[Editorial] Endless Labor-Management Negotiations Throw Industry into Chaos—Government Must Provide a Solution

With the release of the detailed enforcement decree for the Yellow Envelope Act (the revised Trade Union Act), industrial sites have been thrown into turmoil. The Ministry of Employment and Labor (MOEL) will open the enforcement decree, which passed the National Assembly of the Republic of Korea last August, for public comment from the 25th until January 5 next year. While there are traces of consideration for the business community’s demand for unified bargaining channels, the law’s inherent pro-union bias is clear. Companies with hundreds or thousands of subcontractors now face the prospect of endless negotiations throughout the year. Concerns are becoming reality. The law will take effect in March next year. Supplementary measures must be taken swiftly before the industry sinks deeper into chaos.
The core of the enforcement decree is that thousands of subcontractor unions can negotiate separately with a single Main Contractor without a unified channel. Although there is a provision for a unified bargaining channel system—where multiple unions among Main Contractors and subcontractors select a bargaining representative to negotiate with the employer—this is only a voluntary guideline. If unions claim differences in job duties, interests, or characteristics and demand separate negotiations, there is little recourse.
The criteria proposed by the government for grouping numerous subcontractor unions are also extremely ambiguous. While the decree specifies the scope of union organization, commonality of interests, appropriateness of union representation, and the intentions of the parties involved, there is ample room for arbitrary government intervention. If no agreement is reached on unified bargaining, the Central Labor Relations Commission is to intervene. However, there are widespread concerns that the commission’s decisions could be swayed by union pressure.
If things continue as they are, companies will have to bear labor risks year-round. When the Central Labor Relations Commission recognizes the employer status of a Main Contractor, it must respond to bargaining requests from subcontractor unions. Failure to do so is explicitly defined as an unfair labor practice subject to penalties. Hyundai Motor, for example, has about 8,500 partner companies. In the shipbuilding industry, in-house subcontractors account for over 60%. In construction, general contractors typically subcontract civil engineering, architecture, and electrical work after winning a project. Even if only some subcontractor unions request separate bargaining units, the Main Contractor could be forced to negotiate with hundreds of entities. There is no greater chaos than this.
The Yellow Envelope Act could further tilt the already union-favored playing field. Smaller unions with weak bargaining power are likely to join larger umbrella organizations such as the Korean Confederation of Trade Unions (KCTU) or the Federation of Korean Trade Unions (FKTU). Not only subcontractor unions but also Main Contractor unions could fragment into multiple units as a result of bargaining unit separation. This could ignite inter-union conflicts over bargaining leadership, leading to a proliferation of negotiations. Despite this, labor groups are going a step further, opposing the enforcement decree’s provision for unified bargaining channels and demanding that the right of subcontractor unions to negotiate independently be explicitly guaranteed.
Is it reasonable to further tie the hands of companies already struggling with high exchange rates, steep tariffs, and the pressures of a technological arms race? The Yellow Envelope Act not only mandates indiscriminate negotiations but also restricts companies’ ability to claim damages for illegal union activities. Even if a union inflicts significant losses on a company through illegal strikes, the law makes it nearly impossible to seek compensation. The act also expands the scope of labor disputes to include business management decisions that affect working conditions. Corporate mergers and acquisitions or overseas investments could now become grounds for strikes. Existing regulations are already suffocating, and these new shackles are pushing companies to the brink. The government must halt its pro-union course and take follow-up actions that align with the greater goals of growth and national competitiveness.