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Jipyong News|KOREA LEGAL INSIGHT

South Korea Passes the “Yellow Envelope Act”: A Landmark Shift in Labour Law

2025.09.01

Introduction
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On August 24, 2025, South Korea’s National Assembly voted to approve amendments to the Trade Union and Labour Relations Adjustment Act (the “Act”), also known as the “Yellow Envelope Act.”  The reform, long resisted by prior governments and business groups, expands the scope of who qualifies as an “employer,” broadens the range of disputes that may lawfully trigger strikes, and restricts employers’ ability to pursue significant damages awards against workers and their unions.  Proponents of the reform view the bill as an important corrective to what they describe as “outsourced responsibility and weaponised lawsuits.”  Employers, however, regard it as the beginning of a period of legal uncertainty and heightened industrial risk.  </div>
 
 
1. Origins: From Courtrooms to Parliament

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The Act’s unusual nickname dates back to 2014, when union members facing crippling damages suits appealed to the public for support.  Citizens donated small sums, often tucked into yellow envelopes, to cover legal costs.  The symbolism endured, and “Yellow Envelope” became shorthand for reforms intended to shield workers from punitive liability.   
Since then, multiple iterations of the bill have been introduced, passed in committee, and vetoed or stalled.  Twice, the bill cleared the legislature only to be returned unsigned by the presidential office.  The National Assembly’s latest vote marks the first time it has passed the full legislative process, and, given the president’s prior public support, is expected to be signed into law.  </div>
 
 
2. What Has Changed in the Law

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The Act reshapes four critical pillars of Korean labour relations: 
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			<td style="vertical-align: top">a)</td>
			<td style="text-align: left; vertical-align: top">Expanded Definition of Worker and Union Membership
			<div style="margin-bottom: 11px; line-height: 25px; font-size: 16px; text-align: left;">The Act removes the ban on non-workers joining unions, allowing platform workers, dependent contractors, and freelancers to unionise without fear of disqualification.  This codifies judicial trends that had already recognised deliverymen and insurance salespeople as “workers” under labour law.  </div>
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			<td style="text-align: left; vertical-align: top">b)</td>
			<td style="text-align: left; vertical-align: top">Redefinition of “Employer”
			<div style="margin-bottom: 11px; line-height: 25px; font-size: 16px; text-align: left;">The most significant change is the expansion of the employer definition.  Entities that “substantively and specifically control or determine” working conditions may now be deemed employers, regardless of contractual form.   
			This change brings franchisors, principal contractors, and multinational parent companies within the scope of bargaining demands and strike actions, so long as their influence over pay, hours, staffing, other terms and conditions of employment, or the working environment can be demonstrated.  Overseas headquarters, however, will only be recognised as employers in exceptional cases where the local subsidiary does not operate as a truly independent entity.  </div>
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			<td style="text-align: left; vertical-align: top">c)</td>
			<td style="text-align: left; vertical-align: top">Broadened Scope of Labour Disputes
			<div style="margin-bottom: 11px; line-height: 25px; font-size: 16px; text-align: left;">Previously, strikes were lawful only in disputes over the determination of working conditions, such as setting wages or hours.  The Act now extends this to include disputes concerning the interpretation, application, or enforcement of existing working conditions, as well as legal conflicts over major working conditions already set out in collective agreements.  It also covers management decisions related to corporate restructurings, including mergers, spin-offs, departmental consolidations, or organisational reorganisations.  As a result, companies must now be mindful that a wide range of internal and external management measures may fall within the scope of labour disputes.  This expansion grants strike rights in cases involving dismissals, relocations, redundancies, and breaches of collective agreements.  </div>
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			<td style="width: 3%; text-align: left; vertical-align: top">d)</td>
			<td style="text-align: left; vertical-align: top">Restructured Liability for Union Actions
			<div style="margin-bottom: 0px; line-height: 25px; font-size: 16px; text-align: left;">Employers’ ability to seek damages is now more restricted.  Claims must be apportioned individually, based on each person’s causation and involvement, rather than imposed jointly on all union members.  Courts may further reduce damages after considering a worker’s livelihood and the survival of the union.  Liability is barred altogether if the union acted in response to unlawful conduct by the employer.  </div>
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3. Why Employers Are Concerned

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From a corporate perspective, the Act disrupts established risk allocation strategies.  Multinational companies operating in Korea often rely on subcontractors for logistics, maintenance, and production.  Under the new regime, unions representing those subcontractors can demand bargaining directly with the principal company if the latter exercises substantial influence over working conditions.   
 
The implications are twofold: 
 
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	<li>Bargaining Responsibility Shifts Upstream.  Disputes that subcontractors previously managed internally may now be brought directly to principal companies.  </li>
	<li>Potential Impact of Strikes Broadens.  With the expanded definition of labour disputes to include restructuring and relocation decisions, strikes could escalate in sectors previously insulated from direct union confrontation.  </li>
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These boundaries will likely be tested in the courts for years to come, as judges assess “substantive and specific control” on a case-by-case basis, weighing factors such as pricing mandates, scheduling authority, or control over workplace safety.  </div>
 
 
4. The Damages Question: From Blunt Weapon to Calibrated Tool

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One of the most contested elements is the restructuring of damages.  In past disputes, unions faced claims in the tens of billions of won, often aimed at individual members.  Critics argue these lawsuits were used less to recover actual losses and more as means to suppress collective action.   
The Act replaces joint-and-several liability with a system of proportional assessment.  Judges are now required to consider each member’s specific role and financial capacity, and may reduce damages awards to preserve individual livelihoods and union viability.   
Employers can still seek redress for unlawful conduct — but must now prove causation, demonstrate that the damages sought are proportionate, and establish that the employer itself did not engage in any illegal conduct.  </div>
 
 
5. Business Adaptation: What Happens Next

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Companies should undertake three parallel reviews:   
 
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			<td style="width: 3%; vertical-align: top;">a)</td>
			<td style="text-align: left; vertical-align: top">Employer Mapping
			<div style="margin-bottom: 11px; line-height: 25px; font-size: 16px; text-align: left;">Identify control levers, such as pay structures, scheduling systems, compliance rules, that may expose parent companies to employer status.  </div>
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			<td style="width: 3%; vertical-align: top;">b)</td>
			<td style="text-align: left; vertical-align: top">Collective Bargaining Strategy
			<div style="margin-bottom: 11px; line-height: 25px; font-size: 16px; text-align: left;">Prepare for multiple unions, including those representing subcontractors, to demand negotiations.  The existing single-channel bargaining framework remains, but pressure to engage with a broader range of unions will intensify.  </div>
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			<td style="width: 3%; vertical-align: top;">c)</td>
			<td style="text-align: left; vertical-align: top">Dispute Preparedness
			<div style="margin-bottom: 0px; line-height: 25px; font-size: 16px; text-align: left;">Build contingency plans for strikes triggered by restructuring, outsourcing, or relocations — not just traditional wage disputes.  </div>
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<div>Insurers and investors are also reassessing their risk exposure.  Some anticipate higher premiums for labour-related litigation; others warn of reputational fallout if multinational companies resist expanded union rights.  </div>
 
 
Conclusion

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The Yellow Envelope Act may prove to be a pivotal development in Korean labour law.  It addresses long-standing grievances in Korea’s subcontracting economy, reins in a damages regime widely condemned as punitive, and aligns legal doctrine with the realities of platform and precarious work.   
Yet it also introduces vast areas of ambiguity.  Employers brace for litigation, investors for volatility, and unions for a moment of unprecedented leverage.   
Whether this recalibration leads to greater industrial peace or sharper confrontation will depend not only on the black-letter law, but also on how responsibly each party exercises its new rights.  </div>

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