South Korea approves new union rules protecting contract workers

South Korea’s parliament passed a contentious union law that expanded protection for subcontracted workers on Sunday, despite fierce objections from opposition lawmakers and concerns from businesses that it might hurt competitiveness and worsen labour relations.

The amendment to Articles 2 and 3 of the Trade Union and Labor Relations Adjustment Act, better known in South Korea as the “Yellow Envelope” bill, was approved in a 183-3 vote during the morning plenary session of the National Assembly. 

Set to take effect in March 2026, the amended bill will enable subcontracting firms’ labour unions to make demands directly to client companies. It also limits the ability of companies to seek damages for disruptions caused by strikes and broadens the liability of executives who refuse to participate in collective bargaining.  

After liberal President Lee Jae Myung Bak assumed office in June, his Democratic Party, which controls South Korea’s parliament, has pushed to reform the country’s labour union laws to provide more support for workers. 

Democratic Party members lauded the bill, which was first introduced in April 2015, as a ‘monumental moment’ in South Korean history and may contribute to a safer and healthier workplace.

The Korean Confederation of Trade Unions, one of South Korea’s largest unions, welcomed the approval of the new law, describing it as 'a fruit of history achieved by the noble sacrifices' of labour activists.

 

The bill’s approval is also a reversal of the hardline stance of former President Yoon Suk Yeol and his People Power Party (PPP) on unions. All 107 members of the PPP boycotted the vote, with a party spokesperson saying that the concerns of business leaders and the general public were ‘trampled upon’ by the bill. 

Several business groups have expressed worries that the new rules could significantly hinder corporate autonomy. The amendments also broadened the definition of employers to include anyone who sets pay and working conditions and expanded strikeable issues to cover management decisions such as layoffs and restructuring, which critics say may intensify labor disputes.

Several of South Korea’s biggest business lobbies, including the Korea Enterprises Federation and the Korea Chamber of Commerce and Industry, said the ruling will ‘inevitably spark legal battles between labour and management’. They also urged lawmakers to clarify the bill with follow-up legislation and pressed for stronger protections for employers, including the right to hire replacement workers.

"A flexible labour environment is essential to strengthening Korea's competitiveness as a business hub in the Asia-Pacific region," James Kim, chairman and CEO of the American Chamber of Commerce in Korea, told Reuters last month. "This legislation could influence future investment decisions by American companies considering Korea."

The Ministry of Employment and Labour said the government is planning a task force to gather opinions from stakeholders, review previous labour rulings, and consult with experts to draft guidelines before the law comes into effect next year.