Concerns arise over arbitrary criteria and increased negotiation complexity
The core of the enforcement decree revision for the “Yellow Envelope Law” (amendments to Articles 2 and 3 of the Trade Union Act) announced by the Ministry of Employment and Labor on Nov. 24 is that if companies (original contractors) and subcontractor unions fail to reach an agreement on joint negotiations, the National Labor Relations Commission will have the authority to designate which subcontractor unions can negotiate with management.
The Yellow Envelope Law, which will be implemented in March next year, is centered on enabling direct negotiations between original contractors and subcontractor unions. The government’s plan is to allow subcontractor unions with “common denominators” to be grouped together for joint negotiations, given that the number of entities companies must negotiate with has increased exponentially.
The problem is that the criteria for the labor relations commission to unify subcontractor union negotiation channels are excessively arbitrary. Large corporations with thousands of partner companies as subcontractors express that it is unclear what criteria will be used to group unions. If negotiation units increase, negotiations are likely to be delayed and conflicts with unions may intensify.
For instance, Hyundai Motor Company, the nation’s largest finished car manufacturer, has approximately 8,500 internal and external partner companies, while HD Hyundai, a leading shipbuilding company, has 3,900. The construction industry also has a complex original contractor-subcontractor structure. The basic “three-tier structure” involves general contractors winning entire projects and subcontracting to specialized construction companies by sector such as civil engineering, architecture, and electrical work, with dozens to hundreds of partner companies typically participating per site.
The shipbuilding and steel industries were also hit hard. According to statistical analysis by the Ministry of Employment and Labor, subcontractor workers (non-company employees) in manufacturing this year totaled 317,000. The shipbuilding industry had the highest proportion of in-house subcontracting at 63%, followed by construction (44.3%), steel (35.6%), electronic components and computers (16%), and automobiles (10.2%). Starting in March next year, unions at these companies are highly likely to demand direct negotiations citing the substantial control of original contractors and go on strike if negotiations are refused. This is because the enforcement decree includes provisions requiring original contractors to proceed with negotiation procedures when the labor relations commission recognizes their substantial control over specific working conditions.
A corporate official said, “Even when negotiating with original contractor unions that have representative bargaining rights, cases often extend beyond the year,” adding, “No matter how much negotiation units are unified, if negotiation units increase to dozens or hundreds, negotiating all year would not be enough.”
An official from the Korea Construction Industry Research Institute expressed concern, saying, “With poor construction market conditions, increasing safety-related costs, and the worst-case scenario for labor-related negotiations, we will face a ‘triple burden.’”
There are also significant side effects from original contractors negotiating with hundreds or thousands of subcontractor companies. They enter negotiations without knowledge of subcontractor companies’ management performance or background, likely increasing financial burdens and litigation risks.
There is also a strong possibility of management confusion arising from “labor-labor conflicts” within original contractor unions. Currently, workplaces with multiple unions designate one representative for negotiations with management. Business circles believe disputes may arise when original contractor unions without negotiating rights demand negotiating rights like subcontractor unions.
An official from the Korea Employers Federation pointed out, “While the government has announced it will pursue unification of negotiation channels based on original contractor workplaces for negotiations between original contractors and subcontractor unions, it has not separately made enforcement decree revisions to clarify this,” adding, “Legal disputes will continue in the future.”