Layoffs become strike issue under Yellow Envelope Act

If revisions to Articles 2 and 3 of the Trade Union and Labor Relations Adjustment Act, known as the Yellow Envelope Act, take effect in March next year, labor unions will be legally allowed to strike when companies carry out layoffs. Until now, layoffs have not been considered a legitimate subject of strikes. Under the revised law, however, the Ministry of Employment and Labor will change its administrative interpretation, making such strikes possible. Labor management conflict appears unavoidable. The revisions also stipulate that if a prime contractor effectively controls subcontracted workers’ working hours or shift schedules, it will be recognized as an employer, allowing subcontractor unions to demand collective bargaining.

The Ministry of Employment and Labor said on Dec. 26 that it will accept public comments through Jan. 15 on draft interpretation guidelines for Article 2 of the revised Trade Union Act. According to the guidelines related to Article 2, Clause 5, which defines labor disputes, management decisions such as mergers, splits, sales or transfers are not subject to collective bargaining. As a result, unions cannot legally strike solely on the grounds of a corporate sale or the relocation of a company’s headquarters overseas.

However, the ministry said strikes would be permitted if management decisions such as mergers or sales are expected to result in layoffs or job reassignments. Until now, Supreme Court precedents and the ministry’s administrative interpretations have not recognized layoffs as a legitimate subject of strikes. With the Yellow Envelope Act expanding the scope of strikeable issues to include layoffs, confusion at industrial worksites appears unavoidable.

Regarding the scope of “employer” under Article 2, Clause 2 of the Trade Union Act, which has long drawn criticism for its ambiguity, the ministry issued guidance stating that authorities should assess whether “structural control” exists. For example, employer status would be recognized if a prime contractor gives prior approval for the number and scale of workers assigned to tasks, as well as their working hours or shift configurations. Employer status refers to the entity that substantively determines workers’ working conditions. Operating commuter buses or rest facilities for subcontracted workers would also increase the likelihood that employer status would be acknowledged. Critics, however, say the legal provision requiring “substantive and specific control” to qualify as an employer remains vague, and that the new guidelines are similarly unclear, falling short of easing concerns in the field.

Both labor and business groups objected to the ministry’s guidelines. Labor groups said the guidance once again narrows employer responsibility through the concept of structural control, according to the Korean Confederation of Trade Unions. The Federation of Korean Trade Unions said the guidelines add conditions that make even straightforward issues unnecessarily complex. Business groups also said the relevant provisions should be clarified to prevent confusion at industrial worksites during the early stages of the law’s implementation.


Hye-Ryung Choi herstory@donga.com