South Korean Government Passes ‘Yellow Envelope’ Act

HR Policy Global perspective – as reported in our July newsletter, South Korea’s newly elected President, Lee Jae-myung, was expected to make changes to strengthen labour rights and improving working conditions in South Korea. The new act will bring challenges to employers who have complex structures integrating various employment structures. 

The Bigger Picture

On August 24, 2025, the Korean National Assembly enacted amendments to the Trade Union and Labor Relations Adjustment Act (TULRAA), known as the "Yellow Envelope Act," signalling a pivotal change in South Korea's labour relations landscape. These amendments will:

• Permit non-employees to become members of trade unions.
• Broaden the definition of "employer" to include entities that exert significant control over working conditions, even if they don't have direct employment ties.
• Expand the range of legal industrial actions to cover disputes related to collective bargaining agreement (CBA) breaches and managerial decisions impacting working conditions.
• Restrict employers from making damage claims against unions and individual workers.

These legislative changes pose significant implications for employers across various sectors in Korea.  In contrast to many jurisdictions, TULRAA prohibits employers from using substitute workers during a strike or contracting work affected by it. Previously, this rule didn't extend to subcontractors. However, the Yellow Envelope Act changes this by broadening the definition of "employer." Now, using substitute workers for tasks halted due to a subcontractor's labour strike may be deemed illegal replacement labour, carrying potential criminal penalties. 

This shift underscores a stricter stance on labour relations, emphasizing compliance and accountability for Korean employers, especially those using complex workforce structures.

Outlook for Employers: Upon promulgation, the Yellow Envelope Act will become effective after six months.  This offers a brief period for employers to reassess their labour compliance strategies and prepare for the broader union rights and collective bargaining responsibilities.