South Korea’s Yellow Envelope Act Takes Effect, Raising Concerns for Businesses

The South Korean government’s recently enacted Yellow Envelope Act, officially an amendment to the Trade Union and Labor Relations Adjustment Act (TULRAA), came into effect on March 10, 2026, sparking anxiety among employers and intensifying labor-management tensions. The law aims to expand protections for union activities, but businesses fear increased burdens and potential disruptions.

What is the Yellow Envelope Act?

Originally proposed in 2025 and reintroduced after a presidential veto, the Yellow Envelope Act seeks to broaden the definition of ‘employee’ and ‘employer’ under the TULRAA, widen the scope of ‘industrial disputes,’ and, crucially, limit the liability of unions for damages resulting from legal industrial action . It as well expands protections to include “other union activities” beyond collective bargaining and strikes .

Key Concerns for Businesses

The business community has voiced several concerns regarding the implementation of the Yellow Envelope Act:

• Increased Negotiation Demands: A primary worry is a surge in negotiation requests from subcontractor unions, potentially increasing costs and workload for primary contractors. Subcontractor unions have already begun seeking negotiations with main contractors, with 26 workplaces currently pursuing this action .
• Ambiguous Scope of Usability: The criteria for determining when a subcontracting union has bargaining rights remain unclear. If a primary contractor structurally controls the working hours or methods of subcontracted workers, or provides for their safety and health, it could be deemed an ‘employer’ and subject to negotiation . This ambiguity creates uncertainty about the extent of intervention required and potential legal liabilities.
• Lack of Company Input: Businesses express dissatisfaction that their concerns were not adequately addressed during the legislative process and in the subsequent development of implementation guidelines .

Impact on Specific Industries

Industries heavily reliant on subcontracting, such as automobiles, shipbuilding, and steel, are expected to be particularly affected. The potential for simultaneous negotiation requests across multiple subcontractors raises the risk of widespread disruption .

Union Response

Labor unions are actively leveraging the new law. The Korean Confederation of Trade Unions (KCTU) plans to formally request negotiations with primary agencies and hold resolution meetings for those who do not comply. A general strike was announced for July 15th , signaling a potentially confrontational approach.

Government Monitoring and Future Outlook

The South Korean government intends to closely monitor the situation during the initial three months of enforcement to minimize confusion. However, the business community remains skeptical, anticipating practical challenges and legal risks. The National Assembly passed the law in August 2025 , and it will take effect six months after promulgation, providing a limited window for businesses to adapt their labor compliance strategies .