Key implications of the 'Yellow Envelope Act' on labour-management relations

At a glance

• The amendment to Articles 2 and 3 of the Trade Union and Labour Relations Adjustment Act (TULRAA), known as the Yellow Envelope Act, was reintroduced in July 2025 after being previously vetoed.
• The Yellow Envelope Act is a legislative proposal that aims to:
  • expand the scope of 'employee' and 'worker eligible for union membership' under the TULRAA;
  • expand the scope of 'employer' under the TULRAA;
  • widen the concept of 'industrial disputes,'; and
  • limit or exempt unions from liability for damages resulting from industrial action.
• Given these significant proposed changes, we advise businesses to closely monitor the legislative progress of the Yellow Envelope Act to plan for appropriate response strategies.

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This article has been reproduced with the permission of the authors Weon Jung Kim, Ki Young Kim, Paul Cho, Daeyup Kim and Hoin Lee at Kim & Chang.

The ruling Democratic Party recently announced that it will reintroduce bills in the July session of the National Assembly that had been vetoed by the former president. The amendment to Articles 2 and 3 of the TULRAA, commonly known as the Yellow Envelope Act, is one of the bills to be discussed in the July session.

The Yellow Envelope Act is a legislative proposal that aims to: (1) expand the scope of 'employee' and 'worker eligible for union membership' under the TULRAA, (2) expand the scope of 'employer' under the TULRAA, (3) widen the concept of 'industrial disputes,' and (4) limit or exempt unions from liability for damages resulting from industrial action. Although several versions of the bill have been introduced, it has not yet been enacted into law. Since this legislation could significantly reshape labour-management relations in Korea, it is important to closely monitor the legislative process and prepare for potential changes 

The Yellow Envelope Act: Introduction and key issues

While it is difficult at this time to predict precisely which contents will ultimately be included in the Yellow Envelope Act, we can anticipate its likely direction by reviewing the bills currently proposed before the 22nd National Assembly. The main features of each bill are summarised in the table below:

Issues	The expansion of the scope of 'employee' eligible for union membership	The expansion of the scope of 'employer' required to engage in collective bargaining with trade unions
Current provisions	A person who lives on wages, salary, or any other income equivalent thereto.	A business owner, a person responsible for the management of a business, or a person who acts on behalf of a business owner with regard to matters concerning workers in the business.
Proposed bills (National Assembly members)	Kim Tae-sun: A person who personally provides labour for another person’s business. Lee Yong-woo: A person who organises or joins a trade union.	Kim Tae-sun: Anyone who exercises substantial control over a worker’s duties, or who has significant influence over the worker’s working conditions and employment matters such as wages, benefits, or termination. Park Hong-bae: Anyone who can substantially and specifically control or determine a worker’s working conditions. Lee Yong-woo: Anyone who actually exercises or holds de facto influence or control over a worker’s working conditions, assigned tasks, or union activities; or a principal who assigns work to another business but has the work performed at the principal’s workplace.

Expansion of the scope of 'employee' under the TULRAA

The Supreme Court has ruled that whether a person qualifies as an employee under the TULRAA should be determined based on the need to guarantee the three fundamental labour rights, rather than being limited by the definition of 'employee' in the Labour Standards Act. As a result, many courts have allowed special-type workers and platform workers to form unions, engage in collective bargaining, and participate in industrial action, recognising them as employees under the TULRAA.

In this context, if the proposed bills are enacted to presume employees either as 'a person who personally provides labour for another’s business' or 'a person who organises or joins a trade union', it will become even clearer that labour providers, such as special-type workers and platform workers, will be recognised as employees under the TULRAA, regardless of how the Supreme Court rules in pending cases.

Expansion of the scope of 'employer' under the TULRAA

Recently, the Seoul High Court ruled that subcontractor workers may negotiate directly with the contracting entity, specifying that the contracting entity qualifies as an employer under the TULRAA if it exercises 'substantial control' over specific collective bargaining issues. The court held that, in such cases, the contracting entity is obligated to respond to collective bargaining requests from the subcontractor’s union. However, the Busan High Court reached a different conclusion in a similar case. As both cases are now pending before the Supreme Court, whether a contracting entity can be considered an employer under the TULRAA in relation to subcontractor workers will ultimately depend on the Supreme Court’s forthcoming decisions.

Against this backdrop, if the definition of an 'employer' under the TULRAA is expanded to include 'a person who can substantially and specifically control and determine working conditions,' a subcontractor’s union could request that a contracting entity participate in collective bargaining, regardless of how the Supreme Court rules on the current cases. This expansion could also give rise to new legal questions - for example, whether a contracting entity may replace striking subcontractor workers with its own employees or those of other subcontractors, or whether the contracting entity could hold the subcontractor liable for non-performance if a strike by subcontractor workers causes damage to the contracting entity.

Expansion of the concept of 'industrial dispute' under the TULRAA

Issues	The expansion of the concept of 'industrial dispute'
Current provisions	A dispute arising from disagreement over the determination of working conditions.
Proposed bills (National Assembly members)	Kim Tae-sun / Park Hong-bae / Chairperson of the Environment and Labour Committee: A dispute arising from disagreement over working conditions Lee Yong-woo: A dispute arising from disagreement over dismissal and other treatment, working conditions and workers’ status, matters concerning relationships between labour relations parties, and other matters concerning the improvement of workers’ economic and social status.

For labour unions to engage in strikes and other industrial actions, there must be an industrial dispute where negotiations between labour and management have reached an impasse with no possibility of resolution. The TULRAA currently defines 'industrial disputes' narrowly as disputes arising from disagreement over the 'determination' of working conditions. This means unions can only strike when negotiating new working conditions that will apply to all union members.

However, the Yellow Envelope Act removes the word 'determination' from the definition, significantly broadening what constitutes an industrial dispute. This change would allow unions to strike over disputes regarding how already-determined working conditions are applied, implemented, or interpreted. Effectively, unions could use industrial actions to resolve issues that are currently handled through courts or the Labour Relations Commission, such as unpaid wage claims, wrongful dismissal cases, enforcement of existing collective agreements, and opposition to layoffs.

The change also affects what are known as 'peace obligations'. Currently, when unions sign collective agreements, they promise not to strike over those issues during the agreement’s term. The Yellow Envelope Act would effectively end this practice, as unions would be able to strike if they disagree with how the employer interprets or applies the agreement terms. For businesses, this could mean significantly more strikes and work stoppages. Employers will therefore need to prepare action plans for industrial actions and ensure their rules of employment and collective agreements are crystal clear to avoid giving unions reasons to engage in disputes regarding their interpretation.

Limitation on damages claims against unions

Issues	The limitation on damages claims against unions
Current provisions	Employers cannot seek compensation from unions or workers for damages caused by lawful collective bargaining or industrial action under the TULRAA.
Proposed bills (National Assembly members)	Park Hong-bae / Chairperson of the Environment and Labour Committee: Employers cannot seek compensation from unions or workers for damages caused by collective bargaining, industrial action, or other union activities under the TULRAA. Kim Tae-sun / Lee Yong-woo: Employers cannot seek compensation from unions or workers for damages caused by collective bargaining, industrial action, or other union activities under the Constitution. Lee Yong-woo / Park Hong-bae / Kim Tae-sun / Chairperson of the Environment and Labour Committee: When courts recognise liability for damages, they must individually determine each person’s responsibility based on their specific fault and contribution.

The TULRAA already protects unions from damages claims when they engage in lawful collective bargaining or strikes. The Yellow Envelope Act proposes to expand this immunity in two significant ways.

First, it expands this protection by adding 'other union activities' to the list of protected actions, beyond lawful collective bargaining and industrial action.

Second, the Yellow Envelope Act makes it harder for employers to recover damages even when unions engage in illegal industrial actions. Under the proposed bills, employers would be subject to a higher bar of proving the specific fault and individual contribution of each person involved in the illegal activity. If employers cannot meet this demanding burden of proof for each person involved, they cannot recover any damages. As a result, employers will need to invest significantly more resources in preventing and responding to illegal industrial actions, including more comprehensive legal preparation and documentation of any unlawful union activities.

Given these significant proposed changes, we advise businesses to closely monitor the legislative progress of the Yellow Envelope Act to plan for appropriate response strategies.