Subcontractor unions at 1,218 workplaces, with 179,511 members, have demanded negotiations

Only 149 primary contractors — 32.7% — have posted required notices

Confusion grows over scope of bargaining on performance bonuses, factory relocations

Members of the Korean Confederation of Trade Unions march along Sejongno in Seoul on the first day the amended Trade Union and Labor Relations Adjustment Act — commonly known as the "Yellow Envelope Act" — took effect. [Yonhap]
Members of the Korean Confederation of Trade Unions march along Sejongno in Seoul on the first day the amended Trade Union and Labor Relations Adjustment Act — commonly known as the "Yellow Envelope Act" — took effect. [Yonhap]

Six months after the amended labor union law — widely known as the "Yellow Envelope Act" — took effect, expanding the employer responsibilities of primary contractors, confusion on the ground shows little sign of easing. Subcontractor unions have demanded collective bargaining from 456 primary contractors, yet actual negotiations have begun at only 102 of them. Disputes are also spreading over whether demands such as performance bonuses tied to a fixed percentage of operating profit, and management decisions such as building or relocating factories, fall within the scope of bargaining and industrial action.

According to data obtained by People Power Party lawmaker Kim So-hee from the Ministry of Employment and Labor, as of Aug. 14, a total of 456 primary contractor workplaces had received bargaining demands from subcontractor unions under the Yellow Envelope Act. The unions making those demands numbered 1,218, representing 179,511 members.

Yet only 149 primary contractors — 32.7% of the total — had posted the legally required notice acknowledging a bargaining demand. Just 102, or 22.4% of all workplaces that received demands, had gone through the bargaining-channel unification process and actually sat down at the negotiating table. In effect, fewer than one in four primary contractor workplaces has entered genuine talks.

The amended law broadened the definition of "employer" to include companies that do not directly employ subcontract workers but hold a position of substantial and specific control over their working conditions. The change allows subcontractor unions to demand bargaining from a primary contractor that exercises influence over wages, working hours and other conditions.

The central problem is that labor and management disagree sharply over which primary contractors qualify as employers under the new standard. When a primary contractor refuses to acknowledge employer status and declines to post the required notice, the subcontractor union can file a correction request with the labor relations commission. Even if the commission rules in the union's favor, the primary contractor can seek a review and then pursue administrative litigation, meaning bargaining disputes could drag on in the courts for years.

Hanwha Ocean, for instance, has filed an administrative lawsuit challenging a National Labor Relations Commission ruling that it qualifies as the employer of workers at Wellive, a subcontractor handling in-house catering, commuter bus services and facility management. Jungheung E&C and Jungheung Construction are also reported to have entered legal proceedings over primary-contractor employer status. The law's intent to broaden the definition of employer is, in practice, generating a surge in disputes over who that definition covers.

The center of gravity in these conflicts is shifting — from "who counts as an employer" to "what must be bargained over." A prominent flashpoint is the so-called "N percent performance bonus" demand, under which unions call for a set share of a company's sales, operating profit or net profit for the period to be paid out as bonuses.

Labor argues that performance bonuses are directly tied to workers' wages and compensation and therefore qualify as subjects for collective bargaining. Management counters that decisions on how to distribute a company's profits fall within the authority of shareholders and the board of directors, and that treating such decisions as mandatory bargaining or strike subjects would infringe on management prerogatives.

As the controversy grew, the Ministry of Employment and Labor recently issued implementation guidelines on the scope of labor disputes covering performance bonuses and similar matters. The guidelines state that, as a general rule, demands that a fixed percentage of sales or operating profit be distributed as performance bonuses do not qualify as subjects for mandatory collective bargaining or labor disputes — on the grounds that decisions about how to distribute corporate profits belong to the realm of management judgment.

The guidelines also determined that decisions to build or relocate factories, sell or acquire business units, or introduce AI and automation equipment are, as a general rule, not subject to mandatory bargaining in themselves. However, the ministry drew a line: if such decisions objectively and foreseeably lead to concrete changes in working conditions — dismissals, restructuring, transfers, employment succession, or changes in job duties or working hours — then those resulting labor conditions can become subjects for bargaining and industrial action.

Even with the government's guidance in place, uncertainty has not been fully resolved. Disagreements between labor and management are inevitable over questions such as how specific a workforce-management plan must become before changes to working conditions are "objectively foreseeable," and where the line falls between wage negotiations and profit-distribution demands within a performance-bonus claim.

The ministry's guidelines carry no legal binding force — they are administrative guidance only — making confusion likely to persist until rulings from labor relations commissions and courts accumulate on individual cases. Separate from assessments that the Yellow Envelope Act has expanded bargaining rights for subcontract workers, disputes between labor and management over primary-contractor employer status and the boundary between management decisions and working conditions are expected to continue for now.


fact0514@heraldcorp.com