[Choi Seokjin's Law & Biz] Key Q&A on the Yellow Envelope Act Five Months Before Implementation (Part 2)

Various Interpretations on the Scope of the Amended Law
Disputes Inevitable Despite Government Guidelines and Manuals
Collective Bargaining Subjects Include
Business Management Decisions Closely Related to Working Conditions

Despite ongoing constitutional controversy and concerns from the business community, the Yellow Envelope Act (the amendment to Articles 2 and 3 of the Trade Union and Labor Relations Adjustment Act), which passed the National Assembly, is set to take effect in six months.

The amended law, which expands the definitions of “employer” and “labor dispute” and restricts claims for damages against trade unions (hereinafter referred to as “unions”), contains several practical issues that could become sources of dispute. These include: ▲to what extent a principal contractor must respond to collective bargaining demands from multiple subcontractor unions; ▲to what extent managerial decisions of a company can become the subject of industrial action; and ▲how the burden of proof will change in claims for damages related to illegal strikes by unions.

The amended law does not delegate the details to be specified by an enforcement decree (Presidential Decree). While the government is forming a task force to create specific manuals and guidelines, the Ministry of Employment and Labor’s guidance does not have binding authority over the courts. As a result, until the labor commission or courts issue specific rulings on individual cases, disputes are likely to continue, making it difficult for companies to prepare for potential risks.

Below is a summary of key questions raised at seminars held by law firms such as Sejong, Taepyeongyang, Kwangjang, HwaWoo, and YK after the passage of the Yellow Envelope Act, along with the main points from their Q&A materials.

Expanded Definition of Labor Dispute... Including Managerial Decisions

The amended law adds the following as causes of disputes recognized as labor disputes: disagreement over matters relating to the determination of working conditions, such as “the status of workers”; disagreement over “managerial decisions affecting working conditions”; and “the employer’s clear violation of a collective agreement.”

-Should any managerial decision by the company that could even slightly affect working conditions be considered a subject for collective bargaining?

▲The Ministry of Employment and Labor has stated that only managerial decisions that are closely related to working conditions and necessarily entail changes to those conditions-such as layoffs-can be the subject of labor disputes. A mere possibility that a decision could affect working conditions is not sufficient; the impact must be concretely realized. However, despite this position, there is no clear standard for what constitutes a “close relationship” or what level of “concrete realization” is required. Since it is difficult to make such judgments at the time a union demands collective bargaining, considerable debate and confusion are expected after the law comes into effect.

-What new matters could become subjects for collective bargaining?

▲In addition to layoffs, managerial decisions such as downsizing, restructuring of business units, relocating production processes overseas or investing in overseas production facilities, transfer or sale of business units, mergers and acquisitions, and outsourcing (contracting out) of work previously performed in-house could all potentially become the subject of labor disputes. Furthermore, decisions on contract payments that could affect the wages or other working conditions of subcontracted workers, production planning, and the introduction of new equipment could also become subjects for collective bargaining and industrial action by subcontractor unions.

-If a union demands collective bargaining on the grounds of “the employer’s clear violation of a collective agreement,” how can the company contest this?

▲Before the union begins industrial action, the company can apply to the labor commission for mediation or arbitration of the dispute. If the industrial action is deemed illegal, the company can file for an injunction with the court to prohibit the action, thereby contesting whether the alleged violation of the collective agreement is indeed clear and whether all procedures for industrial action have been properly observed.

-If the amended law takes effect during the validity period of a collective agreement, can the union demand collective bargaining on newly expanded subjects?

▲For matters already stipulated in the collective agreement, a “peace obligation” arises, preventing industrial action aimed at amending or abolishing those provisions during the agreement’s validity period. However, for matters not stipulated in the agreement, collective bargaining demands are possible. Therefore, it is interpreted that unions can demand collective bargaining on newly added subjects such as “managerial decisions affecting working conditions” and “the employer’s clear violation of a collective agreement.”

On the 27th of last month, the law firm Kwangjang held a seminar titled 'Analysis and Prospects of the Yellow Envelope Act.' Seokjin Choi, Law & Biz Specialist

Restrictions on Claims for Damages... Shift in Burden of Proof

The amended law not only creates provisions exempting employers from liability for damages caused by collective bargaining, industrial action, or other union activities, but also introduces several provisions restricting claims for damages against unions or workers.

-If the employer cannot specifically prove the status, role, degree of participation, or involvement in the damage of each worker, does this mean that claims for damages cannot be made against individual union members?

▲Even after the amended law takes effect, the Supreme Court’s existing doctrine of “imperfect joint and several liability” will remain in place, and the court will determine the share of liability for each individual union member. Therefore, employers who suffer damages from illegal industrial action can still claim and prove the total damages against participants, and are not necessarily required to provide detailed evidence of each member’s participation or contribution to the damage. However, whereas previously it was sufficient to submit basic evidence of attendance at the industrial action, going forward, employers will need to collect evidence on the extent of each named defendant’s involvement-whether they were actively or passively involved. The courts are likely to assign a lower share of liability to individual union members than to the union itself.

-Does the amended law make it difficult for employers to recover the full amount of damages from unions?

▲The provision requiring the court to determine the share of liability based on the degree of participation or contribution to the damage applies to workers, not unions. Therefore, unions themselves are not subject to apportionment of liability by the court. However, the amended law introduces a provision allowing unions to request a reduction in damages and prohibits claims for damages intended to threaten the union’s existence or disrupt its operation. As a result, when claiming damages against a union for illegal industrial action, companies will need to actively argue and prove that “the union’s existence would not be threatened despite the claim for damages, given its financial status,” and similar points.

-Is there a risk that unions could abuse the law by assigning leading roles in illegal acts to financially vulnerable members?

▲There is such a possibility. However, if a member plays a leading role, the limitation of liability will not be significantly recognized, which could ultimately result in a higher amount of damages assigned to that individual.

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