55% of Foreign-Invested Companies Say "Labor Union Law Amendment Negatively Affects Management"

Hankyung Association Foreign Investment Company Perception Survey
"Strike Up 20%, Investment Down 15%"

Among foreign-invested companies operating in Korea, the majority expect that the recently passed "Yellow Envelope Act" (Amendment to the Labor Union and Labor Relations Adjustment Act) will have a negative impact on corporate management once implemented.

The Korea Economic Association of Foreign-Invested Companies (KEAFIC) announced on the 12th that, based on a survey conducted by Monoresearch from the 25th of last month to the 6th of this month targeting foreign-invested manufacturing companies with over 100 employees, 55% of the 100 respondent companies believed the amendment would have a 'negative impact' on management.

Of these, 49% anticipated a 'slightly negative' impact, while 6% expected a 'very negative' impact. Thirty-five percent predicted 'no impact,' and only 10% of companies responded that the effect would be 'positive.'

The amendment expanded the concept of the employer from the party to the labor contract to those who can 'substantially and concretely control and decide' labor conditions. The response that the expanded employer concept would negatively affect management (59%) overwhelmingly outnumbered those who thought it would be positive (17%).

The six economic organizations including the Korea Employers Federation (KEF), the Korea Chamber of Commerce and Industry, the Korea Economic Association, the Korea International Trade Association, the Korea Federation of SMEs, and the Korea Federation of Mid-sized Enterprises, along with industry-specific groups, held a rally opposing the Yellow Envelope Act on the steps in front of the National Assembly main building on the 1st, together with Kim Hyung-dong, a member of the People Power Party.
[Photo by Yonhap News]

Reasons cited for the negative outlook included 'increased burden of subcontracting contracts leading to decreased labor market efficiency' (27.3%), 'increased strikes by subcontractor unions against primary contractors' (25.3%), and 'conflicts between primary and subcontractor unions' (22.1%).

The amendment also allowed non-workers under the Labor Union Act, such as workers in special employment types and self-employed individuals, to join labor unions. Regarding this, 62% of respondent companies evaluated that it would negatively affect labor-management relations.

Regarding the amendment's expansion of the scope of labor disputes from conflicts over 'decisions on labor conditions' to disputes concerning 'labor conditions' in general, 68% of respondent companies viewed this negatively, while 11% viewed it positively.

Foreign-invested companies forecast that, once the amendment is implemented, domestic strikes will increase by an average of 20%, and foreign investment will decrease by 15.4%.

A KEAFIC official stated, "Following the implementation of the amendment, the expansion of strikes will increase labor market rigidity and intensify labor-management conflicts, making it highly likely that foreign-invested companies will conservatively revise their investment plans."

Respondent companies identified the biggest legislative issues with the amendment as 'insufficient discussion between ruling and opposition parties' (26.0%) and 'legislation biased toward the labor union side' (24.0%).

Lee Sang-ho, Head of KEAFIC's Economic and Industrial Division, said, "The amendment raises serious concerns that it will promote a militant approach that seeks to resolve issues through strikes rather than dialogue and cooperation between labor and management. It risks undermining corporate global competitiveness and significantly shrinking foreign investment, so a comprehensive review is necessary."