Mass Requests for Collective Bargaining Over 'Managerial Decisions' Threaten Physical AI, M&A... Labor Law Becomes a Black Hole

Differences in Determining Employer Status of Primary Contractors
Key Future Businesses at Risk of Suspension

Restructuring Unavoidable as U.S. Operations Expand
Potential Obstacles to "Managerial Decisions"
Concerns Over Delays in Petrochemical Industry Restructuring
Legal Experts: "Conflict with Constitutionally Guaranteed Management Rights"

With the enforcement of the "Yellow Envelope Act" (Amendments to Articles 2 and 3 of the Labor Union and Labor Relations Adjustment Act), the labor community has begun submitting mass requests for collective bargaining over "managerial decisions." As a result, key future businesses in the industrial sector, such as the adoption of physical artificial intelligence (AI) and corporate mergers and acquisitions (M&A), now face the risk of being halted one after another.

According to the business community on March 12, the metalworkers’ union of the Korean Confederation of Trade Unions has designated the introduction of AI, alongside the extension of the retirement age, as core agenda items in this year’s wage and collective bargaining negotiations. The union has demanded negotiations with 16 major primary contractors, including Hyundai Motor Company, HD Hyundai Heavy Industries, and Hanwha Ocean.

In particular, the union is demanding that if AI is introduced into work processes or personnel management, the union must be notified in advance, and the impact on employment and working conditions must be jointly assessed by labor and management. This is expected to inevitably disrupt projects such as Hyundai Motor’s introduction of its humanoid robot "Atlas" and the commercialization of welding robots in the shipbuilding industry.

After the enforcement of the Yellow Envelope Act, labor demands are expected to fall mainly into two categories: First, under Article 2, Paragraph 2 of the Labor Union Act, subcontractor unions will demand direct bargaining with primary contractors. Second, under Article 2, Paragraph 5, unions will demand bargaining over managerial decisions that affect working conditions.

On the first day of the act’s enforcement, 407 subcontractor unions requested bargaining, while Hanwha Ocean and POSCO have begun direct bargaining procedures. Hanwha Ocean has announced that it will accept additional bargaining requests until March 17 and plans to discuss whether to hold individual negotiations or to unify bargaining channels. However, there are differences among subcontractor union branches regarding the determination of primary contractor’s employer status.

For partner companies that work exclusively at Hanwha Ocean worksites, the primary contractor’s employer status is relatively clear. However, for service providers such as catering companies that serve multiple worksites, there is controversy over whether employer status applies. Subcontractor unions are demanding measures to close wage gaps, including a 650% bonus, vacation pay, lump-sum payments for performance bonuses and wage increases, as well as the expansion of working hours, leave allowances, and paid holidays.

POSCO is also accepting bargaining requests until March 17. A POSCO representative stated, "We are internally reviewing whether there is substantial controlling power, and it is necessary to seek a judgment from the Central Labor Relations Commission." The industry expects that a significant number of bargaining requests will be determined based on the commission’s assessment of employer status.

On the first day of enforcement of the "Yellow Envelope Act" (amendment to Articles 2 and 3 of the Labor Union and Labor Relations Adjustment Act) on the 10th, members of the Korean Confederation of Trade Unions raised placards and shouted slogans at the KCTU struggle proclamation rally held in Sejongno, Seoul. Photo by Yonhap News Agency

The business community sees the expansion of "bargaining over managerial decisions" as the biggest burden. The metalworkers’ union of the Korean Confederation of Trade Unions has included the introduction of artificial intelligence (AI) as a key agenda item in this year’s wage and collective bargaining negotiations, alongside retirement age extension and wage increases. The union plans to demand that labor be notified in advance if AI is introduced into work processes or personnel management, and that procedures be established for labor and management to jointly evaluate the impact of AI adoption on employment and working conditions, upon request.

According to the Ministry of Employment and Labor’s guidelines for interpreting the Yellow Envelope Act, mass layoffs or job reassignment during restructuring processes—if they result in substantial or specific changes to employee status or working conditions due to managerial decisions—are considered subjects for collective bargaining. In particular, cases where layoffs or job reassignments are anticipated due to mergers, splits, sales, or transfers, are also included.

If the adoption of physical AI, such as humanoids, leads to reassignment of departments, or if job reassignments occur due to business sales, the company is obliged to negotiate. Hyundai Motor and Kia labor unions are demanding the immediate suspension of all automation plans that do not guarantee job security, and they have called for the abandonment of the company’s plan to introduce "Atlas." At Hyundai Mobis, which has been working to sell its "lamp business unit" since January, the labor union of its subsidiary is demanding bargaining with the primary contractor, citing job insecurity.

Even the government-led restructuring of the petrochemical industry could be stymied. Lotte Chemical and HD Hyundai Chemical have already finalized the "first restructuring plan," which includes shutting down a 1.1 million ton naphtha cracking center (NCC) in the Daesan industrial complex in South Chungcheong Province. Reducing facilities will inevitably require workforce reassignment, making it a bargaining subject. In the shipbuilding sector, there are also concerns that the Marsga project will be affected, as increased U.S. business may lead to restructuring or job reassignments in domestic operations.

Jisoon Park, professor at Korea University School of Law, commented, "By including 'managerial decisions that affect working conditions' as a subject of dispute, there is a conflict between constitutionally protected management rights and the three labor rights. Decisions such as mergers, splits, or sales themselves are not subjects for bargaining, but if mass layoffs, restructuring, or job reassignments arise in the process, they become bargaining subjects, inevitably increasing the burden on companies."

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