With Yellow Envelope Act taking effect, unions should exercise restraint
The revised Trade Union and Labor Relations Act, more commonly known as the “Yellow Envelope Act,” has just gone into effect. Labor groups hail it as a step forward for workers’ rights, but critics warn it could destabilize the country’s labor-management relations.
Earlier, the Korean Confederation of Trade Unions warned it would call a general strike in July against prime contractors that refuse to bargain with subcontractors' unions.
The business community, meanwhile, is on edge. The law takes effect without clarifying who qualifies as an “employer” in union bargaining. It also restricts claims for damages resulting from illegal strikes.
By defining an employer as anyone who can substantially control working conditions -- even if they are not a party to the employment contract -- the law allows subcontractors’ unions to demand bargaining with prime contractors.
Its vague provisions could also undermine “management rights” established through Supreme Court precedents.
Even core business decisions such as mergers, asset sales and overseas plant expansions could become targets of strike action if they are deemed to affect working conditions.
According to the Fair Trade Commission, mergers, acquisitions and other deals reviewed by regulators last year totaled about 52 trillion won ($35 billion). All such deals could now fall under the influence of labor unions.
Strikes over corporate restructuring or layoffs have long been considered illegal, but the Yellow Envelope Act is set to overturn that stance.
Key business decisions traditionally within management’s prerogative could be delayed or discouraged, making it harder to implement effective restructuring or restore industrial competitiveness.
Many companies are considering increasing US production in response to increasing tariffs, but unions could hinder such moves, which could in turn reduce domestic jobs.
The law restricts companies’ ability to claim damages for losses caused by illegal strikes, while unions bear little liability even if a strike does inflict losses on a business.
The law says unions and workers will not be liable for damages if losses to employers occur while protecting workers’ interests from an employer’s illegal acts.
In the near term, the law’s ambiguous provisions are likely to trigger disputes, setting the stage for a wave of litigation. Ultimately, the courts will have to determine how far the new rules extend.
The government should establish clear guidelines and remove uncertainty through fair and consistent standards.
The business environment has been deteriorating amid rising protectionism and instability in the Middle East. If domestic legal uncertainty is added to the mix, corporate survival will become even more difficult.
The damage from strikes or hard-line labor actions that disrupt production will inevitably extend beyond companies to workers and the broader economy. If labor demands are excessive, companies will likely seek ways to survive independently.
If subcontracts decline as prime contractors accelerate process automation or the adoption of artificial intelligence, workers at subcontractors could be adversely affected.
It may sound obvious, but labor unions can exist only if companies survive -- a point unions would do well to heed.
In a challenging business environment, unions should support labor-management coexistence not by making excessive demands, but by exercising restraint.
To prevent subcontractors’ unions from making unreasonable demands, the government must maintain a firm and disciplined approach.
According to the Korea Eximbank, 3,444 firms relocated abroad from January to September last year, far exceeding the full-year total of 3,045 firms for 2024. Excessive corporate regulations are cited as a reason companies prefer to relocate abroad, with the enforcement of the Yellow Envelope Act among them.
Labor relations have now tilted heavily in favor of unions. While it is necessary to address confusion at work sites to ensure the law takes root, what matters most is leveling the playing field.
Without legal and institutional safeguards to address structural problems and adverse effects of the law, the flight of domestic and foreign-invested companies from Korea could accelerate.
khnews@heraldcorp.com
