“Building a factory is a management prerogative, but transferring personnel is subject to labor disputes?” South Korea's business community remains confused by the Yellow Envelope Act guidelines

The South Korean government has published implementation guidelines to mitigate the impact of the amended Trade Union and Labor Relations Adjustment Act, known as the “Yellow Envelope Act,” after its implementation. However, unresolved issues remain in interpretations that affect management decisions on the ground. While the decision to build a new factory is deemed a matter of management prerogative, concerns have emerged that personnel transfers required to bring the facility into operation may be subject to collective bargaining. This could prolong confusion at the operational level. The article examines these shifting interpretations alongside comments from multiple experts and organizations. Developments in follow-up reports are being closely watched.

The issue is particularly contentious in “megaprojects” promoted by the government. Bringing a new production line into operation requires the assignment of experienced engineers, but under the current guidelines, a paradox has emerged in which staffing plans become exposed to strike risks once they take concrete shape. In fact, Samsung Electronics' super-corporate union has announced that it will include investment in a semiconductor fab in the Honam region on next year's collective bargaining agenda.

Labor-management relations experts point out that making personnel transfers subject to collective bargaining could hinder companies' ability to make swift decisions. Debate also remains over the treatment of performance-linked bonuses, and concerns have emerged that unions could create an opening for strikes designed to exploit a loophole simply by changing the wording. Experts are calling for supplementary legislation and point out that additional guidelines alone cannot fully resolve the law's lack of clarity.