[fn Editorial] Foreign-invested companies considering withdrawal due to Yellow Envelope Act

The survey found that 35.6% of foreign-invested companies are considering reducing domestic investment or withdrawing branches ahead of the so-called Yellow Envelope Act scheduled to be implemented in March next year. This is the result of a survey of 100 foreign-invested companies conducted by the Korea Foreign Companies Association (KOFA). Foreign-invested companies are reportedly concerned about the content of adjusting liability for damages caused by industrial action.

Article 3 of the amendment to the Trade Union Act stipulates that if damage is inevitably caused in response to an employer's illegal act, the union or worker is not liable for compensation. It also prohibits employers from claiming damages for the purpose of threatening the existence of the union or interfering with its activities. In particular, it ensures that no liability for damages is imposed on guarantors such as workers' family members or acquaintances. The response rate for the limitation of civil liability for illegal strikes was 50% negative, and the response rate for the limitation of damages was 47% negative.

Concerns about the Yellow Envelope Act among foreign-invested companies have been raised well before the law was passed. The fact that 35.6% of foreign-invested companies are considering reducing investment or withdrawing may seem low at first glance, but this is because there are many places without unions and not many companies that subcontract. According to a government survey of 303 foreign-invested companies, 58 companies had unions.

In that context, it seems that foreign-invested companies with unions or those that subcontract are very concerned about changes in the business environment following the implementation of the Yellow Envelope Act. Among them, the company most worried is Korea GM. Korea GM, which is already rumored to be withdrawing, is known to have 276 first-tier suppliers in Korea, and the number reaches 3,000 when including second and third-tier suppliers.

The possibility of Korea GM's withdrawal from Korea, which was detected due to the imposition of U.S. auto tariffs, will be further heightened by the implementation of the Yellow Envelope Act. If by any chance the Yellow Envelope Act becomes a catalyst for Korea GM's withdrawal, it would mean that this law, which is intended to support subcontracted unions, results in subcontracted workers losing their jobs.

The problem does not stop with the departure of foreign-invested companies from Korea. There will certainly be cases where foreign companies intending to invest and establish businesses in Korea will cancel their plans after seeing the implementation of the Yellow Envelope Act. Even before this, many foreign companies were reluctant to enter Korea due to strong unions, and the Yellow Envelope Act is a significant concern that it might deter foreign companies from coming.

Despite these anticipated situations, it is curious how the ruling party, which pushed through and eventually passed the Yellow Envelope Act, will respond and explain. Needless to say, foreign investment in Korea is a factor that contributes to the development of the Korean economy. Ultimately, while it may still be a hasty prediction, if the Yellow Envelope Act hinders foreign investment and adversely affects our economy, there is no worse law. A reduction in investment leads to a reduction in jobs, and the damage falls on the workers. The government and labor circles should be concerned early on about the boomerang effect that the Yellow Envelope Act may bring.