The “Yellow Envelope Act” of Korea: Key Legal & Policy Considerations in Korea’s Proposed Labor Reform

The so‑called Yellow Envelope Act is a pending amendment (update: law was passed in August 2025) to Articles 2 and 3 of Korea’s Trade Union and Labor Relations Adjustment Act, currently under active deliberation in the Korean National Assembly. The amendments are supported by the Democratic Party of Korea (DPK) and labor unions. The bill seeks to expand union protections and significantly limit employers’ ability to pursue damages claims against workers for strike‑related losses. The amendment is named after civic donations made in yellow envelopes to support SsangYong Motor workers. The legislation is proposed, facially, as a remedy to alleged misuse of provisional seizure and damage litigation in order to suppress labor actions.

Yellow Envelope Act of Korea: DPK’s Labor Law Reform Proposal on Union Labor Relations

Although passed twice by opposition-controlled legislatures in Korea, the legislation has been vetoed twice by former President Yoon Suk Yeol. The DPK has now made its reintroduction a core platform pledge under President Lee Jae Myung and is accelerating its passage in the current legislative term.

Key Amendments to Korea’s Trade Union and Labor Relations Adjustment Act

• Broadening the definition of “employer”: The bill would designate any entity that “substantially and specifically controls” working conditions, even without direct employment contracts, as an employer. This aims to cover subcontracted, dispatched, and platform workers by placing parent companies within the negotiation scope.
• Expanding legitimate labor dispute rights: The bill would permit labor disputes over existing employment conditions, restructurings, layoffs, or overdue wages, not just future contract terms.
• Limiting damage claims against unions or individuals: Employers would be barred from seeking compensation for losses resulting from legitimate strikes. If damages are adjudicated, they must be assigned individually based on personal fault, rather than blanket liability.

Although passed twice by opposition-controlled legislatures, the legislation has been vetoed twice by former President Yoon Suk Yeol. The DPK has now made its reintroduction a core platform pledge under President Lee Jae Myung and is accelerating its passage in the current legislative term.

In May 2023, the ruling People Power Party challenged the bill’s expedited referral to plenary session, alleging procedural violations. Regardless, the DPK majority has advanced the bill through both the Labor Committee and Judiciary Committee stages.

Stakeholder Positions

Labor & Progressive Supporters

• KCTU and FKTU: View the bill as essential to protecting union activities, especially for vulnerable labor groups like platform or subcontracted workers.
• The DPK: Emphasizes the need to shrink labor inequities and protect collective bargaining rights, backed vocally by the nominated Minister of Labor, former union leader Kim Young‑hoon.

Business Community & Some Foreign Investors

Major business associations, including the Korea Enterprises Federation, KCCI, Federation of Korean Industries, and the European Chamber of Commerce in Korea (ECCK), have issued urgent calls for reconsideration. The common concerns include:

• Legal uncertainty: The expanded employer definition is characterized as vague, potentially criminalizing parent companies and weakening legal clarity.
• Operational risk: Predicting exponential growth in union negotiations, especially in subcontractor‑heavy sectors, the associations warn of disruption to industrial efficiency, reduced job creation, and outward investment.

A joint statement released on July 29, 2025, by eight major associations argued that the proposal, alongside concurrent amendments to the Korean Commercial Act, risked destabilizing export‑based Korean industries amidst global uncertainty.

5. Legal Analysis and Implications

● Governance & Legal Certainty

Expanding the definition of “employer” to include entities exercising indirect control may raise constitutional questions under the principle of clarity in criminal and administrative liability. Vague statutory language risks inconsistent application and higher exposure to litigation. We shall update the reader when more is known.

● Impact on Subcontract and Platform Sectors

If parent companies become effectively responsible for labor actions by subcontracted or platform workers, they may face multiplied negotiation pressures and additional financial risk for non‑core labor disputes.

● Compliance & Risk Management

Employers will likely need to reassess labor relations strategies, ensure stricter internal controls, and consult legal counsel in Korea regarding restructuring wage negotiation or dispute policies. They should also evaluate exposure to litigation and consider adjustments in subcontracting relationships.

The Yellow Envelope Act of Korea represents a landmark shift in South Korean labor law by expanding collective bargaining protections while curtailing corporate legal remedies for strike‑related damages. Its legislative fate now hinges on the DPK‑controlled Korean National Assembly, political maneuvering surrounding President Lee’s leadership, and ongoing debate between pro‑labor and business constituencies.

For employers, unions, or legal professionals seeking detailed compliance guidance or preparing for potential repercussions, our firm stands ready to support you with tailored advice under this evolving regulatory environment.

Sean Hayes is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. He assists clients with their contentious, non-contentious, and business development needs, and is regularly quoted by leading media sources on Asia’s legal and business issues. Sean is rated a Top 100 attorney, and his firm was rated a top dispute resolution law firm in Korea.   

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