Labor Bill Sparks Showdown: Businesses Fear Legal Chaos Over Worker Protections

Ruling party’s push for broader labor protections draws backlash from businesses over legal uncertainty, employer liability

The ruling Democratic Party of Korea is rapidly advancing a controversial labor bill, sparking concerns from the business community about potential disruptions to industrial relations.

Known colloquially as the “Yellow Envelope Bill,” this proposed amendment to the Trade Union and Labor Relations Adjustment Act aims to expand worker protections across all employment types while limiting companies’ ability to sue for strike-related damages.

The bill’s nickname stems from a 2014 campaign where citizens sent cash donations in yellow envelopes to support SsangYong Motor workers facing substantial lawsuits over strikes. Since its inception, the bill has undergone significant revisions.

Five versions of this pro-labor union bill are currently before parliament. The Environment and Labor Committee is tasked with reviewing all proposals, identifying key provisions, and negotiating a unified draft for a plenary vote.

While the final wording remains uncertain, the core intent of the amendment is likely to persist: enhancing protections for workers engaged in union activities and restricting companies’ ability to file excessive damage claims against them.

Key Provisions of the Bill
The proposed legislation would broaden the definition of “employer” beyond those with direct employment contracts to include anyone who “substantially and specifically controls” working conditions.

A stricter draft version stipulates that companies outsourcing work would still be considered employers if the outsourced work occurs on their premises.

This change could allow unions representing subcontracted workers to demand negotiations directly with large corporations.

Another contentious provision expands the definition of “worker” to include anyone who joins or organizes a labor union. This would extend to platform workers, self-employed individuals, and freelancers, previously excluded under existing law. Consequently, freelance associations and gig workers could operate as unions and legally strike.

The bill also broadens the circumstances under which strikes are legally permitted. Current law only allows strikes during negotiations over changes to employment terms like wages and benefits. The proposed revision would permit strikes over already established employment terms.

One variation goes further, explicitly allowing workers to initiate labor disputes over employment conditions affected by corporate restructuring, such as mergers, acquisitions, or organizational changes. This could expose companies conducting layoffs during restructuring to potential labor protests.

The proposal also tightens restrictions on when employers can sue for damages during labor disputes. Companies would be barred from seeking compensation for losses resulting from legitimate strikes. If a union protests in response to an employer’s unlawful actions, neither the union nor its members would be held liable for resulting damages.

Additionally, if a court rules on damages, the bill requires responsibility to be assigned individually based on each person’s level of fault, rather than imposing blanket liability on all union members.

Business Concerns
While labor advocates hail the bill as a crucial step in protecting vulnerable workers, businesses worry it could hamper their ability to manage labor disputes, disrupt workplace order, and expose them to legal challenges.

On Monday, South Korea’s six major business organizations urged lawmakers to delay the bill’s passage, citing concerns about workplace stability. These groups include the Korea Enterprises Federation, Korea Chamber of Commerce and Industry, Federation of Korean Industries, Korea International Trade Association, Korea Federation of SMEs, and the Federation of Middle Market Enterprises of Korea.

“This isn’t just a simple law revision, but a fundamental change that could significantly disrupt our labor-management relations,” warned Sohn Kyung-shik, chair of KEF and CJ Group, during a meeting with lawmakers. He stressed the need for broader consensus through stakeholder dialogue.

“The bill’s expanded definition of ’employer’ to include anyone with substantial and specific control over working conditions is vague and abstract,” Sohn added. “If dozens or hundreds of subcontractor unions demand negotiations, it would be impossible for parent companies to respond to each one individually.”

Industry officials are particularly concerned about the bill’s impact on sectors heavily reliant on subcontracting, such as automobile manufacturing, shipbuilding, and construction.

“If companies become liable for strikes by hundreds or thousands of subcontractors, when will they have time to operate, produce, and generate profits?” questioned one industry official, speaking anonymously.

“This trend may force companies to be more cautious about domestic investment and hiring.”

Growing Political Momentum
With President Lee Jae Myung’s support and his ruling Democratic Party controlling the National Assembly, observers believe the bill’s enactment is imminent.

“Both the Supreme Court and the International Labor Organization have acknowledged the necessity of this law,” Lee stated during a May presidential debate. “The Yellow Envelope Bill is an essential measure.”

The legislation has a long history. First proposed in 2015, progressive lawmakers have repeatedly attempted to revise the labor union law but faced opposition from conservative parties and business groups. In 2023 and 2024, the bill passed the Democratic Party-controlled Assembly but was vetoed twice by then-President Yoon Suk Yeol.

Now, the Democratic Party is determined to pass key bills previously derailed by Yoon’s veto. A revision to the Commercial Act, also vetoed during Yoon’s term, received Cabinet approval on Tuesday and awaits presidential promulgation.

Jin Sung-joon, chair of the Democratic Party’s policy committee, recently announced that President Lee personally urged lawmakers to expedite the passage of key bills, including the Yellow Envelope Bill.

The push gained additional support from Kim Young-hoon, President Lee’s nominee for labor minister and former leader of the Korean Confederation of Trade Unions, the country’s largest umbrella union group.

In documents submitted to the parliamentary Environment and Labor Committee last week, Kim emphasized the revision as the most urgent priority.

Rejecting claims of bad legislation, Kim stressed that the revision aims to clarify employer responsibilities and institutionally support legitimate bargaining structures, not to encourage indiscriminate negotiations.

Regarding provisions on strike-related damages, Kim explained that the goal is to ensure accountability for illegal acts while keeping damage claims proportional to authority and responsibility, preventing excessive claims from discouraging union activities.

The KCTU plans mass rallies on Wednesday and Friday to demand the bill’s full and immediate passage.