Following the implementation of the amended Trade Union and Labor Relations Adjustment Act (the “TULRAA”), also known as the “Yellow Envelope Act,” on March 10, 2026, disputes have surged as newly formed subcontractor unions have frequently demanded collective bargaining with principal companies. To help companies navigate this legal landscape, this newsletter outlines the recent trends in decisions by the Labor Relations Commission and highlights key practical points to consider.
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Status of Labor Relations Commission Cases
As of early May 2026, following the implementation of the Yellow Envelope Act, a total of 365 cases have been filed. Among these cases, 316 cases were resolved at the Regional Labor Relations Commission (the “RLRC”), while 49 cases remain pending. In terms of category, approximately 98% of the cases fall under the following two categories: (i) applications to correct the principal company’s failure to post notices of collective bargaining requests, and (ii) applications for the separation of bargaining units.
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Trends on Principal Company’s Status as “Employer”
In disputes regarding principal-subcontractor collective bargaining, the key question is whether the principal company qualifies as an employer under Article 2 Paragraph 2 of the TULRAA (“Non-Contractual Employer”). This clause stipulates that even if a company is not a direct party to an employment contract, the company is deemed an employer if it is in a position to substantially and concretely control the working conditions of the subcontractor’s workers.
Based on data from the RLRC as of early May 2026, among substantive decisions in cases involving applications for correction of failures to post a notice of bargaining demands (excluding withdrawals), “employer” status was recognized in approximately 89% of the cases (48 out of 54), making affirmative findings the overwhelming majority. Recently, the Labor Relations Commission adopted an approach requiring a subcontractor union to specify the core working conditions subject to bargaining. If the principal company is found to have substantial control over even one of these working conditions, the principal company is deemed a Non-Contractual Employer.
There have also been cases where “employer” status was denied. In one of these cases, the RLRC denied the principal company’s “employer” status on the grounds that the principal company did not directly, continuously or concretely instruct the operators on their work content, method or volume. Moreover, the operators relied on high-level professional judgment, which placed them in a different position compared to typical workers of subcontractor companies. The RLRC ruled that safety measures implemented by the principal company were merely the fulfillment of standard legal obligations as a contractor, not an exercise of authority as an employer. However, the National Labor Relations Commission (the “NLRC”) recently overturned the RLRC’s decision and recognized the principal company’s “employer” status with respect to the agendas on occupational safety, but not those related to wage. This decision demonstrates that analyzing “employer” status varies on a case-by-case basis depending on the nature of the duties performed by subcontractor workers and the level of supervision exercised by the principal company.
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Trends on Separation of Bargaining Units
When a principal company’s “employer” status is recognized, an application to correct the failure to post bargaining requests concludes with a corrective order for the company to post the notice. In contrast, in cases involving an application for the separation of bargaining units, even when a principal company’s “employer” status is recognized, the application is dismissed if there is no need for separation of bargaining units.
As of early May 2026, excluding cases that have been withdrawn, the RLRC rendered 16 decisions recognizing the need for separation of bargaining units and 14 decisions dismissing such need. Unlike the decisions on the “employer” status issue, decisions regarding the separation of bargaining units are closely divided.
The criteria for separation of bargaining units prioritize different factors, including the similarity of interests among the trade unions, the adequacy of interest representation by other trade unions and the potential for conflicts between different unions if the existing bargaining unit is maintained.
In cases where the union’s separation request was rejected, the following rationales were presented:
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There were no stark differences in working conditions or employment types between members of the applicant union and other unions, and there was no specific bargaining practice to consider as there had been no prior bargaining history with the principal company.
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Differences in ideology or operation between unions cannot be viewed as an essential divergence of interests.
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When the bargaining agenda is narrowed down to occupational safety, it constitutes an issue that is commonly applicable to all workers, regardless of their union affiliation.
Separation was granted in cases where applicable laws and regulations differed by occupation, and where there were significant differences in employment type, wage calculation methods and working environments (in which case forcing a single bargaining channel would highly likely lead to unreasonable outcomes). Through close legal analysis and a thorough review of the facts, we effectively demonstrated that separation was unwarranted in multiple bargaining unit separation cases where the principal company’s “employer” status was recognized, successfully obtaining dismissal decisions for our clients.
The implementation of the Yellow Envelope Act has triggered numerous complex issues and inevitable confusion. As the NLRC begins reviewing cases this month, its decisions will establish key standards for “employer status” and “bargaining unit separation.” We recommend companies to stay abreast of NLRC decisions and subsequent administrative lawsuits.
Under these circumstances, principal companies should (i) proactively review expected working conditions and related agendas to be raised by subcontractor unions, (ii) assess whether they exercise substantial control over those conditions, and (iii) determine the exact scope of their bargaining obligations. It is also necessary to evaluate how the separation of bargaining units may impact relations between the principal company and the subcontractor. Furthermore, since decisions on the separation of bargaining units vary on a case-by-case basis depending on the underlying facts (i.e., scope and nature of bargaining agenda, similarity in working conditions, existence of prior bargaining practices, etc.), we recommend a close review of these individual factors.
[Korean Version]
