On the 3rd of last month, the Democratic Party of Korea candidate, Lee Jae-myung, won the 21st presidential election, increasing the possibility of enacting amendments to Articles 2 and 3 of the Trade Union and Labor Relations Adjustment Act (the yellow envelope law). The name 'yellow envelope law' is derived from citizens who opposed a court ruling in 2014 that ordered union members participating in the Ssangyong Motor Company strike to pay 4.7 billion won to the company by donating funds in yellow envelopes. This law mainly includes expanding the scope of employers, expanding the scope of labor disputes, and establishing the burden of proof concerning claims for damages by employers.

President Lee Jae-myung has firmly expressed his support for the yellow envelope law during the election process. He stated during the presidential candidate TV debate held on the 18th of last month that, 'The yellow envelope law is a bill that the Supreme Court has already recognized as necessary through precedent, and the International Labour Organization acknowledges it as well. It should naturally be implemented.'

President Lee Jae-myung prepares for the 3rd debate of the 21st presidential candidates held at the Seoul Sangam MBC Studio on the 27th of last month during the election period./Courtesy of National Assembly Photographers

The yellow envelope law passed the National Assembly last year, but former President Yoon Suk-yeol exercised his veto. In response, Democratic Party lawmakers Park Hong-bae and Kim Tae-sun reintroduced the bill in February and March. Lawmaker Lee Yong-woo has also expressed his intention to reintroduce it. Since the Democratic Party, which holds 171 seats in the National Assembly, can push the bill through, the possibility of President Lee exercising his veto is nonexistent, allowing it to be implemented immediately.

The most significant feature of the yellow envelope law is the broadening of the definition of employers. The existing Trade Union Act defines employers as the parties to the employment contract; however, the yellow envelope law expands this definition to include 'any individual or entity that has the position to substantively and concretely dominate or determine working conditions, even if they are not parties to the employment contract.'

Under the existing Trade Union Act, subcontractor workers can negotiate with the company to which they are affiliated, but the yellow envelope law will grant them the authority to negotiate with primary contractors as well. This means that labor unions of Samsung Electronics and Hyundai Motor Company will be able to negotiate directly with Samsung Electronics and Hyundai Motor Company.

Samsung Electronics has over 700 first-tier suppliers, and Hyundai Motor Company has around 350 first-tier suppliers. When including second-tier and third-tier suppliers, the total reaches thousands. The number of suppliers in the shipbuilding industry also amounts to over 1,000.

The scope of labor disputes will also change from 'determining working conditions' to 'working conditions.' Under current law, labor disputes are limited to conflicts arising in the process of determining working conditions, referred to as 'interest disputes.' In contrast, conflicts arising over already determined working conditions are called 'rights disputes.' If the term 'determination' is removed from the yellow envelope law, the permissible scope for strikes will expand from interest disputes to rights disputes.

In the legal community, there are many concerns that unions may raise issues about working conditions and even challenge the inherent rights of employers. For example, there is a significant likelihood that unions will oppose layoffs and even the transfer of production facilities overseas, leading to strikes. Companies considering increasing local production in the U.S. following the inauguration of Donald Trump's administration may face crises.

Indirectly employed and subcontracted workers affiliated with the Korean Confederation of Trade Unions and the Metal Workers' Union shout slogans urging the revision of Articles 2 and 3 of the Trade Union Act and primary negotiations in front of the Seoul Regional Employment and Labor Office in Euljiro on the 14th of last month. /Courtesy of Yonhap News Agency

Even if a strike occurs, corporations' responses may be undermined. This is because the conditions for employers to claim damages for illegal strikes will become much more stringent.

Strikes fall under collective dispute actions, making it challenging for employers or outsiders to clearly identify the role of participating union members. Consequently, current law recognizes the joint liability of the leadership and officials of unions participating in illegal strikes, allowing employers to hold them accountable for damages.

However, the yellow envelope law stipulates that in order to hold individuals liable for damages resulting from illegal strikes, it is necessary to define the individual responsibilities of each liable party. Employers suffering damages due to illegal strikes must prove what illegal acts each individual worker committed. If unions conduct illegal strikes while wearing masks, it essentially becomes impossible to file damage claims.

Moreover, the bills proposed this year or scheduled to be proposed contain more content than the previously introduced yellow envelope law. The bill proposed by Lawmaker Kim Tae-sun includes provisions that allow for the exemption or reduction of damages based on the financial situation and payment capacity of the liable parties, as well as clauses that prevent corporations from being held liable for damages caused by their illegal acts. Lawmaker Lee Yong-woo is considering adding provisions to guarantee the right to organize for special types of workers and platform workers.

In the business community, there are concerns that the implementation of the yellow envelope law will hinder corporate management activities. Yoon Hee-sook, head of the People Power Party's Yeouido Institute, pointed out on the 28th of last month that, 'The yellow envelope law is far more brutal than the minimum wage increase under the Moon Jae-in administration. It will completely destroy the ecosystem of our economy.'

An anonymous source from a large corporation stated, 'If management decisions are influenced by union interference, I am concerned about whether proper corporate activities will be possible.'