Following the effective date of the amended Trade Union and Labor Relations Adjustment Act (“Yellow Envelope Act”) on March 10, 2026, there has been a significant surge in demands for direct collective bargaining with principal companies by subcontractor labor unions. In response to rejections to such demands by principal companies, unions are actively filing claims for (i) corrective orders based on the non-disclosure of bargaining requests by principal companies and (ii) separation of bargaining units.
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Trends regarding “employer” status of principal companies
The core issue in most disputes is whether the principal company qualifies as an “out-of-contract employer” under Article 2(2) of the Yellow Envelope Act due to the principal company’ s substantial control over the working conditions of subcontractor workers. The Labor Relations Commission (“LRC”) now requires unions to specify their core bargaining agendas (e.g., occupational safety and health), and if the principal company is found to hold “substantial control” over even one of the agendas, the LRC tends to recognize the principal company as an employer under the Yellow Envelope Act.
In recent cases across the construction and logistics industries, the LRC has ruled principal companies as “employers” solely based on the fact that they exercised control over the occupational safety and working environments of subcontractor workers, skipping further assessment of other working conditions.
Meanwhile, in cases involving claims field by labor unions comprised of delivery workers for manufactured goods, tower crane operators, etc., the LRC denied “substantial control” by manufacturing and construction companies over the workers. On such basis, such companies were not recognized as “out-of-contract employers.”
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Trends in Separation of Bargaining Units
If a principal company’s “employer” status is recognized, they are ordered to publicly post the subcontractor union’s bargaining request. However, such orders are issued only in cases where the necessity for separation is clearly demonstrated by the subcontractor union. While the general criteria for separation of bargaining units include clear differences in working conditions and employment types, the Enforcement Decree of the Yellow Envelope Act places heavier emphasis on mitigation of conflict among unions as a key justification for separation.
Recently, the LRC recognized the need for separation by job category in cases where different regulations applied to each job type, noting that a unified bargaining channel could result in unfair or unreasonable bargaining outcomes for certain job types. On the other hand, the LRC denied the need for separation when the request was made solely because the unions belonged to different umbrella federations. Separation based on different umbrella federations was granted only if there was a history of continuous, deeply-rooted conflict between those specific federations.
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Implications & Recommendations
Although the Ministry of Employment and Labor has issued guidelines and manuals regarding bargaining procedures between principal companies and subcontractor unions, we expect principal companies to encounter more uncertainty until sufficient case precedents are established by the courts and the LRC. As a preventive measure, we recommend that companies (i) assess which working conditions the subcontractor unions are likely to target, (ii) audit whether the company exercises substantial control over those specific working conditions, and (iii) evaluate how a potential separation of bargaining units would affect the company’s overall principal-subcontractor labor relations going forward.
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[Korean Version]
