In a subcontractor arrangement, the subcontractor enters into a contract with the principal company to provide predetermined services. Whether the principal company has an obligation to engage in bargaining with the union of the subcontractor will continue to be an issue this year. As you may recall, an amendment to the Trade Union and Labor Relations Adjustment Act (the so-called “Yellow Envelope Act”) expanding the definition of “employer” to include principal companies in this context was passed at the National Assembly but was vetoed by the President in December 2023. The legislative effort to impose this obligation to bargain with subcontractor unions on principal companies has not been successful to date but several cases on this point are being reviewed by the Supreme Court.
The leading case on this issue was appealed to the Supreme Court more than five years ago. The principal company defendant prevailed at both the trial court and appellate court levels and the Supreme Court recently decided to send the case to an en banc review. This demonstrates that the Supreme Court recognizes the fundamental impact its decision can have on the bargaining process and landscape for principal companies. Specifically, it would impose on principal companies a duty to bargain with subcontractor unions.
Several Labor Relations Commission and court decisions have imposed this duty to bargain with subcontractor unions on principal companies and some of these court decisions have been appealed to the Supreme Court. These Supreme Court cases could be jointly reviewed by the Supreme Court en banc with the leading case.
If the Supreme Court overturns the lower court decision and rules in favor of the subcontractor union in the leading case, it would impose on the principal company the duty to bargain with the unions of its subcontractors. As a result, companies that utilize subcontractors will be faced with requests to bargain from subcontractor unions. This means that part of the Yellow Envelope Act that was vetoed by the President would be de facto legislated by the court. A principal company will have to bargain with each subcontractor union that requests bargaining and each subcontractor union will be able to engage in strikes and other types of industrial actions against the principal company. The current single bargaining channel process, which is based on the premise that a company bargains with unions comprised of its own employees, will likely have to go through significant changes.
