[Yellow Envelope Act Implementation ③] Where Will Labor-Management Clashes Erupt? The Three Major Expected Dispute Points

Key Issue: What Constitutes 'Substantial Control or Determination' in Employer Status
Questions Remain on the 'Legitimate' Scope of Limitation on Damages Claims
M&A and Business Sales: The Line Between Managerial Rights and the Right to Strike

As the implementation of the Yellow Envelope Act (the amendment to Articles 2 and 3 of the Trade Union and Labor Relations Adjustment Act) approaches, there is growing potential for conflict between labor and management. Experts point out that disputes are likely to concentrate especially on differing interpretations of key provisions, such as the expanded definition of employers, the broadened scope of labor disputes, and the limitations on claims for damages, as the system is applied in the field. The Yellow Envelope Act is based on principles, which means that specific standards for its application are likely to be shaped through decisions by labor commissions and court precedents.

How Far Does the Definition of 'Substantial Control' by the Principal Employer Extend?

After the amended trade union law takes effect, the most significant point of dispute is expected to be whether the principal employer is recognized as an "employer." Article 2, Item 2 of the amended law (employer under the Trade Union Act) stipulates that even without an employment contract, an entity can be considered an employer if it has the power to "substantially and specifically control or determine" a worker’s working conditions. However, the scope of what constitutes control remains subject to interpretation.

A representative case is the ongoing HD Hyundai Heavy Industries lawsuit concerning principal employer status. The in-house subcontractor branch of the Korean Metal Workers’ Union at Hyundai Heavy Industries, comprised of subcontracted workers, demanded collective bargaining from HD Hyundai Heavy Industries, asserting that the principal employer substantially determines their working conditions. However, both the first and second instance courts ruled that "the duty to bargain collectively is limited to employers who have an employment contract," and did not recognize the principal employer's obligation to negotiate. The case was referred to the Supreme Court’s Grand Bench in 2024 and is awaiting a final decision.

To date, the National Labor Relations Commission and the courts are known to focus on whether the subcontracted workers’ tasks are essentially incorporated into the principal employer’s business when determining principal employer status. They also comprehensively consider the extent of the principal employer’s involvement in working conditions and the structural relationship between the principal and subcontractors. The issue is that the outcomes of employer status determinations vary from case to case. For example, in the case of delivery workers’ unions, principal employer status was recognized based on the company’s influence over delivery methods and operations. However, in 2019, when the Metal Workers’ Union requested mediation for collective bargaining with nine major companies, including Hyundai and Kia, the National Labor Relations Commission did not accept the request.

Experts believe that the initial decisions by labor commissions and courts will, in effect, set the field standards for the Yellow Envelope Act. In particular, the Supreme Court’s pending decision on principal employer status is expected to become a key standard for future disputes. A research fellow at the Korea Labor Institute explained that "the core criteria will likely be the principal employer’s pricing structure, the system for issuing work instructions, and the degree of involvement in workforce management."

Limitations on Claims for Damages: What Is the Scope?

The clause restricting claims for damages in the amended trade union law also carries potential for further disputes. In the past, it was common for companies to file large-scale lawsuits seeking damages against unions or union members during labor disputes. The amendment limits excessive claims for damages in cases of legitimate industrial action that does not involve violence or destruction. Furthermore, even when liability for damages is recognized, the proportion of damages must be determined based on the individual responsibility of union members, rather than holding the entire union collectively responsible. The intent is to mitigate situations where individual union members face substantial liability simply for participating in collective action.

However, in actual cases, determining the boundaries of legitimate industrial action still requires legal judgment. Disputes are likely to arise between labor and management over issues such as the extent to which production disruptions or business losses during a strike are protected, or how liability for damages is determined when there is occupation of workplaces or interference with work.

The business community raises concerns that limiting claims for damages could lower the burden of industrial action and potentially increase the frequency of strikes. A representative of the Korea Employers Federation stated, "If the scope of damage claim limitations is unclear, it could increase uncertainty for businesses." On the other hand, labor groups emphasize the need for reform, arguing that large-scale claims for damages in the past have been used as a means to stifle union activities. The Korean Confederation of Trade Unions evaluated the amendment as "a minimum safeguard to prevent excessive lawsuits for damages that suppress union activities."

On October 2, union members belonging to the Incheon Airport Regional Branch of the Korean Public Service and Transport Workers' Union held a pre-strike rally in front of the departure hall of Terminal 1 at Incheon International Airport, urging for increased staffing and reduced working hours. 2025.10.2 Photo by Kang Jinhyung

Can Restructuring Be Grounds for a Strike? The Expansion of the Scope of Labor Disputes

The expansion of matters subject to labor disputes is also emerging as a new flashpoint. Traditionally, disputes centered on wages and working hours, but the amended law allows business management decisions that affect working conditions to become subjects of dispute as well.

For example, if a company pursues factory relocation or downsizing of production lines, with anticipated workforce reductions, such situations could now fall within the scope of labor disputes. This is because unions may view these matters as directly affecting employment and working conditions and thus seek to take strike action. Conversely, companies may argue that these are management strategies and therefore not subjects of dispute.

The government, in its official interpretation guidelines, clarified that "reassignment of workers," which is a subject of labor disputes, refers not to routine personnel actions but to "reassignment resulting from restructuring." This is a measure to prevent general personnel transfers driven by management needs from being expanded as grounds for disputes.

Nevertheless, concerns persist within the business community. Since mergers and acquisitions (M&A) or business sales typically entail organizational restructuring and workforce reallocation, there are worries that in practice, the possibility of strikes at workplaces will greatly increase. In particular, there are projections that labor-management conflict could intensify in industries such as petrochemicals, where large-scale restructuring is currently underway.

Kim Sunghee, Director of the Industrial Labor Policy Institute (and former professor at Korea University Labor Problems Research Institute), stated, "Restructuring is directly linked to the most fundamental issues of working conditions from the workers’ perspective," and added, "How the balance between constitutionally protected property rights and the three basic labor rights is maintained will be the key criterion for future decisions."

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