'Yellow Envelope Act D-1' Construction Industry Holds Countermeasure Meeting: "Concerns Over Increased Construction Costs If Subcontractor Strikes Rise"

Top 10 Construction Firms Share Preparation Status and Trends
KCTU Announces Plans to Raise Key Issues with Major Builders
Government Moves to Address Industry Concerns

With the implementation of the so-called "Yellow Envelope Act," which amends Articles 2 and 3 of the Trade Union and Labor Relations Adjustment Act, just around the corner, the construction industry has gathered to discuss countermeasures. This is the first time that the industry has held an official meeting to respond to the Yellow Envelope Act. Industry insiders predict that if direct negotiations between construction companies and subcontractor workers take place, the number of labor disputes will increase and, ultimately, this will lead to higher construction costs. On March 9, Minister of Employment and Labor Kim Younghoon convened a senior staff meeting, stating, "Rather than excessively worrying about conflicts that have not yet occurred, it is important to resolve issues through dialogue and consultation between labor and management."

According to the construction industry, the Korea Construction Association recently held a meeting to discuss countermeasures for the Yellow Envelope Act with representatives from the nation’s top 10 construction companies. At the meeting, the companies shared their respective preparations and updates on labor trends. In particular, there was concern that the implementation of the Yellow Envelope Act would allow subcontractor workers to negotiate directly with the primary construction companies, increasing the likelihood of strikes and other industrial actions. This is because more strikes could lead to construction delays and higher costs, ultimately becoming a greater management burden.

Establishing a Response System for the Yellow Envelope Act

Major construction companies are reported to have signed advisory contracts with labor and legal firms and are preparing response systems for dealing with subcontractor workers. A representative from a large construction company said, "Due to the characteristics of the construction industry, where there are many hierarchical subcontracting relationships, labor issues at the site level can escalate to company-wide negotiations and management risks. We are therefore updating contracts and establishing response systems to clarify the roles and responsibilities between primary and subcontracted parties."

The construction industry is structured so that various subcontractors are responsible for different processes. At each site, dozens of subcontractors may be working simultaneously. Until now, even when labor issues such as wage disputes arose at construction sites, it was rare for the primary construction company to intervene directly, as risk management was left to the subcontractors. However, with the implementation of the Yellow Envelope Act, the possibility has increased that subcontractor workers will directly demand solutions from the primary contractor. Particularly, as many of these workers belong to the two major labor unions in the construction sector, there is a risk that these issues could escalate into collective action.

The Korean Confederation of Trade Unions (KCTU) Construction Industry Federation has already announced that it will demand negotiations with major construction companies once the Yellow Envelope Act is implemented on March 10, raising issues such as job security for domestic workers and appropriate wage levels. The KCTU has also made public its plan for a general strike in July. An industry official commented, "If subcontractor workers demand job security from the primary contractor, this could lead to additional increases in labor costs, among other expenses."

The photo is unrelated to the article. Construction site photo.

Concerns Over Increased Costs Due to Construction Delays

The main concern is that more negotiations and industrial actions between labor and management will result in construction delays. In the construction industry, delays in construction schedules directly translate into increased costs and can also affect the sales price of new units. Prolonged construction periods mean higher labor costs, material costs, and equipment rental fees, and if completion is not achieved within the contracted timeframe, companies may also incur late completion penalties.

Recently, the sales price of new housing has soared due to increased construction costs. According to the Housing and Urban Guarantee Corporation (HUG), in January, the average sale price of private apartments in Seoul per 3.3 square meters was 52.74 million won, up 19.5% from a year earlier. An industry insider said, "If construction periods are extended, project costs could rise by as much as tens of billions of won. This ultimately impacts sales prices."

With concerns in the industry persisting up to the day before the Act’s implementation, the government moved to address the situation. At the senior staff meeting, Minister of Labor Kim Younghoon urged, "The business community should not avoid negotiations, but should strive to find mutually beneficial solutions through dialogue and a responsible attitude. Labor unions, for their part, should engage in discussions with restraint and a willingness to compromise in order to resolve problems in a practical manner." He added, "If both labor and management approach discussions with mutual respect and trust, it will be possible to reduce conflicts at worksites and build sustainable cooperative relationships."

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