SOUTH KOREA Trends and Developments Contributed by: Sang Hoon Lee and William Kim, Lee & Ko
The Impact of the Yellow Envelope Act Introduction
Widened scope of industrial disputes The Act expands disputes to include not just determi - nation but also application, implementation and inter - pretation of working conditions, covering issues like unpaid wages, wrongful dismissals, restructurings, and management decisions affecting workers. It ena - bles strikes over a wider array of matters, including business transfers or disciplinary actions, potentially leading to more frequent industrial actions. Limitations on damage claims The Act prohibits employers from claiming damag - es if intended to obstruct union activities; exempts unions from liability for unavoidable damages resisting unlawful employer acts; requires proof of individual fault and contribution for any claims, with courts able to reduce awards. It therefore reduces financial risks for unions engaging in strikes, even illegal ones, shift - ing the burden to employers and encouraging bolder union tactics. Effect of the changes These changes are poised to empower unions, as evidenced by the Korean Confederation of Trade Unions (KCTU) launching nationwide strikes in July 2025 to demand the Act’s enactment and resumption The Act has faced vehement opposition from major business groups, including the Korea Enterprises Fed - eration, Korea Chamber of Commerce and Industry (KCCI), and Federation of Korean Industries, as well as foreign chambers like the American Chamber of Commerce in Korea (AMCHAM) and the European Chamber of Commerce in Korea (ECCK). Critics argue it undermines corporate competitiveness by introducing legal uncertainty, particularly around the vague “employer” definition, which could criminalise parent companies or principals. They warn of “indus - trial paralysis” through an “endless stream of labor disputes”, paralysing sectors like auto manufacturing and shipbuilding that rely on subcontracting. Foreign investors have expressed concerns that the law could deter future investments, threatening employment prospects and exacerbating economic challenges amid global uncertainties. of labour–government talks. Opposition and concerns
Korean employment law has undergone signifi - cant evolution in recent years, driven by a push to enhance worker protections amid shifting economic landscapes and labour dynamics. Key trends in 2025 include efforts to reduce working hours, abolish the comprehensive wage system, extend retirement ages, and strengthen family-friendly policies through amendments to the Labor Standards Act and the Equal Employment Opportunity and Work–Family Balance Act. These changes reflect a broader gov - ernmental agenda under President Lee Jae-myung to prioritise workers’ rights, including improved mater - nity and paternity leave, and greater flexibility in work arrangements. However, the most contentious devel - opment is the Yellow Envelope Act (also known as the Yellow Envelope Law), an amendment to the Trade Union and Labor Relations Adjustment Act (TULRAA). Reintroduced in July 2025 after previous vetoes, this Act has passed the Legislation and Judiciary Commit - tee on 1 August 2025, and is expected to be enacted imminently, marking a pivotal shift in labour–manage - ment relations. This chapter of the guide examines the Act’s provisions, opposition, potential scenarios and outlook, drawing on recent legislative progress and stakeholder reactions. Background and key provisions of the Yellow Envelope Act The Yellow Envelope Act, named after the yellow envelopes used by unions to collect funds for legal battles, aims to bolster union protections and address perceived imbalances in labour relations, particularly for subcontracted and non-traditional workers. The Act introduces several transformative provisions. Broadened definition of “employer” The definition includes entities that “substantially and specifically control or determine working condi - tions”, even without a direct employment contract. This targets principal contractors in subcontracting arrangements. The provision thus obligates principals to negotiate with subcontractor unions, blurring lines between contractors and subcontractors, and expos - ing principals to liability for labour issues.
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