Is There Room for Negotiation on the Yellow Envelope Act?... Business Community Says "Some Poison Pill Provisions May Be Acceptable" (Comprehensive)

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The business community is reportedly open to accepting certain provisions of the amendment to the Trade Union and Labor Relations Adjustment Act Articles 2 and 3, commonly known as the Yellow Envelope Act. This consideration comes as the ruling party has taken a hardline stance, declaring its intention to pass the bill on the 21st, prompting business leaders to consider a give-and-take approach. However, with about ten days remaining until the legislative deadline, business groups continue to prioritize an all-out effort to block the bill.

According to economic organizations on August 12, the business sector is adamantly opposed to the significant expansion of the definition of "employer," which could result in criminal penalties for refusing to engage in collective bargaining with subcontractor unions. In contrast, they have indicated a willingness to accept, in principle, some aspects of limiting liability for damages arising from illegal strikes, in recognition of the legislative intent behind the proposal.

The provision that business leaders have signaled a willingness to accept is Article 3 of the proposed amendment. This provision would set specific proportions of liability for damages for each worker participating in a strike, thereby reducing their individual responsibility. The Yellow Envelope Act was introduced in response to excessive damage claims following the 2009 Ssangyong Motor mass layoff strike, and the business community has expressed respect for the purpose of the bill.

Kim Hongseong, head of the labor-management legal affairs team at the Korea Employers Federation (KEF), stated, "The Yellow Envelope Act was proposed to address the excessive damages imposed for illegal strikes, which have led to wage garnishments and made it difficult for workers to maintain their livelihoods. For Article 2 of the Trade Union Act, we have suggested maintaining the current provisions, but for Article 3, we have proposed alternatives such as setting a cap on damages through enforcement ordinances or prohibiting wage garnishments."

However, business groups have made it clear that they cannot accept Clause 2 of Article 3, which exempts liability for damages if a strike is deemed "self-defense" against an employer's illegal activities. They are concerned that this could lead to frequent strikes justified by alleged employer misconduct, thereby escalating labor-management conflicts. There is also concern that ongoing debates over the scope of employer illegality could create further confusion in the workplace.

The business community's willingness to compromise on certain provisions stems largely from the need to adapt to reality. With the ruling party determined to push the bill through on the 21st, they recognize that outright opposition would yield no results. As such, they are considering selectively conceding on provisions that are not entirely unacceptable in order to protect their core interests.

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The business community views Article 2, Clause 2 of the proposed amendment?which would extend corporate responsibility to subcontracted workers?as a "poison pill" and has declared it a red line that cannot be crossed. This provision would expand the definition of "employer" from "the party to the employment contract" to those with "substantial and specific control." Business leaders argue that this ambiguous standard could make parent companies potential criminals. An industry representative stated, "It is virtually impossible to accept a situation where the parent company must be held responsible for subcontracted workers with whom they have no direct involvement, simply due to their 'influence.'" Another representative added, "This is not an issue that can be resolved through compromise."

Another reason for their strong opposition is the fear that the collapse of the core parent-subcontractor industrial ecosystem?fundamental to domestic manufacturing?would severely undermine not only corporate competitiveness but also national competitiveness. Jeong Seokjoo, executive director of the Korea Offshore & Shipbuilding Association, commented, "The reason Korea's shipbuilding industry is more trusted than China's is production stability. As union negotiations increase, the likelihood of production disruptions rises, and there is real concern about losing the trust of foreign shipowners."

The construction industry is also pushing back strongly. A construction company representative explained, "Apartment construction involves hundreds of specialized subcontractors, such as those handling electrical work, plumbing, and structural frames. If unions at these subcontractors demand negotiations with the parent construction company and go on strike, even residents could be affected."

Business leaders are also opposed to Article 2, Clause 5 of the amendment, which expands the scope of legal strikes. Under current law, only strikes over wages, working hours, welfare, or dismissals are considered legal. The amendment would also legitimize strikes over "business decisions," such as restructuring, investment decisions, or workplace relocations?matters involving high-level management judgment.

The business community fears that expanding the scope of legal strikes will lead to a proliferation of "strike omnipotence." Kim Taejeong, executive director at Samsung Electronics, remarked, "The semiconductor market is currently fiercely competitive, making flexible decision-making crucial. If internal uncertainties in labor relations increase, there are concerns about how to navigate an already uncertain business environment." Another company official, speaking on condition of anonymity, said, "Since the advent of artificial intelligence (AI), the pace of change across all industries has accelerated significantly. If business decisions themselves become subject to strikes, there is concern that management decisions will be delayed."

Economic organizations, including the KEF, have launched an "all-out, last-ditch effort" to block the Yellow Envelope Act by the 21st. As even the enforcement ordinances could become unfavorable, they are also considering filing a constitutional petition as a final measure. Lee Donggeun, executive vice chairman of the KEF, stated, "We do not know how the Constitutional Court will rule, but a constitutional petition is the business community's last resort. If the enforcement ordinances fail to reflect the business community's position, we will proceed with a constitutional petition."

Yonhap News Agency

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