"Negotiations May Repeat 3,500 Times"... Business Community in 'Panic Mode' Over Passage of Yellow Envelope Act and Commercial Act Amendments

The business community has begun preparing for the worst-case scenario and is moving to pursue supplementary legislation in response to the National Assembly's passage of the Yellow Envelope Act (the amendments to Articles 2 and 3 of the Trade Union and Labor Relations Adjustment Act) and the second amendment to the Commercial Act. Having failed to block the bills, there is a prevailing assessment that the industry is now in a state of 'panic,' and economic organizations and companies across various sectors are accelerating efforts to come up with measures to minimize the deterioration of the business environment.

According to the business community on August 25, the National Assembly, led by the Democratic Party, passed the second amendment to the Commercial Act on this day, mandating cumulative voting and expanding the separate election of audit committee members for listed companies with assets of 2 trillion won or more. The Yellow Envelope Act was passed in the plenary session immediately after the conclusion of a filibuster that lasted over 24 hours the previous day.

With a sense of 'panic' spreading throughout the business sector, a human resources executive at a major domestic shipbuilding company told Asia Economy that they are considering the scenario in which each of their approximately 3,500 partner companies demands separate collective bargaining as the worst case. "We have begun preparing to prove, step by step, that the main contractor is neither the employer nor a party to the collective agreement," the executive said.

The automobile industry is focusing its response strategy on first-tier suppliers (about 400 companies). A labor affairs executive at Hyundai Motor Group stated, "After the implementation of the Yellow Envelope Act, third-tier suppliers will demand collective bargaining with second-tier suppliers, second-tier with first-tier, and first-tier with the main contractor. Second-tier and lower suppliers will be able to bring labor disputes directly against the main contractor, and even if there is no direct employment or shared workplace, this could still become a burden."

Economic 8 Organizations' Appeal to the Public from the Business Community

The business sector believes that it is difficult for individual companies to respond effectively, so they have decided to unite around economic organizations. At the same time, they are actively raising the need for supplementary legislation.

The key tasks include: ▲ limiting the scope of employers ▲ redefining the scope of labor disputes ▲ securing a grace period ▲ institutionalizing the employer's right to defense. Since the law already includes 'substantial control' in the definition of employer, the goal is to minimize the scope of application through enforcement ordinances and interpretative processes.

An official from an economic organization stated, "Interpreting the current provisions as effectively meaning a 'direct employment relationship' is the realistic alternative," and emphasized, "Since Minister of Employment and Labor Lee Younghoon has clarified that this is not about strengthening regulations, this intent should be reflected in the subsequent legislative process."

The business community is also considering procedural mechanisms to narrow the definition of employer. There is discussion about requiring labor unions to prove that the main contractor was directly involved through contract approval rights, personnel authority, or the right to determine working conditions, rather than just price negotiations or delivery demands, in order for the main contractor to be recognized as the employer. One proposal is to require supporting evidence to be attached to the notification of labor disputes or applications for collective bargaining.

There are also ideas to strengthen the requirements for mediation applications so that negotiations with the main contractor are only possible if talks with subcontractors have failed, and to introduce a procedure in which the Labor Relations Commission reviews the employer status of the main contractor before the start of negotiations. Another suggestion is to limit employer status to subcontracted workers within the same workplace through interpretative guidelines.

Experts also point out two legal issues in this amendment. Professor Lee Jung of Hankuk University of Foreign Studies Law School stated, "If the main contractor effectively controls the working conditions of subcontracted employees, making it impossible for the subcontractor to exercise independent decision-making, then employer status may apply. However, if the subcontractor can determine working conditions independently but still demands collective bargaining with the main contractor, this raises an issue of infringement on management rights." He also noted, "Since the scope of labor disputes now extends beyond working conditions to include management decisions, the possibility of strikes has significantly increased, making it necessary to clearly define the scope."

Although a constitutional complaint was initially considered as a last resort, skepticism about its effectiveness has grown, so for now, the focus is shifting to participating in follow-up measures such as an enforcement ordinance task force (TF) led by the Korea Employers Federation.

Meanwhile, in response to the National Assembly's passage of the Commercial Act amendment, the business community issued a joint statement expressing regret. The eight major economic organizations-Korea Enterprises Federation, Korea Chamber of Commerce and Industry, Korea Employers Federation, Korea International Trade Association, Korea Federation of SMEs, Korea Federation of Mid-sized Enterprises, Korea Listed Companies Association, and KOSDAQ Association-stated, "It is concerning that, just one month after the first amendment to the Commercial Act in July, an additional amendment mandating the separate election of audit committee members and cumulative voting has passed the National Assembly." They emphasized, "Since these changes could increase management disputes and litigation risks, a balanced approach is needed in the legislative process to minimize side effects."

The business community also stated, "It is urgent to establish global-standard management rights defense mechanisms to ensure that companies can operate freely without the threat of speculative capital," and added, "To enable companies to make bold decisions for future investments, it is necessary to codify management judgment principles and improve the laws on breach of trust." They further noted, "Regulations on economic crimes and differentiated regulations and incentives by company size should be revised to create an environment where companies can focus on innovation and growth."

This content was produced with the assistance of AI translation services.