South Korea’s ‘Yellow Envelope Act’ Sparks Labor Disputes and Industry Concerns

Seoul, South Korea – March 10, 2026 – Amendments to South Korea’s Trade Union and Labor Relations Adjustment Act, commonly known as the “Yellow Envelope Act,” took effect today, triggering a wave of demands for negotiations from subcontracted workers and raising concerns among businesses about potential labor disputes. The law expands the definition of an employer and widens the scope of industrial disputes, significantly altering the landscape of labor-management relations.

What is the Yellow Envelope Act?

The Yellow Envelope Act, reintroduced in July 2025 after a previous veto, aims to broaden worker protections and strengthen the bargaining power of unions. Specifically, the amendments focus on four key areas:

• Expanding the scope of ‘employee’ and ‘worker eligible for union membership’
• Expanding the scope of ‘employer’ to include those exercising control over working conditions, even without a direct employment contract.
• Widening the concept of ‘industrial disputes’ to include issues beyond direct working conditions.
• Limiting or exempting unions from liability for damages resulting from industrial action.

Expanded Definition of ‘Employer’ and Industrial Disputes

A core change introduced by the Yellow Envelope Act is the expanded definition of an employer. Previously, bargaining was limited to parties with a direct employment contract. Now, subcontracted workers can demand negotiations directly with the main contractor who exercises substantial control over their working conditions. The law removes the word ‘determination’ from the definition of an industrial dispute, broadening what constitutes a legitimate basis for labor action. DLA Piper notes this allows unions to strike over disputes regarding the application, implementation, or interpretation of already-determined working conditions.

Immediate Impact: Union Demands and Potential Strikes

The Korean Confederation of Trade Unions (KCTU), representing over 1 million members, has already begun sending bargaining notices to companies overseeing subcontracted operate on behalf of nearly 140,000 workers. The Korea Times reports that unions are preparing for strikes against firms that refuse to negotiate. Industries heavily reliant on subcontracted labor, such as petrochemicals, steel, shipbuilding, automotive, and construction, are expected to be particularly affected.

Several unions have already initiated negotiations, including the Hyundai Motor Temporary Workers’ Branch and the HD Hyundai Heavy Industries In-house Subcontracting Branch, submitting their third requests to main contractors after previous attempts were ignored. Platform workers and logistics companies are also mobilizing, with the Korean Confederation of Trade Unions’ Chemical Fiber Food Workers’ Union Kakao Association demanding improved treatment and bargaining rights.

Business Concerns and Government Response

The business community has expressed concerns about the potential for widening disputes. The Korea Enterprises Federation has warned of indiscriminate demands for negotiation, even in cases where employer recognition is not legally justifiable. The Korea Herald reports that some unions have threatened negotiations even without established bargaining rights, and some subcontractors have launched sit-ins.

The government has emphasized a labor-management cooperation model and has issued guidelines to interpret the latest law and provide negotiation advice. President Lee Jae-myung recently met with executives from major conglomerates to promote win-win cooperation, citing Hanwha Ocean’s resolution of a worker dispute and contribution to performance bonuses for subcontracted workers as a positive example.

Looking Ahead

The implementation of the Yellow Envelope Act marks a significant shift in South Korea’s labor landscape. While both labor and management are expected to engage in intense negotiations, finding a practical balance between management rights and labor rights will be a key challenge. As The Korea Herald points out, even management decisions like layoffs could become subject to collective bargaining if they substantially impact working conditions. The coming months will be crucial in determining how the law is interpreted and applied in practice, and whether it leads to increased labor stability or heightened conflict.