Legal Experts on the Yellow Envelope Act: "Unconstitutional Provisions" and "Insufficient Regulations" [Legal Issue Check]

Infringement of Property and Equality Rights...
Violation of the Principle of Clarity
Poorly Constructed Framework...
Not a Reflection of Supreme Court Precedents
A Comprehensive Review from the Ground Up Is Needed

The Democratic Party of Korea has announced that it will bring the Yellow Envelope Act (the amendment to Articles 2 and 3 of the Trade Union and Labor Relations Adjustment Act) to the National Assembly plenary session this week, raising growing concerns not only in the business community but also among legal professionals.

Labor law and constitutional experts generally diagnose that, beyond practical issues such as increased management burdens for companies, prolonged strikes, and reduced employment, which the business community worries about, the bill contains numerous legal problems from a legal perspective.

Constitutional Issues Embedded Throughout the Bill

Cha Jinah, a professor at Korea University Law School and a constitutional law expert, stated on the 21st, "The most problematic provision is the expansion of the definition of 'employer.' If someone is defined as an employer simply by being in a position to substantially and specifically control or determine working conditions, even without an employment contract, the scope could expand infinitely."

She explained, "The concept of 'employer' is important because employers are obligated to engage in collective bargaining, and violating this obligation can result in criminal punishment for unfair labor practices. If it becomes impossible to clearly define the scope of 'employer,' which is part of the elements constituting a crime, it violates the principle of clarity in criminal law."

Professor Cha added, "Restricting employers' claims for damages caused by illegal strikes infringes upon employers' property rights and the right to equality, making it highly likely to be unconstitutional. A similar law was previously ruled unconstitutional by the French Constitutional Court."

She further emphasized, "The amendment even restricts claims for damages against individual union members in cases where the union leads illegal strikes involving violence or destruction, which undermines the rule of law and excessively infringes on basic rights such as employers' property rights, making it unconstitutional."

Professor Cha also stated, "Excluding joint and several liability for joint torts and individualizing responsibility for illegal acts that are not exempt from liability, such as illegal strikes or acts of violence and destruction committed outside the union's direction, essentially renders employers' claims for damages meaningless and deviates from the essence of the three labor rights guaranteed by the Constitution."

She added, "It is practically impossible for employers to prove the extent to which each participant contributed to damages in cases of joint illegal acts, such as violence or destruction committed by numerous workers."

Cho Chanyoung, a partner attorney at Shin & Kim and a former judge of the Seoul High Court's labor division, said, "Article 3 of the current Trade Union Act already restricts employers' claims for damages, but the new amendment adds several more provisions that further restrict such claims. This would excessively limit employers' ability to claim damages even for illegal strikes by unions and union members, raising significant constitutional concerns."

Attorney Cho added, "Some provisions could even be interpreted as allowing self-help remedies not recognized under current law, which is likely to spark considerable controversy and could potentially encourage illegal strikes."

Lack of Procedural Provisions and Systemic Inconsistencies

Experts pointed out that the amendment only changes the definition of 'employer' without amending other affected provisions, which is problematic.

Attorney Cho Chanyoung said, "Despite being legislation that could have a significant impact on overall labor-management relations, the amendment lacks sufficient provisions regarding procedures and methods."

He continued, "Since only the general definition provisions have been amended, there are systemic flaws in that the lower-level provisions on collective bargaining, collective agreements, and industrial actions do not align with the new definition. There are also many inconsistencies and conflicts not only within the Trade Union Act itself but also with other laws such as the Civil Act."

Park Eunjeong, an attorney at Bae, Kim & Lee LLC and a former research officer for labor cases at the Supreme Court, said, "The main content of the Yellow Envelope Act fundamentally changes the basis of labor-management relations established by the existing legal system and Supreme Court precedents. Yet, no specific implementation plan has been presented."

Attorney Park added, "For example, if the scope of the principal employer is expanded, issues such as the process for unifying bargaining channels, determining bargaining units, wage payments during industrial actions, allowing replacement work, and employer lockouts have not been reviewed. Although the Ministry of Employment and Labor plans to provide related guidelines and manuals, after the law takes effect, labor-management conflicts and disputes will likely increase significantly, and legal confusion will be inevitable until sufficient judicial precedents accumulate."

Im Dongchae, a partner attorney at the labor law firm INS, said, "The current Trade Union Act is based on the principle of 'unified bargaining channels,' but the amendment does not provide any procedural rules for unifying bargaining channels between multiple subcontractors and the principal company."

He continued, "For a principal company with dozens of subcontractors, there are procedural issues regarding how to unify the bargaining channels between the subcontractors' unions and the principal company's union. If unification does not occur, the principal company will be obliged to respond to collective bargaining demands from many subcontractors, which will likely lead to frequent strikes and significantly increase the manpower, time, and effort required for labor-management relations, thereby increasing the burden on employers."

A Misguided Framework... Not a Clarification of Supreme Court Precedent

Professor Cha stated, "While preparing a paper on the unconstitutionality of the Yellow Envelope Act last year, I had the opportunity to thoroughly review the Ssangyong Motor decision. The notion that 'it is too harsh to impose 4.7 billion won in damages on powerless workers who had no choice but to participate in an illegal strike under union orders' was the starting point for the Yellow Envelope Act, but this is a misguided framework."

She continued, "The defendants who were ordered to pay damages at the time were those who actively participated in occupying the factory through violence and actively blocked other workers from entering. Even under existing Supreme Court precedents, workers who merely participated in illegal strikes under union orders are not held jointly liable for illegal acts."

Professor Cha further stated, "The claim that the amendment specifically legislates Supreme Court precedents regarding the expansion of the employer concept or the individualization of liability for damages is unconvincing. In the former case, the court recognized the principal employer only in special cases where the subcontractor had no independence from the principal, so generalization is controversial. In the latter case, the decision was made by a small panel, not the full bench, and the apportionment of liability was not complete, and the Supreme Court even issued a press release clarifying that its position had not changed."

Ultimately, the Public Will Suffer... Concerns Over Labor-Labor Conflict

There are also predictions that the amendment, which was proposed under the pretext of enhancing workers' rights and interests, will ultimately have a negative impact on both companies and workers.

Attorney Park said, "If corporate decision-making and stable operations are hindered, business activities will inevitably contract, and workers will inevitably face job insecurity and deteriorating working conditions."

Jo Inseon, head of the Labor and Serious Accident Center at YK Law Firm, stated, "Given that South Korea's economic growth rate is currently very low and there are numerous factors hindering economic development, such as tariff issues, I am concerned that the country's overall growth engine may be constrained. In particular, the amended Commercial Act requires decisions that protect shareholders' interests, so if legal conflicts or practical operational problems arise, companies will face increased uncertainty and a deteriorating business environment, and people who depend on wage income from companies may suffer as the overall economic situation worsens."

He added, "Ultimately, this amendment is unlikely to benefit either companies or workers who earn wage income from companies."

A labor law specialist at another major law firm, referred to as Attorney A, predicted, "From a corporate perspective, due to increased bargaining costs or legal burdens, companies are likely to reduce employment or at least not increase it, which will generally shrink the job market."

Attorney A also warned, "If the scope of labor disputes is expanded, even areas previously resolved through litigation, such as so-called 'rights disputes,' will become subject to industrial action, turning many issues into power struggles rather than legal resolutions. This is likely to exacerbate, rather than resolve, social conflict."

There are also predictions of labor-labor conflict between principal and subcontractor unions.

Attorney Park forecast, "If both principal and subcontractor unions simultaneously demand collective bargaining, the likelihood of labor-labor conflict between these unions will increase."

Attorney Jo Inseon said, "The purpose of amending the law is to substantially enhance workers' rights and interests, but recognizing the principal employer's status could prolong negotiations and, crucially, trigger labor-labor conflict between the principal company's workers or union and the subcontractors' workers and unions, ultimately intensifying conflict among workers themselves."

Employers' 'Business Decisions' Should Be Excluded from Industrial Action

Attorney Im stated, "Previously, industrial action was only permitted in cases of disagreement between labor and management over determining working conditions. However, under the amendment, industrial action can also be taken against managerial decisions such as layoffs, business transfers, new investments, and restructuring that affect working conditions, which would excessively restrict managerial rights."

He pointed out, "Even when layoffs are inevitable due to urgent business needs, such as to avoid bankruptcy or to preemptively address future crises, current law allows workers to seek remedies through legal means such as unfair dismissal claims after the fact. However, the amendment would allow industrial action against the layoffs themselves, significantly restricting employers' managerial rights compared to the current situation."

Attorney Park said, "As the purpose of industrial action expands, the scope of bargaining will also expand to include corporate changes such as layoffs, mergers and acquisitions (M&A) that affect workers' status or working conditions, and even matters that are the employer's exclusive prerogative, such as organizational restructuring, performance evaluations, and job reassignments. Even decisions already approved by shareholders' meetings could be halted at the union's demand for bargaining."

She added, "In workplaces that use outsourcing or contract labor, such as subcontracting or service contracts, labor disputes and their prolongation due to subcontractor unions' bargaining demands will make it difficult to maintain stable business operations."

Attorney Cho Chanyoung said, "For major business management decisions, the fact that in practice companies would need union consent means that companies will be restricted in making proactive decisions in response to changing economic conditions."

He added, "The provision regarding 'business decisions affecting working conditions' is potentially unconstitutional and should be deleted, and the term 'clear violation of collective agreements' should also be deleted or replaced with more predictable criteria, as the term 'clear' could be subject to disputes between parties."

"A Comprehensive Review from the Ground Up Is Needed"

Attorney Im said, "South Korea is one of only a few countries in the world where all forms of replacement work, including new hires, are completely banned during industrial action. Most advanced countries allow companies to hire new employees or use contractors to perform work interrupted by union action. Expanding the scope of labor disputes without addressing this serious imbalance in the principle of equal footing could seriously infringe on the constitutionally protected managerial rights of employers."

Attorney A pointed out, "The existing labor law system is premised on the existence of an employment relationship between workers and employers, but the Yellow Envelope Act imposes labor law obligations even between principal and subcontractor workers who do not have such a legal relationship. This completely undermines the existing labor law system and contradicts its essence. A comprehensive review from the ground up is necessary."