Following the Yellow Envelope Act, Mandatory Employment Succession... Lee Jae-myung Administration Tightens Labor Reform

The government is initiating preliminary steps to mandate employment succession for subcontracted service providers, such as cleaning, security, and logistics companies, requiring job security for workers when service contractors are changed.

When over 120 subcontracted workers at Korea GM's Sejong Logistics Center were collectively notified of their dismissal, the Daejeon-Chungbuk branch of the Korean Metal Workers' Union and the GM Parts Logistics Branch held a press conference on the 1st in front of the Daejeon Regional Employment and Labor Office, condemning it as "a retaliatory mass layoff in which the primary contractor Korea GM induced the subcontractor's closure to suppress union activities." Korean Metal Workers' Union

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According to relevant ministries on April 28, the Ministry of Employment and Labor will conduct a “Survey on the Utilization Status of Service Providers in Industrial Workplaces” starting next month. This survey aims to understand the current practices before amending the law to mandate employment succession when service providers are changed-a key labor policy task for the government. The investigation will look into industry-specific, job-specific, and contract-size contract practices, as well as workforce management status.

The employment succession mandate means that, in the absence of special circumstances, a new contractor must retain the existing workforce when taking over services such as cleaning, security, or logistics. Refusing succession without just cause will be deemed unfair dismissal, triggering legal responsibility. Related legislative provisions were proposed last July by Assemblyman Changmin Han of the Social Democratic Party and others and are currently under review in the standing committee. Since current law does not guarantee employment succession, court rulings have been required in each dispute. Courts have determined the expectation of employment succession by examining succession clauses in employment contracts, customary practices, and the nature of work. The government’s bill is expected to clearly define the right to expect employment succession by law. A Ministry of Employment and Labor official stated, “Based on the survey, we will draft concrete measures and push for full-scale legislation to mandate employment succession next year. Once the government bill is submitted, it may be discussed in conjunction with the existing proposals.”

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Earlier this year, Minister of Employment and Labor Kim Younghoon hinted at legislative efforts on this issue when meeting with subcontracted workers during the Korea GM Sejong Logistics Center dispute. At that time, Korea GM terminated its subcontract with Woojin Logistics and signed a new contract with Jeongsu Distribution, resulting in 120 dismissed workers occupying the logistics center and halting parts delivery for a month. The situation was resolved by rehiring the existing workers, thanks in part to Minister Kim's intervention, which accelerated the push for mandatory employment succession.

The business community is expressing concern that, following the “Yellow Envelope Act,” the push to mandate employment succession for service providers could further restrict managerial autonomy. This is because new service providers would lose the right to select employees according to their own management policies and scale. A representative from the business community stated, “If even the indirect employment market is subject to mandatory employment succession, companies will inevitably face greater burdens in workforce management. Consequently, there will be a stronger incentive to replace people with automation or artificial intelligence (AI) to reduce labor costs.”

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