On Aug. 24, the National Assembly Republic of Korea (NAROK) passed, by an overwhelming margin, the Trade Union and Labor Relations Adjustment Act amendments (the Yellow Envelope Act). The amendments aim to make the constitutional right to collective action effective in workplaces by strengthening practical protections for workers. Managements have warned, however, that the law could unduly constrain managerial discretion and disrupt the legal system, suggesting that conflict between labor and employers may intensify even after passage.

  The Yellow Envelope Act takes its name from a civil-society fundraising campaign that grew out of the mass layoff dispute at SsangYong Motor Company (now KG Mobility Corp.). In 2009, the company filed damage and provisional seizure lawsuits totaling tens of billions of KRW against union leaders and members who participated in a strike, a move that many workers described as an economic death sentence. After a journalist proposed a symbolic plan—let 47,000 citizens each contribute 100,000 KRW to pay 4.7 billion KRW in damages—donations spread nationwide, with contributors placing funds in yellow envelopes as a gesture of solidarity. The National Human Rights Commission of Korea raised concrete concerns about the situation and potential human-rights violations in an emergency statement issued in July 2009.

  The yellow envelope became a powerful emblem of social responsibility and solidarity against the collapse of lives following what unions argued were lawful strikes. For nearly 15 years, it fueled a legislative push to restrict excessive civil damages and asset seizures against workers. Cases like SsangYong Motor Company’s highlighted how the constitutional rights to organize, to bargain collectively, and to take collective action often failed to have real-world effect under existing law. This was especially true in an economy where subcontracting and other forms of indirect employment had increased, allowing lead firms to wield substantial influence over working conditions while avoiding legal accountability. The need to address these structural limits and improve the system has been flagged repeatedly in reviews by the National Assembly Research Service.

  The amendments seek to address these problems by guaranteeing the rights of workers who often have no one to bargain with in fragmented supply chains. According to release from the Ministry of Employment and Labor (MOEL), the reform’s core aim is to strengthen alignment between real-world authority and legal responsibility.

  The Yellow Envelope Act attempts to reset three fundamental interpretive baselines in Korean labor law—areas that had long relied on court precedents. As summarized in a press release distributed by the MOEL, the key issues are as follows.

1) Expansion of the Definition of Employer

  Previously, the employer was, in practice, limited to the company that directly concluded a labor contract. As a result, a lead firm that effectively directed subcontracted workers and shaped their working conditions often fell outside the scope of collective bargaining. This loophole undermined worker rights in industries reliant on outsourcing. A side-by-side comparison on the National Law Information Center of the Ministry of Government Legislation indicates that, regardless of a direct contract, an individual or company that exerts substantial influence or decision-making authority over working conditions is now treated as an employer and must bargain with the union.

  Managements argue that imposing obligations on entities without direct employment contracts violates freedom of contract and excessively infringes on core managerial rights. They warn that blending ordinary civil-law contracting between lead and subcontractors with labor-law obligations will create uncertainty and expose firms to unpredictable labor-risk. They further contend that lead firms, burdened with managing such risks, may curtail subcontracting and outsourcing, harming irregular workers through job losses. According to testimony by business representatives in the Environment and Labor Committee public hearings at the NAROK, requiring lead firms to bargain with numerous subcontractor unions would impose heavy costs and administrative inefficiencies, eroding productivity and international competitiveness.

2) Expansion of the Permissible Scope of Strikes

  Under prior law and case law, legitimate strike issues were narrowly confined to traditional working conditions such as wages and hours. Matters deemed managerial prerogatives, including personnel decisions, restructuring, and outsourcing, were excluded. Courts reasoned that allowing strikes over such issues could endanger a company’s existence.

  Labor organizations argue that dismissals and outsourcing directly and substantially affect workers’ livelihoods and therefore constitute core terms of employment that should be opened to collective action. Standards under the International Labor Organization concerning freedom of association have broadly recognized collective bargaining over issues that significantly impact workers’ living conditions.

  Managements counter that personnel and management decisions are inherent to managerial rights—the backbone of a market economy—and must remain protected. As reflected in the Environment and Labor Committee transcripts and government press materials, they warn that union involvement in management decisions would slow or paralyze decision-making, undermine competitiveness, and ultimately jeopardize corporate survival and job stability. They also caution that this provision could invite pervasive union intervention at every stage of business decision-making.

3) Limits on Damages for Strike-Related Losses

  The most contentious provision limits civil damages for losses caused by strikes. Unless a union member acted with intent or gross negligence, the individual may be exempted from liability, and courts must closely examine each person’s degree of responsibility when calculating damages. According to clause-by-clause explanations released by the MOEL, the provision is designed to prevent excessively harsh application of general civil-law liability to workers exercising the right to strike.

  Labor organizations argue that prior damage suits chilled even lawful strikes and were misused to pressure workers, making this clause an essential safeguard for exercising constitutionally guaranteed labor rights. The bill also directs damage calculations to consider the employer’s share of responsibility—for example, if the employer induced a dispute or bargained in bad faith—thereby aiming for a more balanced allocation of fault.

  Managements respond that the provision undermines the civil-law principle that unlawful acts require full compensation, raising constitutional concerns by restricting legitimate property rights. They warn that workplaces will grow more chaotic because unlawful strikes will carry less liability and that moral hazard may increase if actors expect reduced responsibility. With respect to constitutional review, procedures and effects are governed by the Constitutional Court of Korea (CCK) framework for constitutionality adjudication.

1) Legality

  The damages-limitation clause sits at the intersection of corporate property rights and workers’ constitutional labor rights. If managements conclude that the law excessively restricts property rights, they may seek a constitutionality review by the CCK. In the early phase of enforcement, indeterminate concepts such as substantial control and gross negligence will likely be clarified by courts and labor commissions. The Central Labor Relations Commission has indicated that the government intends to mitigate early confusion through casebooks and guidelines. Nevertheless, some labor-law scholars warn that interpretive turbulence may persist for a time.

2) Economy

  Economists note that the law may increase labor-management costs and uncertainty, particularly in subcontracting-heavy manufacturing and platform industries. Firms may postpone new investments or consider relocating production. According to feedback gathered by organizations such as the Korea Chamber of Commerce and Industry, such concerns are prominent in the business community.

Labor organizations and some economists counter, citing public research from the Korea Labor Institute, that improving wages and treatment for indirectly employed workers can boost consumption and deliver long-run positive effects. They also argue that resolving disputes through law and dialogue can reduce social costs.

3) Politics

  Effective implementation will require the MOEL and labor commissions to apply the new standards promptly and clearly. If administrative capacity is strained, disputes may grow more complex and early-stage confusion may widen. Without detailed and industry-specific criteria for assessing substantial control, workplace turmoil may be difficult to avoid. According to the government’s field-support plans announced in the second half of 2025, follow-up measures include guidance documents, casebooks, and sector-specific roundtables.

  Political uncertainty also looms. Given intense partisan confrontation during the bill’s passage, the government and the ruling party may reflect business concerns and consider exercising a veto, which would force renewed deliberation in the NAROK. That process could escalate labor-management disputes into a broader political standoff, affecting governance and future reform agendas.

  For the Yellow Envelope Act to function well in practice, clear judicial precedents, strengthened expertise within labor commissions, and a culture of mutual respect and compromise between labor and management will be essential. Current government plans, according to policy explanations from the MOEL, emphasize standard guidelines and expanded consulting. Many experts also urge additional support to reduce compliance burdens for small and medium-sized subcontractors and to stabilize the transition.

  Protecting workers’ rights and safeguarding managerial freedom are both fundamental pillars of social progress. The Yellow Envelope Act will test the balance between these values and is likely to remain a central challenge for the government in the years ahead.