'Yellow Envelope' act at 100 days: Employer status recognized in 9 of 10 cases while legal risks grow

More than 100 days after the so-called Yellow Envelope act took effect, labor authorities have recognized principal contractors as employers in more than nine out of 10 cases reviewed, with most rulings centered on workplace safety issues. Unions, however, are increasingly pushing to expand negotiations to wages, benefits and other core working conditions, raising concerns about future unfair labor practice disputes and potential strike action.

Subcontracted workers' unions at 439 workplaces, representing a total of 164,000 union members across 1,161 unions, requested collective bargaining during the first 100 days after the revised Trade Union and Labor Relations Adjustment Act — commonly known as the Yellow Envelope act — took effect, according to the Ministry of Employment and Labor and the National Labor Relations Commission (NLRC) on Monday.

Of those cases, the labor authorities issued employer-status rulings for 113 workplaces. Principal contractors were recognized as employers in 103 cases, resulting in a 91.2 percent approval rate.

The Yellow Envelope act is designed to guarantee bargaining rights for indirectly employed and subcontracted workers and prohibit companies from filing damage claims against unionized workers to recoup losses from strikes. It has been put into effect since March 10.

Business groups have pushed back against the judgment, arguing that the playing field has become tilted in favor of labor.

This comes after several recent rulings that cited a principal contractor's legal obligations under the Occupational Safety and Health Act — such as budgeting and managing workplace safety expenses or overseeing mandatory safety training — as evidence of effective control over subcontracted workers.

Critics argue that this approach makes it too easy for unions to compel bargaining between principal contractors and subcontractors based solely on workplace safety issues.

An NLRC official, however, rejected that interpretation, saying labor authorities did not base their decisions solely on statutory obligations.

"We primarily examined which party had the authority to manage or improve facilities and equipment," the official said.

 Currently, labor authorities generally do not determine employer status separately for each bargaining agenda item. Instead, if employer status is recognized for even one issue, the principal contractor is typically required to enter negotiations.

Observers warn that this approach could create additional disputes because many unions are seeking bargaining not only on workplace safety but also on wages, benefits and other substantive working conditions.

"If an employer determines during negotiations that issues such as wages are not subject to bargaining, it can refuse to negotiate on those matters," an NLRC official said. "If the union then files an unfair labor practice complaint, the issue can be reviewed again at that stage." 

The commission’s explanation, however, has done little to ease concerns among employers.

Business groups argue that repeated disputes over the scope of bargaining could force companies to seek repeated rulings from labor authorities while exposing executives to greater legal risks.

"If an unfair labor practice is found, it can immediately lead to criminal penalties," said Kim Sang-min, a lawyer at Bae, Kim & Lee LLC. "The current situation means disagreements over bargaining with subcontracted workers' unions could ultimately develop into criminal liability for management."

Some workplaces are also facing the possibility of strikes.

The Korean Plant Construction Workers' Union has launched membership votes across eight regional branches through Friday to secure the legal right to strike in support of bargaining demands directed at principal contractors.

"Once disputes move into the strike stage, even more contentious questions are likely to emerge, such as how far employers can go in using replacement workers and how responsibility and damages arising from work disruptions caused by strikes should be assessed for subcontractors," said Park Sam-geun, a lawyer at legal firm Yoon & Yang. 

Another challenge is that only 10 of the principal-contractor workplaces that received bargaining requests have actually begun negotiations.

"Among the 71 workplaces that have received final rulings, 54 are currently undergoing the bargaining-channel unification process in accordance with labor commission decisions, which is why negotiations are taking time to get underway," the Labor Ministry said.

The ministry also dismissed concerns that the law would trigger a "bargaining tsunami."

Each principal contractor received an average of 2.6 bargaining requests, with unions averaging about 375 members each. 

Applications to separate bargaining units were approved at only 12 of 29 workplaces, for a 41.4 percent approval rate. 

The ministry added that bargaining requests were heavily concentrated between March 10 and March 31, with 363 principal contractors facing requests. Only 42 additional workplaces filed requests in April and 23 in May, suggesting that the pace of new filings has begun to stabilize.

BY KIM YEON-JOO [[email protected]]