[Econ & Biz] Yellow Envelope Act opened: the name, reason, concerns, and future of labor and businesses

It's widely known as the "Yellow Envelope Act" here in South Korea.

The new law, signed on Tuesday, expands labor union rights, but has displeased businesses.

With a six-month grace period before it takes effect, what are the key points of discussion?

We have our reporter Kim Do-yeon in the studio.

Do-yeon, President Lee Jae-myung's administration was adamant about passing this law.

That's right Dami, first it was passed as means by the government to tackle labor inequality.

There is a gap in treatment in the nation's labor scene between full-time employees and contract workers.

This law was vetoed by the former administration twice and now it's one of the first laws to be signed by President Lee.

Take a listen to the President first about this.

Now, to give you a bit more detail.

The so-called "Yellow Envelope Act," refers to revisions to labor unit laws which expand the definition of an 'employer' to include principal contractors and allow non-employees to join trade unions.

Furthermore, it broadens the scope of lawful industrial action while limiting a company's ability to seek damages from unions for strike-related losses.

Now, the Yellow Envelope Act will come into effect in six months.

Before we get into the discussions, why is it called the Yellow Envelope Act?

The name 'Yellow Envelope Act' originates from the 2009 Ssangyong Motors strike.

After the 77-day strike, a court ordered workers to pay a staggering 4.7 billion won, or about 3.4 million U.S. dollars, in damages.

In response to their hardship, a citizen sent a 47,000-won donation a symbolic 1/100,000th of the total debt inside a yellow envelope to a local newspaper with a letter showing empathy to their cause.

That single act sparked a nationwide grassroots movement, which became known as the Yellow Envelope Campaign, as the public sent donations to support the workers.

The law, parts of which are designed to protect unions from such crippling damage claims, was ultimately named in honor of that campaign.

Despite the heartwarming story, this is fiercely fought against by businesses.

The expansion of the definition of the word 'employer' seems to be a key point.

That is the central issue.

In essence, it means employees of a subcontracting firm can now negotiate their working conditions directly with the principal corporation that hired their company.

For these large corporations, this could create a significant new burden, as they may now be responsible for the employees of hundreds of different contractors, amounting to thousands of workers.

However, experts argue this legal change was an inevitable reflection of the current economic structure.

Contracting has become prevalent over the last few decades, and courts have already been setting precedents for this type of responsibility.

To put the scale into perspective, data from the Korea Institute for Industrial Economics and Trade shows that in the manufacturing sector alone, over half—50.6 percent—of all small and medium-sized enterprises operate as subcontractors.

"Subcontracting firms are often very small, and their employees' wages are inevitably determined by the contract value set by the principal contractor. That is why subcontracted workers have consistently wanted to negotiate directly with the principal contractor. In that sense, this was an unavoidable legal measure."

Another key part of this bill is the limitation on filing for damages from strikes.

It sounds like that could result in more strikes that could halt business operations.

That's a crucial point, and it's important to understand the context.

But, of course we saw from the story behind the name of Yellow Envelope Act it's been put into question whether companies were retaliating against strikes when filing for damages.

Take a listen to an expert.

"The scope of what constitutes an 'illegal strike' in South Korea is very broad compared to Western countries. It's very easy for a strike to be deemed illegal here."

This legislation aims to shield unions from what they see as punitive damages that could dismantle a union entirely.

Will there be riot-like strikes by the union now that no damages can be claimed by the company?

The texts will have to be clarified, and that's what the government is aiming to do going forward.

"Many people are concerned about this. So, if the law cannot be abolished, then the enforcement decree must be drafted with great detail and care."

Businesses have voiced strong concerns, including worries that this could drive foreign investment away.

Is there validity to that argument?

That is certainly a major concern for business lobbies.

They fear rising labor costs and increased disputes could make South Korea a less attractive market, but take a listen to an expert.

"However this seems to have somewhat limited on the U.S. investment because labor cost to U.S. is higher than in Korea. Passing such bills does not seem to critically increase labor cost in Korea to that in U.S."

But, he added if things add up, at one point the scale could be tipped.

Right Do-yeon.

Thanks for the comprehensive coverage tonight.

We appreciate it.