'Yellow Envelope Law' will repel investment, foreign biz groups warn

Korea Herald

2 days ago

US chamber raises 'deep concern,' says legislation may deter future American investment
A controversial pro-labor union bill advancing through Korea's National Assembly is drawing a rare, unified backlash from both foreign business chambers and local industry groups, who warn it could erode legal predictability and diminish the country's investment competitiveness.
The proposed legislation, commonly referred to as the 'Yellow Envelope Law,' would amend the Trade Union and Labor Relations Adjustment Act.
If passed, the bill would expand the definition of 'employer' to include main contractors in subcontracting chains, giving bargaining power to workers in indirect or outsourced jobs.
It would also limit companies from demanding compensation from unions for strike-related losses and hold executives liable if they refuse to negotiate with unions.
The American Chamber of Commerce in Korea, the country's largest foreign business chamber with over 800 member companies, on Wednesday expressed 'deep concern' after the bill passed the parliamentary Environment and Labor Committee last week.
'If enacted in its current form, this legislation could influence future investment decisions by American companies considering Korea,' said AmCham Chairman and CEO James Kim in a statement.
'A flexible labor environment is essential to strengthening Korea's competitiveness as a business hub in the Asia-Pacific region,' he said, adding that the bill had progressed 'without sufficient input from industrial stakeholders.'
Backed by President Lee Jae Myung's resolve to protect vulnerable workers, the ruling Democratic Party of Korea has been pushing to pass the bill in a move that conservative People Power Party lawmakers have denounced as 'anti-business."
The European Chamber of Commerce in Korea echoed those concerns a day earlier, warning that vague and expanded liability could expose companies to unclear criminal risk.
'If a company faces legal exposure simply for failing to respond to unclear bargaining requests, it could result in withdrawal from the Korean market,' the chamber said in a statement.
Pushing back against the criticism from the ECCK, Korea's Labor Minister Kim Young-hoon argued on Tuesday that the bill aims to align Korean labor regulations with global standards.
Speaking at a government briefing, Kim cited Europe's supply chain due diligence laws as an example of international norms demanding 'responsible corporate behavior' and shared liability between parent and subcontractor firms.
'Meeting international standards is increasingly essential not just for labor rights, but also for global trade and competitiveness,' Kim said.
He added that the OECD has repeatedly pointed to Korea's dual labor market structure, marked by a stark divide between large corporations and small- and medium-sized enterprises, as a key factor limiting long-term growth, calling the bill a necessary step for sustainable development.
First proposed in 2015, the bill has long faced resistance from conservative parties and business lobbies.
Now one of Korea's most polarizing bills, its fate could reshape labor governance and signal how the country balances worker rights with business interests.
A renewed political showdown appears imminent as the revised bill is scheduled for a potential floor vote on Aug. 4.
Korean industry groups are alarmed by the bill's potential fallout for subcontracting-heavy sectors such as automotive, shipbuilding and construction.
On Wednesday, major Korean business associations, including the Korea Enterprises Federation, Korea Automobile & Mobility Association, Korea Offshore & Shipbuilding Association, and Construction Association of Korea, issued a joint statement urging lawmakers to halt the legislation.
KEF Vice Chairman Lee Dong-geun warned that the amendment would destabilize Korea's complex, multi-tiered subcontracting system, which is foundational to its manufacturing and industrial competitiveness.
'It will inevitably trigger disputes targeting prime contractors, fracturing supply chains and damaging Korea's global competitiveness,' he said.
Lee added that the proposed legislation could paralyze executive decision-making by exposing business leaders to 'indiscriminate criminal liability.'
He also cautioned that limiting damage claims against unions could lead to a 'culture of strike absolutism,' normalize illegal workplace disruptions and weaken productivity across sectors.
'These sectors are already under pressure from global market shifts and sensitive trade negotiations. This bill could tip them into deeper instability,' he said.