Korea’s Pro-Union “Yellow Envelope Act” Passes

On 24 August 2025, Korea’s National Assembly passed the so-called Yellow Envelope Act by 183–3, with the conservative opposition party boycotting the vote. The President is expected to sign and promulgate the bill promptly, with the law to take effect six months after promulgation—likely late March 2026. This legislation marks a significant pro-labour shift within Korea’s already union-friendly legal framework.

Key Elements of the Yellow Envelope Act

As outlined in more detail in our newsletter of 5 August 2025, the Act amends the Trade Union and Labor Relations Adjustment Act (the “Union Act”) to:

• Expand who counts as an “employer.”
  
  Businesses that substantially and concretely control the employees of a supplier or contractor may be treated as “employers.” This enables unions representing those employees to demand collective bargaining with another business that materially controls their working conditions, and seeks to protect workers from replacement or disadvantageous treatment.

• Permit non-employee union membership.
  
  Unions may include certain non-employees as members.

• Broaden lawful industrial action.
  
  Lawful action may now cover disputes over clear violations of collective bargaining agreements and management decisions that affect working conditions.

• Limit damages claims against unions and members.
  
  The Act imposes new constraints and rules on civil damages claims brought against unions and individual union members.

Reactions from Business and Labour

Major domestic business organisations have expressed strong concern, warning that the reforms could paralyse decision-making, create legal uncertainty, and weaken manufacturing. Foreign business associations—AMCHAM, ECCK and UCCK—also voiced deep concerns, citing potential erosion of investor confidence. Some multinationals have publicly raised the possibility of exiting the Korean market.

Labour leaders welcomed the Act and pledged to use it to compel bargaining with workers’ “real” bosses, while continuing campaigns for improved rights. There is already a reported case in which a contractor labour union filed a criminal complaint against a service-recipient company for refusing to bargain directly on worker-dispatch issues—an approach likely to be strengthened once the new law takes effect and such management decisions arguably become subjects for bargaining.

What Employers Should Do Now

Employers who could be affected should begin risk reviews and compliance planning. Recommended steps include:

1. Assess contractor relationships.
   
   Map where your organisation may substantially control an outside contractor’s working conditions—especially where smaller, dependent or quasi-dependent contractors are involved.

2. Set interaction rules.
   
   Adopt guidelines for day-to-day engagement with contractors to avoid unnecessary control over working conditions. Consider structural changes to outsourcing models if risks are identified.

3. Prepare for bargaining demands.
   
   Develop a response framework for bargaining requests from contractor unions and train HR/labour relations teams. Key topics include unification of the bargaining channel, criteria for proper subjects of bargaining, and related procedures. The Ministry of Employment and Labor is expected to issue guidelines on key Yellow Envelope Act issues.

4. Strengthen employee relations.
   
   Positive engagement reduces the likelihood of being selected as a test case for union assertions under the new law.

5. Plan for industrial disputes.
   
   Anticipate disputes involving management decisions, and develop contingency plans where necessary.

Our Yellow Envelope Act Center

With the law to become effective in roughly six months, unions are already preparing to leverage it—particularly against large businesses utilising smaller or dependent contractors. Organisations likely to be impacted should start preparations now.

To support clients comprehensively, we have established a cross-disciplinary Yellow Envelope Act Center, drawing on diverse expertise to advise on the full range of challenges posed by the new law.

By Yulchon, Korea, a Transatlantic Law International Affiliated Firm.

For further information or for any assistance please contact korea@transatlanticlaw.com

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