Encouraging Illegal Strikes and Restricting Business Activity, the Yellow Envelope Act (Revised Labor Commission Act) Can Hardly

The National Assembly has finally passed the Yellow Envelope Act (Revised Labor Commission Act). Triggered by the massive damages claims filed against union members during the 2014 SsangYong Motor strike, the bill had already passed the National Assembly twice, in 2023 and 2024, only to be blocked each time by a presidential veto. Nevertheless, the ruling bloc and its allied parties ultimately reintroduced it, and on the third attempt, succeeded in turning it into law.

This revision significantly expands the concepts of “employer” and the scope of labor disputes, while also allowing damages liability for striking workers to be reduced or exempted. In particular, the provision allowing courts to reduce the amount of compensation by taking into account a worker’s financial condition and ability to pay could fundamentally undermine legal stability for businesses. This raises concerns that it may instead encourage illegal strikes or more extreme labor disputes.

Over the past 10 years, the number of labor disputes has doubled. The number of working days lost may appear to have declined, but it still exceeds 300,000 days annually. Even by conservative estimates, the socioeconomic cost over the past decade ranges from at least KRW 373.5 billion (based on the minimum wage) to as much as KRW 665.4 billion (based on average monthly wages).

The international comparison is even more troubling. The average annual number of working days lost per 1,000 wage workers is 35.2 in Korea—176 times Japan’s 0.2 days and 3.7 times the United States’ 9.5 days. This shows that instability in Korea’s labor-management relations is at a very high level by global standards.

The general assessment is that the Yellow Envelope Act (Revised Labor Commission Act), though presented as well-intentioned, in reality contains many toxic provisions and therefore gives rise to serious concern. First, there is the issue of constitutional incompatibility. The excessive expansion of the concept of employer and the widening of the scope of industrial action risk undermining the principles of legality in criminal law and the protection of management rights. Second, it will discourage business management. Reducing damages liability infringes on corporate property rights and significantly destabilizes management.

Third, it will expand and prolong social conflict. As sanctions against illegal strikes are effectively neutralized, a “strike solves everything” mentality may spread. Fourth, to make matters worse, it will weaken international competitiveness. At a time of intensifying protectionism through tariff negotiations and growing instability in global supply chains, stronger domestic regulation could further erode the investment and production competitiveness of Korean firms.

Now that the law has been passed, an urgent response is needed to minimize the fallout. In subordinate legislation such as presidential decrees (enforcement decrees), the scope of the expanded concept of employer must be strictly limited, and the requirements for recognizing a controlling or decision-making position must be clearly specified.

Every year, a cost-benefit analysis should be conducted on the Yellow Envelope Act (Revised Labor Commission Act), a highly restrictive regulatory law, to assess its socioeconomic impact and develop policies to offset its side effects. The boundary between lawful industrial action and illegal conduct must be made clear, and norms that both labor and management can observe under the rule of law must be established.

The Yellow Envelope Act (Revised Labor Commission Act) is promoted as protecting workers’ rights and interests, but in reality it is difficult to avoid the criticism that it is anti-business legislation that encourages illegal strikes and constrains corporate activity. At a time when uncertainty in the global trading environment overlaps with difficulties in the domestic economy, what the political sphere should be doing is not legislating for particular interest groups, but restoring social trust based on labor-management balance and the rule of law.

Gwang yong Go

Policy Director, Center for Free Enterprise (CFE)

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Original title: 불법 파업 조장·기업 활동 제약, '노란봉투법' 반기업적 비판 피하기 어려워

Author: Gwang yong Go

Date: 2025-08-26

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=28007