishment of the Republic of Korea.

A vicious cycle has repeated, where companies are reluctant to engage in collective bargaining and labor relies on aggressive struggles rather than legal disputes. The dual structure of the labor market, split between regular and non-regular workers, and prime contractors and subcontractors, has been a key cause of this deep distrust. Prime contractors have claimed no responsibility for the treatment of their subcontractors' workers, while subcontractors' workers could not voice their concerns to the actual employer. The government's inconsistent stance on labor relations—sometimes siding with labor, sometimes with management—has also eroded public trust in the government.

In this complex situation, certified labor attorneys should act not just as a legal representative but as a key system designer and mediator for healthy labor relations. Specific advisory activities are needed to promote a virtuous cycle and suppress a vicious one.

First, concrete efforts are vital to establish the bill's intent - to protect workers' rights, curb reckless damage claims, and clarify the responsibilities of prime contractors and subcontractors - in practice. This involves activating regular communication channels for unions, prime contractors, and subcontractors. It also requires creating predictable manuals for bargaining and dispute procedures to prevent legal confusion and conflicts.


In addition, it's necessary to help minimize initial confusion by educating field practitioners about the changed laws, precedents, dispute scopes, and actual issues in bargaining related to management rights.

At the same time, the concerns of businesses—such as an increase in illegal acts, infringement on management rights, and greater legal uncertainty—must be addressed proactively. Without a unified bargaining channel, a prime contractor could face repeated negotiations or disputes with dozens of subcontractor unions. Therefore, practical guidelines for a single bargaining channel and clearer negotiation topics must be established to streamline the complex bargaining structure.

Since the exercise of management rights (restructuring, relocation, mergers) is now a subject of bargaining and disputes, it is practically necessary to implement a pre-emptive labor risk assessment system for all major business decisions.

Furthermore, it is important to advise both management and unions to break the vicious cycle by supporting them with cost-benefit simulations during strikes or disputes. This allows them to make decisions based on data and realistic outcomes, not emotional conflict. It is also crucial to provide clear education and advice on what constitutes illegal and unlawful acts.

Finally, we, certified labor attorneys, should not stop our efforts to continuously improve labor-management communication channels tailored to each organization. We need to also work to design and establish a virtuous cycle culture based on multi-party trust, a sense of shared responsibility, and social equity among prime contractors, subcontractors, and unions.

Certified labor attorneys need to play a vital role beyond simply providing legal knowledge. They need to act as a mediator to restore trust between both sides and guide them toward a productive relationship.
AHN pursues Simplicity, upholds Integrity and acts with Fairness.