Side effects of labor law raise concerns

A month after South Korea’s revised Trade Union Act, known as the “yellow envelope law,” took effect, signs of strain are emerging across labor relations.

Requests from subcontractor unions for direct negotiations with primary contractors continue to rise, while multiple unions are increasingly seeking separate talks with the same company. Large firms that rely on extensive subcontracting say they are struggling to define who falls within the scope of bargaining and what issues should be negotiated.

Since March 10, when the law came into force, 987 subcontractor unions have requested negotiations with 368 primary contractors. Only 31 companies have formally acknowledged those requests by issuing notices to begin talks. The gap underscores a deep divide between unions, which view primary contractors as the “real employer,” and companies that reject that designation.

Labor relations commissions, which make initial determinations on employer status, have largely concluded that primary contractors qualify as the effective employer and must enter negotiations.

Complications have intensified following an exception to the principle of unified bargaining channels. The government added the potential for inter-union conflict as grounds for allowing separate bargaining units under the law’s enforcement rules.

On April 8, a regional labor commission in North Gyeongsang Province approved a request by subcontractor unions affiliated with the Korean Confederation of Trade Unions to split bargaining units. The ruling recognized POSCO as the effective employer while allowing those unions to negotiate separately from an existing subcontractor union affiliated with the Federation of Korean Trade Unions.

POSCO is now expected to negotiate with at least four unions, including its in-house union.

Analysts say the balance in South Korea’s labor relations has shifted noticeably toward unions just one month after the law took effect. Companies that depend on large subcontracting networks face mounting time and cost pressures as they manage increasingly complex negotiations.

The impact is spreading to the public sector as well. A growing number of rulings recognize public enterprises and government agencies as the effective employer of subcontracted workers, extending labor disputes into state-run institutions.

Despite earlier warnings, the government and the ruling Democratic Party of Korea pushed ahead with the legislation last year, arguing it would promote dialogue and reduce conflict. Developments so far are raising doubts about that expectation.

Before broader disruption takes hold, the government needs to move quickly to clarify the scope and conditions under which subcontractor unions can negotiate with primary contractors, along with the range of issues subject to bargaining.