Understanding 'Yellow Envelope' bill: Labor reform or threat to business?

Korea Herald

17-07-2025

Ruling party's push for broader labor protections draws backlash from businesses over legal uncertainty, employer liability
A contentious labor bill championed by the ruling Democratic Party of Korea is barreling toward passage. The business community, however, warns that the revision could throw the country's industrial relations into disarray.
Commonly known as the 'Yellow Envelope" bill, the proposed amendment to the Trade Union and Labor Relations Adjustment Act would broaden labor protections across all employment types while restricting companies' ability to sue for financial damages resulting from industrial action.
The bill, which has evolved dramatically from earlier drafts, takes its name from a 2014 campaign where citizens sent cash donations in yellow envelopes to support a group of SsangYong Motor workers facing massive damage lawsuits over their occupation of the company's main factory.
Five different versions of this pro-labor union bill have been submitted to parliament. The Environment and Labor Committee is expected to review all proposals, identify key provisions and negotiate to create a single, united draft for the plenary session to vote on.
While it's difficult to predict the final wording of the bill, the gist of the amendment will likely remain intact: expanding protections for workers engaged in union activities and restricting companies' ability to file damage claims against them.
What's in the bill?
Under the proposed bill, the definition of 'employer' would no longer be limited to those who have direct employment contracts with workers, but would include anyone who 'substantially and specifically controls' working conditions.
A stricter version of the draft even stipulates that if a company outsources work to another firm, it will still be recognized as an employer if the outsourced work is performed on its premises.
This change means unions representing subcontracted workers could effectively demand negotiations directly with large companies.
Another controversial provision is the broadened definition of "worker" to include anyone who joins or organizes a labor union. This extended scope would cover platform workers, self-employed individuals and freelancers, the groups that were previously excluded under the existing law. This would allow freelance associations and gig workers to operate as unions and legally go on strike.
The bill also extends the situations when strikes are legally allowed. Under current law, strikes are only permitted during negotiations over changes to employment terms such as wages and benefits. But the proposed revision would permit stirkes over employment terms that have already been decided.
One variation of the proposal goes even further. It explicitly permits workers to launch labor disputes over employment conditions affected by corporate restructuring, such as mergers and acquisitions or organizational changes. Under this framework, companies conducting layoffs during restructuring would face potential labor protests.
The proposal also imposes tighter limits on when employers can sue for damages during labor disputes. Under the revision, companies would be barred from seeking compensation for losses caused by legitimate strikes. If a labor union protests in response to an employer's unlawful conduct, the union and its members would not be held liable for resulting damages.
Additionally, if a court rules on damages, the bill requires that responsibility be assigned individually based on each person's level of fault, rather than imposing blanket liability on all union members.
While labor advocates hail the bill as a crucial step forward in protecting vulnerable workers, companies are concerned that it could handcuff their ability to manage labor disputes, disrupt workplace order and expose them to legal challenges.
South Korea's six major business organizations — Korea Enterprises Federation, Korea Chamber of Commerce and Industry, Federation of Korean Industries, Korea International Trade Association, Korea Federation of SMEs and the Federation of Middle Market Enterprises of Korea — on Monday urged lawmakers to slow the bill's passage, raising concerns that it could destabilize workplace order.
'This is not simply revising the law, but a fundamental change that could bring tremendous disruptions to our labor-management relations,' said Sohn Kyung-shik, chair of KEF and also of CJ Group, during a meeting with lawmakers. He stressed the need for broader consensus through dialogue with all stakeholders.
'The bill expands the definition of 'employer' to include anyone with substantial and specific control over working conditions, which is vague and abstract,' he said. 'If tens or hundreds of subcontractor unions demand negotiations, it would be impossible for the parent companies to respond to each one individually."
Industry officials are particularly concerned about the bill's impact on subcontracting-heavy industries such as automaking, shipbuilding and construction.
'If the bill makes companies liable for strikes by hundreds or thousands of subcontractors, when can companies operate, produce and make profit?" asked one industry official speaking on condition of anonymity.
'If this continues, companies may have no choice but to be more cautious about expanding domestic investment or employment.'
With President Lee Jae Myung backing the law, armed with his ruling Democratic Party controlling the National Assembly, it's just a matter of time before it is enacted, observers say.
'The Supreme Court has already acknowledged (the necessity) of this law. The International Labor Organization also recognizes it,' Lee was quoted as saying during a televised presidential debate in May. 'The Yellow Envelope bill is something that must be done.'
The legislation has a long history. First proposed in 2015, progressive lawmakers have attempted to revise the labor union law for many years, but have failed to pass it due to opposition from conservative parties and business groups. In 2023 and 2024, the bill passed the Democratic Party-controlled Assembly but was vetoed twice by then-President Yoon Suk Yeol.
Now, the Democratic Party is determined to pass key bills that were previously derailed by Yoon's veto. A revision to the Commercial Act, which was also vetoed during Yoon's term, was approved by the Cabinet on Tuesday and is now awaiting the final step of presidential promulgation.
Jin Sung-joon, chair of the Democratic Party's policy committee, said last week that President Lee personally urged lawmakers to expedite the passage of key bills, including the Yellow Envelope bill.
The push received another support from Kim Young-hoon, President Lee's nominee for labor minister, who formerly led the country's largest umbrella union group, the Korean Confederation of Trade Unions.
In documents submitted to the parliamentary Environment and Labor Committee last week, Kim highlighted the revision as the "most urgent."
Rejecting the claim that the bill is "bad legislation," Kim stressed that the revision is not to encourage "indiscriminate bargaining, but to clarify who bears real responsibilities of employers and to institutionally supplement a legitimate bargaining structure so that negotiations are no longer considered illegal."
Regarding the provisions on the damages for losses, Kim said the goal is to hold parties accountable for illegal acts while ensuring that damage claims are proportionate to their authority and responsibility, so that union activities are not discouraged by excessive damage claims.
The KCTU is planning mass rallies on Wednesday and Friday to demand the bill's full and immediate passage.