'Yellow envelope law' at 1 month: bargaining expands, but not to 'thousands'

Members of the Korean Confederation of Trade Unions (KCTU) shout slogans during a rally in Sejong-ro, central Seoul, March 10, the first day the "yellow envelope law" came into force. Yonhap

One month after South Korea's revised labor law took effect, early rulings suggest the worst-case scenarios from business groups have not materialized. Employers said the "yellow envelope law" — a pro-labor act limiting damages against strikers — could force companies to bargain with hundreds or even thousands of subcontractor unions and invite interference in core management decisions.

However, the first rulings have shown a limited scope. Labor authorities have recognized employer status more broadly for principal contractors, while restricting bargaining to a limited number of units and confining recognized issues largely to working conditions.

The law marked its first month Friday. It expanded the definition of employer to include firms that substantially control working conditions even if they do not directly hire the workers.

Labor relation commissions nationwide started ruling on subcontractor unions' bargaining demands, often recognizing prime contractors as the "real employer" of subcontracted workers. Business groups said this could lead to endless demands, but the government and labor advocates called the concerns exaggerated.

Bargaining units narrowed, not multiplied

Business groups have argued that the law could force companies into continuous negotiations with multiple unions by forcing them to deal separately with every subcontractor union at a workplace. That argument gained traction after regional labor boards began approving requests to split bargaining units for subcontractor unions.

The labor authorities decide whether to separate bargaining units by weighing common interests among unions, the potential for conflict and whether the arrangement properly represents workers' interests.

On Wednesday, the labor board in Incheon told Incheon International Airport Corp. to divide subcontractor unions into three bargaining units — the Federation of Korean Trade Unions (FKTU), the Korean Confederation of Trade Unions (KCTU) and others — and bargain with each.

The labor commission of the North Gyeongsang divided POSCO’s subcontractor unions into three units — the FKTU and two KCTU affiliates. Because prime and subcontractor unions negotiate separately, POSCO and Incheon International Airport Corporation must now bargain with at least four unions.

The Ministry of Employment and Labor (MOEL) pushed back Thursday, calling business concerns "excessive." MOEL said authorities recognized only three bargaining units for POSCO's 50-plus subcontractors, and narrowed seven unions at Incheon International Airport to three.

Representatives of labor, management and the government attend their first meeting. From left, clockwise, are Economic, Social and Labor Council Chairperson Kim Ji-hyung, Federation of Korean Trade Unions (FKTU) President Kim Dong-myeong, Korea Enterprises Federation (KEF) Chairman Sohn Kyung-shik and Minister of Employment and Labor Kim Young-hoon. Yonhap

The labor ministry called warnings of "hundreds or thousands" of unions unrealistic, despite acknowledging an increased burden over the previous system.

"We comprehensively considered the nature of the work, past bargaining practices, the possibility of conflict between unions and interest representation," the ministry said. "We did not divide the bargaining units simply because the unions are different.

Working conditions remain the core issue

Business groups have also said the law could infringe on management rights by letting subcontractor unions influence decisions such as factory relocations or business-unit sales. But the issues that labor boards and MOEL's advisory body on employer status have recognized so far involve working conditions rather than corporate strategy.

The labor board in the South Chungcheong Regional recognized four public institutions, including Korea Asset Management Corp., as employers in matters involving subcontracted workers' safety management and staffing.

Members of a POSCO subcontractor union protest with a sign that reads "POSCO is our actual employer!" Korea Times file

Seoul's labor commission also deemed Korea Airports Corp. an employer, citing its control over subcontracted workers' overtime schedules.

Labor boards recognized Incheon International Airport Corp. as an employer for controlling major facilities, and the National Tax Service for dictating working conditions for subcontracted call center staff.

This pattern reflects subcontractor unions' strategy to identify "real employers" to improve working conditions. However, the MOEL’s advisory committee has not granted blanket employer status, declining to rule on unverified claims in the National Tax Service case, for example.

Early friction, but no settled pattern yet

Businesses also oppose the law, warning it could spark more labor disputes. The MOEL data shows 985 subcontractor unions filed bargaining demands with 367 principal contractors as of Monday. On Thursay alone, labor commissions handled cases involving 11 principal contractors, including Kookmin Bank, Coupang Logistics Service and S-Oil.

Labor and management representatives of Hyundai Motor hold an introductory meeting for the 2025 wage and collective bargaining agreement at the automaker's factory in Ulsan. Courtesy of Hyundai Motor.

Only five workplaces, or 2.3 percent, posted notices acknowledging bargaining demands and said they would respond. Most others are expected to face reviews by labor commissions or the MOEL’s advisory committee.

“The process of verifying employer status in the early stages of the law’s implementation cannot be seen as a dispute,” the ministry said, calling it part of rebuilding Korea’s bargaining system under the new law.

The rollout has also created confusion at workplaces. Dozens of petitions tied to the "yellow envelope law" were voluntarily withdrawn. They included petitions filed by tower crane workers against construction companies, retail workers against department stores and duty-free operators, and health care workers against large hospitals.

Workers at public institutions in South Jeolla Province and Ulsan also withdrew bargaining-related petitions. Some unions withdrew after labor authorities asked them to provide additional documentation. Others appear to have dropped their cases to avoid unfavorable rulings.

The law's first month shows a narrower impact than businesses predicted. While authorities broadly recognize prime contractors as employers, they are restricting bargaining units and limiting negotiations mainly to working conditions. Officials and labor advocates expect early confusion to ease as precedents establish clearer guidelines.

This article from the Hankook Ilbo, the sister publication of The Korea Times, is translated by a generative AI system and edited by The Korea Times.