Warning sounded by European chamber on Korea's Yellow Envelope legislative proposal
The proposed "Yellow Envelope Law" in South Korea has sparked significant controversy due to its potential impacts on foreign companies and the subcontracting ecosystem. The bill, currently under consideration by the National Assembly, aims to revise Articles 2 and 3 of the Trade Union and Labor Relations Adjustment Act.
For foreign companies, particularly those with subsidiaries in Korea, the expanded definition of "employer" is a major concern. The law intends to cover subcontracted laborers on a company's worksite, potentially treating businesses as potential criminals due to the vague and broad scope of liability under the Trade Union and Labor Relations Adjustment Act. This could discourage foreign investment and lead some companies to consider leaving the Korean market.
The European Chamber of Commerce in Korea (ECCK) has expressed concerns that the expanded definition of "employer" broadens the scope of legal liability, undermining the principle of legal certainty. The ECCK, representing around 400 European companies with Korean subsidiaries, is calling for a revision of the amended "Yellow Envelope Law."
Regarding the subcontracting ecosystem, major Korean industry associations argue that broadening employer liability might destabilize the system underpinning manufacturing in Korea. They fear this will increase conflicts between primary contractors and subcontractors and lead to more strikes by subcontracted workers. The Korea Employers Federation and other industry groups warn that the bill could "destroy the industrial ecosystem between subcontractors," seriously lowering competitiveness.
The law also broadens what constitutes a legitimate labor dispute, extending it beyond "working conditions" to include "business management decisions" that affect working conditions. This permits unions to strike over managerial decisions such as investment plans or factory relocations, raising concerns that companies might be forced to negotiate union approval for major business decisions, potentially hindering management flexibility.
The ECCK's concerns about the "Yellow Envelope Law" focus on potential risks to business activity and the subcontracting ecosystem. The organization believes that the law could destabilize the subcontracting ecosystem and increase labor disputes and strikes among subcontracted workers. The ECCK's call for a revision of the "Yellow Envelope Law" is a new development in the ongoing debate about the bill.
Opposition urges reconsideration or revision of the bill to avoid damaging Korea’s competitiveness and business environment, especially at a time when Korea aims to showcase leadership in innovation and economic policy internationally (e.g., at the 2025 APEC summit).
The bill passed the Environment and Labor Committee's plenary session on Monday, adding to the urgency of addressing the concerns raised by the ECCK and other industry groups. The "Yellow Envelope Law" remains a contentious issue in South Korea, with its potential impacts on foreign companies and the subcontracting ecosystem still a matter of debate.
The proposed changes in the "Yellow Envelope Law" have been met with concerns within the finance sector, as foreign companies may be negatively affected by the expanded employer definition and potential increase in legal liability. The European Chamber of Commerce in Korea (ECCK) urges a revision of the bill to maintain legal certainty and avoid negatively impacting business activities. In the realm of politics, opposition is calling for reconsideration of the bill to preserve South Korea's competitiveness and ensure a favorable business environment, particularly with the 2025 APEC summit approaching. Despite the bill's progress through the Environment and Labor Committee's plenary session, the controversy surrounding its potential impacts on foreign companies and the subcontracting ecosystem continues. These concerns are also echoed by major industry associations, which warn that broadening employer liability could destabilize the manufacturing industry and impact competitiveness.
