Problems with the Re-introduction of the Yellow Envelope Law and Countermeasures

1. Controversy Over Reintroducing the “Yellow Envelope Act”
◩ Concerns About Re-submitting the Yellow Envelope Act, Previously Scrapped in September 2024

The Democratic Party of Korea, together with other opposition parties—including the Rebuilding Korea Party and the Progressive Party—has moved to jointly reintroduce the so-called “Yellow Envelope Act” (amendments to the Trade Union and Labor Relations Adjustment Act), which was scrapped twice after being blocked by the President’s request for reconsideration (veto). The term “Yellow Envelope Act” originated from a 2014 SsangYong Motor strike, when union members faced a damages judgment of KRW 4.7 billion and civic groups sent donations in yellow envelopes to support them.

Substantively, the bill consists of: (1) amendments to Article 2 expanding the concept of “employer,” widening the scope of labor disputes, and removing certain restrictions related to union membership; and (2) amendments to Article 3 limiting employers’ ability to claim damages against workers involved in strikes. The bill previously passed under opposition leadership in the National Assembly in December 2023 and again in August 2024 (during the 21st and 22nd Assemblies), but legislation was derailed both times after President Yoon Suk Yeol exercised the veto. With the Democratic Party now leading a renewed push—joined by smaller parties—concerns have been raised that a business-unfriendly agenda is being advanced once again.

◩ The Reintroduced Bill Further Expands Liability Relief Compared to Last Year’s Version

The main version currently being reintroduced by the Democratic Party and minor opposition parties is sponsored by Rep. Kim Tae-seon (Bill No. 2208800). Compared with the version that was ultimately scrapped in September last year, this proposal further strengthens protections for workers—heightening concerns within the business community.

In particular, it would allow workers who caused losses to employers through collective bargaining or industrial action to petition courts directly for a reduction in damages. It also authorizes courts to exempt or reduce all or part of damages after considering the obligor’s financial condition and ability to pay, as well as the overall reasonableness of the claimed amount. This is a core difference from the previously discarded bill.

While such provisions may appear to be designed to protect workers’ rights, they could in practice increase the frequency of unlawful strikes or highly confrontational industrial action. Corporate losses arising from unlawful strikes have long imposed significant burdens on business operations and have been cited as a factor weakening overall economic dynamism. If courts are given broad discretion to adjust damages, employers may worry that legal protection for normal business operations could become less predictable. This issue report examines the problems associated with the renewed Yellow Envelope Act amid domestic and global economic uncertainty and explores corresponding policy responses.

2. Current Status of Labor Disputes and Workdays Lost
◩ Continued Rise in Labor Disputes (Nearly Doubling Over the Past Decade) and Decline in Workdays Lost (Halved Over the Past Decade)

Over the past decade (2014–2023), the annual number of labor disputes averaged 129.1 cases, roughly doubling between 2014 and 2023. From 2014 to 2022, cases generally ranged between 100 and 140, but the figure increased to 223 cases in 2023. This indicates not only a steady rise in the number of disputes but also intensifying social tension and conflict in industrial workplaces.

By contrast, the number of workdays lost has generally declined, despite year-to-year fluctuations. It stood at 651,000 days in 2014 and peaked at 2,035,000 days in 2016 before trending downward. Since 2022, it has remained in the mid-300,000-day range.

◩ Estimated Socioeconomic Costs of Workdays Lost Over the Past Decade (2014–2023): KRW 373.5 Billion to KRW 665.4 Billion

Even so, production disruptions and broader social costs associated with labor disputes remain significant. Estimating labor-loss costs based on workdays lost, the cumulative socioeconomic burden over the past decade is projected at a minimum of KRW 373.5 billion (based on the minimum wage) and a maximum of KRW 665.4 billion (based on average monthly wages). On an annual average basis, this corresponds to KRW 31.13 billion to KRW 55.45 billion. Since the calculations rely on minimum wage and average monthly wage benchmarks, the estimates are considered conservative.

◩ Cross-Country Comparison of Workdays Lost (Per 1,000 Wage Employees): Korea 35.2 Days—176× Japan, 3.7× the U.S., 5.7× Germany

To compare across countries, workdays lost per 1,000 wage employees were calculated. Over the ten-year average (2013–2022), Korea recorded 35.2 days, compared with 9.5 days in the U.S., 22.9 days in the U.K., 0.2 days in Japan, and 6.2 days in Germany—making Korea the highest among these countries. Although Korea’s figure has declined somewhat in recent years, it remains far higher than Japan and the U.S., at roughly 176 times and 3.7 times, respectively, indicating that Korea still shows comparatively high levels of workdays lost internationally.

3. Key Problems and Risks of the Reintroduced Yellow Envelope Act
◩ Constitutional Concern (1): Violations of the Principle of Clarity and the Core Scope of Labor Rights

In this context, the reintroduced bill—centered on expanding the concept of “employer” and easing legal consequences related to unlawful conduct by labor organizations—contains multiple provisions that may raise constitutional concerns, including potential infringements on property rights, freedom of business, and equality rights (Cha Jin-ah, 2024).

First, expanding the employer concept excessively, or allowing non-workers to join unions, may conflict with the constitutional requirement of legal clarity under the principle of legality. A key issue is that third parties newly treated as “employers” may have no direct legal relationship with the workers demanding negotiations (Park Jong-hee, 2024).

Second, expanding the scope of labor disputes to broader “matters related to working conditions” could increase the likelihood of disputes over issues beyond the employer’s decision-making authority or those tied to essential managerial prerogatives, potentially diverging from the constitutional boundaries of the three basic labor rights.

◩ Constitutional Concern (2): Infringement on Employers’ Property Rights and the Hollowing-Out of the Right to Claim Damages

Measures that reduce liability may undermine corporate property rights and legal stability. First, limiting damages liability can function as a de facto shield for unlawful strikes or violent and destructive acts, raising concerns about weakening the rule of law and disproportionately infringing employers’ fundamental rights (Cha Jin-ah, 2024).

Second, excluding joint liability and individualizing responsibility for unlawful acts is not only difficult in practice, but it can also weaken employers’ ability to seek compensation (Cha Jin-ah, 2024). As legal exemptions and reductions become easier, some unions may feel less constrained by legal consequences and may opt for more aggressive actions. This risks blurring the boundary between lawful industrial action and unlawful conduct, thereby amplifying workplace conflict. Ultimately, the system could be interpreted as institutional tolerance that encourages unlawful strikes and prolongs disputes.

◩ Risk of “Strike-First” Norms and Prolonged Social Conflict

If implemented, the bill could foster a perception that strikes carry reduced consequences, potentially spreading “strike-first” norms across society. By expanding the employer concept and limiting damages for industrial action, the amendments may disrupt the balanced responsibility structure embedded in the current framework.

In particular, provisions that obscure the line between legitimate industrial action and unlawful conduct—and that allow avoidance of substantial damages liability even where illegality is recognized—could contribute to a broader normalization of high-intensity disputes. Protecting workers’ rights is important, but if protections expand in ways that undermine public order, the outcome may ultimately harm society at large.

For example, if large-scale illegal occupation or blockades of production facilities are effectively tolerated under the banner of union activity, this may clash with public perceptions of fairness and weaken confidence in lawful enforcement. If disputes recur without meaningful accountability, social conflict may become more entrenched and the trust base of the labor market could be severely damaged.

◩ Deteriorating Investment Climate Through a Cycle of Frequent, High-Intensity Disputes

Frequent and high-intensity disputes can dampen domestic investment sentiment and reduce foreign investors’ confidence. Where legal predictability in labor relations is weak, companies may shift investment toward countries with more stable environments, resulting in significant losses in national competitiveness. In this sense, the bill can be criticized as embedding structural risks that extend beyond social equity and into the broader economy.

Moreover, at a time when global competitiveness is increasingly decisive, advancing such amendments may weaken firms’ international competitiveness and raise uncertainty for overseas investors—further harming the domestic investment climate. Accordingly, voices are growing in both business and academic communities calling for reconsideration and more careful deliberation.

◩ “Tariff Pressure” from the Trump Era and Domestic Legislative Pressure—A Double Burden for Korean Firms

During the Trump administration, high-tariff policies were widely viewed as protectionist measures that imposed real costs on Korean exporters. Tariffs—including a 25% levy on steel and aluminum, pressure framed around “reciprocal tariffs,” and supply-chain instability stemming from the U.S.–China trade conflict—directly affected Korea’s export-oriented industries. Many firms faced reduced price competitiveness in the U.S. market and were pushed toward costly responses such as relocating production bases or relying on indirect export routes. Korea’s exports to the U.S. slowed in subsequent years, and reduced exports inevitably constrained value creation.

Against this backdrop of a worsening external trade environment, Korea is now facing renewed momentum for labor legislation such as the Yellow Envelope Act. The bill expands the definition of employer and limits damages liability arising from strikes. From the corporate perspective, this implies narrower legal tools in labor disputes and potentially higher operational risk due to production disruptions. In Korea—where manufacturing and exports remain central—an uncertain trade environment combined with sharp shifts in domestic labor rules could produce compounded pressure on business stability.

If companies face new constraints at home while their competitive position is already under strain globally, they may lose the capacity to respond effectively and risk erosion of competitiveness. This is not merely a firm-level issue, but a structural risk affecting export industries and employment stability. What is needed now is not a one-sided tightening of legal constraints on business activity, but a cautious legislative approach that considers balance in labor relations and supports firms’ ability to survive and compete amid global protectionism.

4. Policy Response Tasks: Concerns Over “Government–Union Collusion” and Calls to Reject the Bill
◩ The Yellow Envelope Act: Overprotection of Unions and Concerns About “Government–Union Collusion”

If the Yellow Envelope Act is advanced in earnest, debate over its direction and political context could intensify, raising allegations of undue alignment between the government and organized labor. The bill is structured to strengthen union leverage—by limiting damages liability and expanding the concept of employer—while comparatively weakening employers’ defensive rights, which can invite political interpretation and controversy.

Because some observers view major beneficiaries as certain militant unions, suspicions may grow about disproportionate influence by organized labor and over-reflection of labor interests in legislation. Such criticism may spread the perception that the bill prioritizes specific organizations’ interests over the broader labor market or the national economy, potentially fueling controversy over “imbalanced relationships” rather than healthy cooperation. For this reason, a cautious approach is needed to avoid unnecessary political conflict and erosion of trust in government–labor relations.

◩ Response Task: Halt the Push at the Committee Level and Reject the Bill

The reintroduced Yellow Envelope Act should be halted immediately at the standing committee level or rejected. Reopening a bill that has already been vetoed twice is inappropriate. The bill can be criticized as a market-unfriendly measure that legitimizes unlawful strikes and restricts normal business operations.

Korean firms already face multiple pressures: tariff-related uncertainty linked to the Trump era, accelerating global competition in advanced sectors such as AI and semiconductors, and domestic volatility including high interest rates and exchange-rate fluctuations. In this environment, pushing the Yellow Envelope Act is likely to make the economy even more difficult.

Korean version: https://www.cfe.org/bbs/bbsDetail.php?cid=issue&pn=1&idx=27530