[Editorial] South Korean Government’s “Yellow Envelope Act” Guidelines Cause Confusion; Amending the Law Is the Answer (JoongAng Ilbo Japanese-language edition)

South Korea’s Ministry of Employment and Labor published new guidelines on the implementation of the amended Trade Union and Labor Relations Adjustment Act, known as the “Yellow Envelope Act.” The guidelines confirmed that companies’ investment decisions themselves, such as building or relocating factories and introducing new technologies, are not mandatory subjects of negotiations. At the same time, they stated that such decisions may become subject to negotiations if changes in workforce allocation or work arrangements take concrete form. This indicated that the focus may extend beyond whether an investment decision has been made to its impact on working conditions.

The issue arises from the addition, in Article 2 of the amended law, of “business management decisions that affect working conditions” to matters including wages, working hours, benefits and dismissals. The government was criticized for a lack of specificity in its interpretation, and the guidelines ultimately suggested a range of possible interpretations. They stated, however, that decisions may become subject to negotiations when specific impacts arise, such as changes to factory design or the mobilization of workers.

Developments surrounding semiconductor cluster plans also form part of the background. In situations involving the construction of factories by Samsung Electronics and SK hynix that entail workforce reallocation in the Seoul metropolitan area, the guidelines suggested that such matters could become the subject of labor disputes. They also clarified that performance pay may be included within the scope of matters subject to negotiations.

The government stated in the guidelines that, apart from amending the law and its enforcement decree, there is no solution to making the country more conducive to business activity. While presuming that disputes will be resolved through dialogue between labor and management, some have also said that the current guidelines leave uncertainty.