South Korea's so-called 'Yellow Envelope Act' has been passed, strengthening protections for union activities within an already supportive legal framework. We summarise the key provisions and takeaways for employers.
On 24 August 2025, South Korea's National Assembly passed the so-called 'Yellow Envelope Act' by a vote of 183 to 3, with the conservative opposition party boycotting the vote. The president is expected to quickly sign the bill into law and promulgate it, after which it will become effective six months later, probably in late March 2026. This new law represents a marked pro-labour shift in South Korea's already supportive legal regime for union activity.
Key elements of the new law
As we explained in more detail previously, the Yellow Envelope Act will make significant changes to South Korea's Trade Union and Labour Relations Adjustment Act (the "Union Act"). In particular, the new law will:
- Expand the scope of an "employer" under the Union Act to include businesses that substantially and concretely control the employees of a supplier or contractor. This will enable unions representing a business's employees to demand collective bargaining with another business that substantially controls their working conditions, and protect them from replacement or disadvantageous treatment.
- Permit unions to include non-employee members.
- Expand the justifications for lawful industrial action to include disputes over clear violations of the collective bargaining agreement and management decisions affecting working conditions.
- Impose various limitations and rules on claims for damages against unions and their members.
Takeaways for employers
Employers who may be impacted by this law should review their risk exposure and develop their compliance approach. Recommended steps may include:
- Evaluate your outside contractor relationships and practices to determine the risk of having substantial control over their working conditions, especially if you rely on smaller, dependent or quasi-dependent outside contractors.
- Consider establishing rules for interaction with outside contractors to avoid unnecessary control over working conditions, and consider possible structural changes regarding the use of outside contractors, depending on the identified risks.
- Develop an approach for responding to contractor union demands for bargaining, and educate HR and labour-relations managers. Various key issues need to be carefully considered, such as unification of the bargaining channel, the criteria to determine proper subjects of bargaining, and more. The Ministry of Employment and Labour is expected to publish guidelines on these sorts of issues in due course.
- Try to maintain positive employee relations generally, and reduce your risk of being a target or test case for unions to assert their rights under the new law.
- Prepare for potential industrial disputes over management decisions and consider contingency planning where necessary.
As South Korea moves to strengthen union protections through the Yellow Envelope Act, employers should act now to understand the implications and proactively adapt to this evolving labour landscape.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
