August 29, 2025
SEOUL – South Korea’s labor relations are set for a major shift.
On Aug. 24, South Korea’s National Assembly passed a landmark amendment to the Trade Union and Labor Relations Adjustment Act, better known as the “Yellow Envelope” bill.
With 183 lawmakers voting in favor and only three against, the legislation marks the culmination of a 20-year demand from the labor movement to strengthen the constitutional right to organize, bargain and strike.
Set to take effect in March 2026 after a six-month grace period, the amendment is expected to reshape labor relations. Experts say its impact lies not in strengthening unions that already wield influence, but in addressing Korea’s deeply segmented labor market.
“This law is not mainly about empowering workers in large firms who already enjoy strong protections,” said Lee Byoung-hoon, professor emeritus of sociology at Chung-Ang University. “The real purpose is to support those in the secondary or marginalized labor market — subcontracted, non-regular and platform workers — who have long been outside the reach of effective labor rights.”
Korea’s labor market has long been described as dualized. Workers in the primary market, who are regular employees at conglomerates, public corporations and large manufacturers, benefit from job security, relatively high wages and strong unions.
In contrast, those in the secondary market — small and mid-sized firms, contract-based positions, many women workers and the growing platform workforce — face low pay, weak representation and little legal protection.
“In the secondary labor market, many workers can be dismissed at will, often without formal layoff procedures,” Lee said. “These are the groups the Yellow Envelope bill is designed to protect by ensuring they can demand negotiations with the entities that actually control their working conditions.”
Consider the shipbuilding industry, where dozens of subcontractors operate within the shipyards of a single conglomerate.
Under the old framework, subcontracted workers could only bargain with their direct employers, often small, financially vulnerable firms, while the conglomerate that effectively dictated wages and safety standards could deflect responsibility. Strikes against layoffs were often ruled illegal, paving the way for multimillion-dollar lawsuits against unions.
With the Yellow Envelope bill in place, subcontractor unions can demand bargaining with the parent firm if it has “substantial and specific control” over working conditions. A strike against mass layoffs could now be considered legal, and courts would be restricted from imposing ruinous damages on workers.
Similar changes are expected in logistics and platform work, where unions representing delivery drivers or gig workers will be able to demand talks with companies that control dispatch systems, pay algorithms or safety rules.
While employers warn of chaos, legal experts note that bargaining will still be funneled through a unified channel system, and courts will apply strict tests before holding parent firms responsible.
The roots of the Yellow Envelope bill trace back to 1990.
Under the Roh Tae-woo administration, a directive was issued in 1990 that instructed companies to “actively utilize civil damage claims” against striking workers. Following the directive, companies adopted lawsuits as a means of applying pressure on organized labor.
As a result, workers faced damage sums so astronomical, often tens or hundreds of billions of won, that they could never repay in a lifetime. Between 2009 and 2020, corporations and state institutions brought 151 damage suits against unions, with total claims reaching 275.2 billion won ($198.3 million).
However, the Yellow Envelope bill is more directly rooted in the SsangYong Motor mass layoff strike of 2009.
The company, acquired by Shanghai Automotive in 2004, entered court receivership amid mounting losses during the global financial crisis. More than 2,600 workers lost their jobs during a 77-day occupation. The company later sought over 300 billion won in damages. Nearly 100 union members were detained and dozens of workers and family members died in circumstances linked to the dismissals.
In 2013, a local court ordered union officials to pay 4.8 billion won in damages, resulting in the seizure of wages and personal assets. The ruling prompted a citizen to donate 47,000 won in a yellow envelope, a gesture that spread into the nationwide “Yellow Envelope Campaign” and collected around 1.5 billion won in contributions. The color referenced the pay packets workers once received and quickly became a symbol of public support.
The campaign led to renewed legislative attention. In 2015, then-lawmaker Eun Soo-mi introduced the first version of what became known as the Yellow Envelope bill, aimed at broadening the scope of lawful strikes and limiting the scale of corporate lawsuits. However, it was not passed before the parliamentary term expired.
Later, renewed strikes in 2022 by subcontracted shipbuilding workers broadened the debate to include the definition of “employer.” That year, Rep. Lee Eun-ju reintroduced the bill, which, after two presidential vetoes by Yoon Suk Yeol, finally passed in 2025.
Now that the government has six months to ease the transition, the Labor Ministry announced Thursday that it will establish a task force that includes representatives from labor and business as a standing communication channel. The task force will collect feedback, identify concerns raised in workplaces and provide continuous input to reduce uncertainty in the implementation process.
Employers are expected to coordinate through the Korea Employers Federation alongside foreign chambers and industry associations, while labor federations such as the Korean Confederation of Trade Unions and the Federation of Korean Trade Unions will relay worker perspectives.
The task force will also provide on-site support for subcontractor bargaining, diagnosing industries with layered labor structures and offering consultations to companies where conflicts are most likely to arise.
In sectors such as shipbuilding, authorities plan to pilot joint bargaining models that bring parent firms and subcontractors to the same table, aiming to protect subcontracted workers while maintaining competitiveness.
To guard against conflict, the ministry will run a monitoring and reporting center for unlawful labor practices, including obstruction of negotiations or illegal occupations. Any violations will trigger investigation and enforcement.
The law’s ultimate significance lies in whether it can reduce Korea’s entrenched labor divide, according to Lee.
“If it works as intended, the Yellow Envelope bill will not only protect precarious workers but also help Korea move toward a more mature, less adversarial model of labor relations,” Prof. Lee said. “That would be the true measure of change.”
For companies, the Yellow Envelope bill introduces both new responsibilities and uncertainties.
Large firms that relied on subcontracting and outsourcing to keep labor costs low will now face direct bargaining demands if they exert substantial control over working conditions. This could raise labor costs and complicate restructuring decisions, particularly in industries with layered supply chains such as shipbuilding, logistics and manufacturing, according to observers.
Employers also worry about an increase in legal disputes, as questions over what constitutes “substantial control” or a “lawful dispute” will likely be tested in court.
At the same time, by curbing excessive lawsuits and offering clearer bargaining frameworks, the law could push companies toward more predictable and institutionalized labor relations, reducing reliance on conflict-heavy tactics that have long characterized Korea’s labor landscape.
Q: What are the major changes?
First, the definition of “employer” is broadened to include not only direct employers but also contracting firms and parent companies that exercise significant control over working conditions.
Second, the scope of labor disputes is expanded. Strikes may now address issues beyond wages and working hours, including restructuring, mass layoffs and other managerial decisions that substantially affect workers.
Third, companies will face stricter limits in seeking damages from unions or individual workers. Courts must consider workers’ roles, financial circumstances and the proportionality of any losses before approving lawsuits or asset seizures tied to strikes.
Q: Can subcontractor unions now bargain directly with parent companies?
Yes, if the parent company has substantial control over wages, hours, or safety. But courts will still determine whether such control exists, meaning not all parent firms are automatically obligated.
Q: Will parent firms face endless bargaining requests from multiple unions?
No. Korea’s single bargaining channel rule consolidates negotiations, preventing dozens of subcontractor unions from individually demanding talks.
Q: Are strikes against layoffs now legal?
Yes. Restructuring decisions that directly affect workers’ employment and pay can now be grounds for strikes. Previously, walkouts opposing mass layoffs or restructuring have been deemed illegal because they infringe on “management rights.” This has made Korea an outlier internationally, as many other countries recognize such disputes as valid grounds for collective action.
The Yellow Envelope bill broadens the definition of a labor dispute to include “business management decisions that affect working conditions.” This means strikes opposing large-scale layoffs, factory closures or corporate restructuring plans could now fall within the scope of lawful industrial action, provided they are directly linked to the job security or terms of employment of workers.
Q: Does this law give unions a blanket immunity from damages?
No. Unions remain liable for unlawful acts, but courts must apply proportionality and consider circumstances before awarding damages. The law recognizes a concept akin to “self-defense,” for which damages may be waived if the strike was the only means to protect workers from unlawful employer conduct.