[Invest&Law] Law Firms Mobilize All-Out Defense Against "Substantial Control" Ahead of Yellow Envelope Act Enforcement

Subcontractor Unions Can Directly Bargain with Principal Contractors
Dedicated Teams Reorganized, Led by Former Judges and Officials

With just one week left until the enforcement of the amendments to Articles 2 and 3 of the Trade Union and Labor Relations Adjustment Act, commonly known as the “Yellow Envelope Act,” corporate demand for legal risk management is surging. This is due to the introduction of the concept of “substantial control,” which allows subcontractor unions to demand direct bargaining with the principal contractor. In response, major law firms have reorganized their dedicated teams and placed top experts-including former vice ministers of the Ministry of Employment and Labor, as well as former judges and prosecutors-at the forefront to provide comprehensive services ranging from pre-assessment of substantial control, to collective bargaining, and response to industrial actions.

According to the legal community on March 4, Kim & Chang has formed a “Labor Policy Task Force (TF)” within its HR and labor group to provide in-depth advisory services on the new government labor policies and corporate response strategies. Led by Kim Wonjeong, head of the HR and labor group (13th class of the Judicial Research and Training Institute), the advisory team includes lawyers Kim Kiyoung, Park Jeongtaek, and Kwon Sunha. Notably, the team has been further strengthened with the recent addition of lawyer Joo Seona (33rd class), a former presiding judge, and lawyer Kang Geomyun (37th class), formerly of the Ministry of Employment and Labor. Drawing on its vast pool of experts, Kim & Chang’s strength lies in offering customized solutions that reflect industry-specific characteristics for domestic and international clients across various sectors.

Lee & Ko has recently established and expanded its existing organization into a 50-member “Labor Compliance Team,” creating a proactive response system. Led by lawyer Jin Changsoo (21st class), the team has also recruited Ahn Kyungdeok, former 8th Minister of Employment and Labor, as an advisor. The team is staffed with lawyers with both prosecution and judicial backgrounds. Lee & Ko provides one-stop comprehensive legal services for complex practical issues such as the differences between the Act on the Protection of Temporary Agency Workers and the Yellow Envelope Act, and whether the prohibition of replacement workers applies during industrial actions by subcontractor unions.

Shin & Kim operates a “Yellow Envelope Act TF” with about 30 experts. The team is led by lawyer Jo Chanyoung (29th class), a former labor division judge at the Seoul High Court, and advisor Kim Minseok, former Vice Minister of Employment and Labor. Since immediately after the presidential election, the team has proactively analyzed campaign pledges and conducted research on precedents and Japanese cases. Shin & Kim excels in consulting on contract structures, wage calculation methods, and bargaining strategies to mitigate risks arising from the expanded definition of principal employer liability.

Bae, Kim & Lee is operating a “Yellow Envelope Act TF” that provides consulting to around 100 client companies. The TF, comprising about 40 members, is led by Kim Sangmin (37th class), head of the HR and labor group, and lawyer Lee Ukrae (22nd class), a former judge at the Seoul Central District Court. The team has recently been bolstered by the addition of advisor Park Hwajin, former Vice Minister of Employment and Labor, and lawyer Park Eunjung (39th class), a former research judge at the Supreme Court. Notably, Bae, Kim & Lee has directly represented cases such as those involving CJ Logistics and Hyundai Steel, which the Ministry of Employment and Labor uses as standards for determining substantial control. Unlike most other large law firms, Bae, Kim & Lee’s significant differentiator is its hands-on expertise, including direct participation as bargaining representatives and direct intervention in labor-management issues on-site.

Yulchon proactively launched its “Yellow Envelope Act Response Center” with about 40 members in August last year. The center is jointly led by advisor Jeong Jiweon, a former policy officer at the Ministry of Employment and Labor; lawyer Lee Myeongcheol (30th class), a former chief labor relations researcher at the Supreme Court; and lawyer Lee Gwangseon (35th class), who brings a wealth of pre-consulting experience. They cover all areas, from government and judiciary to practical advisory services. Even before the legislation of the Yellow Envelope Act, Yulchon had secured specialized expertise in substantial control cases through extensive experience with labor commissions and litigation. The firm has established a four-step integrated response process, from pre-assessment of principal employer liability, preparation for bargaining, and response to the spread of industrial action, with a core strategy focused on proactive evidence collection and organizational restructuring before enforcement.

Koo Yoonchul, Deputy Prime Minister and Minister of Economy and Finance, is speaking at the Meeting of Relevant Ministers on the Enforcement of the Revised Labor Union Act held at the Government Complex Seoul in Jongno-gu, Seoul on March 4, 2026. Photo by Jo Yongjun

HwaWoo has established a unified response system by launching a “New Government Labor Policy TF” with a team of 80 members. The task force is led by lawyer Park Chankun (33rd class), head of the labor group; lawyer Park Samgeun (33rd class), TF leader; and lawyer Park Sanghoon (16th class), former editor-in-chief of the Supreme Court Labor Law Practice Research Society, all of whom are former judges. Advisor Lim Seojeong, former Vice Minister of Employment and Labor, and Bae Sangyun, senior specialist and former deputy head of the Korean Confederation of Trade Unions, have joined the team to provide balanced insights from both government and labor perspectives. Policy proposals developed by the “HwaWoo Yellow Envelope Act Research Society” have been partially reflected in the amended enforcement decree and interpretive guidelines. In addition to principal and subcontractor relationships, the team is also preparing for risks arising from contract-based principal employer liability between holding and affiliate companies.

Jipyong has been operating a “Yellow Envelope Act TF” with about 50 members. The organization is led by co-TF leaders Kim Yongmun (35th class), head of the labor group, and lawyer Kwon Younghwan (3rd bar exam). Drawing on its consulting experience in manufacturing, logistics, and finance, Jipyong offers comprehensive legal services in HR, labor, and safety. In particular, the firm’s strength lies in its system for thoroughly diagnosing risks on the ambiguous boundary where the implementation of occupational safety and health measures under the Occupational Safety and Health Act could potentially be regarded as unlawful substantial control under the Yellow Envelope Act.

In the industrial field, there is growing concern about management contraction, as the ambiguous standard of “substantial control” now means that business decisions such as mergers and acquisitions (M&A) or spin-offs could become subjects of labor disputes. Large corporations that work with hundreds of subcontractors are exposed to the risk of receiving simultaneous bargaining demands from multiple subcontractor unions due to the separation of bargaining units.

Law firms commonly recommend a thorough review of the principal and subcontractor work structure, including all contracts for outsourcing and service arrangements, before the law takes effect. One law firm partner commented, “It is urgent to establish objective evidence in advance to prove the absence of substantial control, and to fully prepare an in-house dedicated team and manual to consistently respond to multiple bargaining demands from subcontractor unions.”

This content was produced with the assistance of AI translation services.