Labor adjudicator says 'yellow envelope law' is about dialogue, not direct hiring

Park Su-ken, chairperson of the National Labor Relations Commission, speaks during a government event in Sejong, March 4. Park told reporters on Monday that the new “yellow envelope law” is designed to encourage dialogue between parent companies and subcontracted workers, not to automatically guarantee or require higher wages or direct employment. Yonhap

Korea’s top labor adjudicator has clarified that the new “yellow envelope law” is designed to compel parent companies and subcontracted workers to engage in dialogue, not to automatically guarantee or require higher wages or direct employment.

Park Su-ken, chairperson of the National Labor Relations Commission, made the clarification on Monday as fresh data show a rapid rise in disputes over whether large companies qualify as “employers” for workers formally hired by subcontractors.

“It only grants them the status to sit down and talk. It does not mean they must raise wages or directly hire the workers,” Park told reporters. “Many companies seem to be refusing to engage because they worry, once employer status is recognized, they will be dragged into liability for illegal dispatch, demands for wage hikes or direct employment — but those fears are misplaced.”

Data compiled by the commission and the Ministry of Employment and Labor showed that, as of Friday, subcontractor unions at 1,012 workplaces, representing about 147,000 workers, have demanded talks with 372 principal employers since the law came into force on March 10.

Meanwhile, labor commissions across the country have received 294 cases asking them to rule on whether principal companies qualify as “real employers.” Of these, 171 petitions seek to correct failures to post bargaining notices — filed when principal companies do not even announce that subcontractor unions have requested talks — and 117 are applications to split bargaining units.

So far, 224 cases have been processed. While 197 were closed after the applicants withdrew voluntarily, employer status has been recognized in 19 cases and denied in eight.

In many cases, unions rushed to submit petitions as soon as the law took effect, then pulled them back so they can refile later with more thorough legal review and stronger supporting documents. Park added that many unions initially sought to create separate bargaining units, only to withdraw their requests once they realized it would be difficult to secure meaningful bargaining rights after legal reviews.

In most of the cases so far where the main issue was whether principal companies qualify as employers, local labor commissions have recognized employer status primarily in disputes focused on industrial safety. This has included in-house manufacturing subcontracting including those done by companies like POSCO or public institutions and universities that outsource cleaning and security services to subsidiaries or service contractors, where the principal firms were found to be substantively and specifically directing subcontracted workers’ industrial safety-related conditions.

Some have criticized that the commission's rulings are inconsistent or causing confusion, but Park said that regional labor officials are applying the government’s interpretive guidelines to the specifics of each case. He added that, at least so far, the new system appears to be running “smoothly as intended.”

He emphasized that the commission is not unconditionally siding with unions and appealed to principal employers to at least talk to their subcontracted workers.

“Labor representatives can sometimes overreach as well, and the commission will not issue decisions in the sweeping way management seems to fear,” he said.