Primary Contractors Now Required to Negotiate Even Over Indirect Roles Like Security and Food Service... Companies Face 'Bargaining Crisis'

The Aftermath of 100 Days of the Yellow Envelope Act
Rising Costs and Backlash Over Labor-Management Conflict

As negotiations between subcontracted workers and primary contractors are now permitted not only at subcontracted worksites but also for indirect support roles such as security and food service, confusion is spreading across the entire industrial sector. More than 1,100 subcontractor unions are demanding collective bargaining with primary contractors, making a bargaining crisis a reality across the industry.

The Yellow Envelope Act (an amendment to the Trade Union Act), which marks its 100th day of enforcement on June 17, 2026, has triggered a structural transformation in labor-management negotiations. However, concrete grounds—such as the criteria for recognizing employer status—remain ambiguous.

On the 13th, members of the Metalworkers' Union held a rally in front of the Korea Development Bank in Yeouido, Seoul, urging for a wage increase for subcontracted workers at Daewoo Shipbuilding & Marine Engineering. Photo by Jinhyung Kang aymsdream@

According to industry sources on June 16, recent decisions by the Labor Relations Commission have sided with subcontractor unions in over 80% of cases regarding requests for remedies related to negotiations between primary and subcontracted parties. As a result, major domestic conglomerates are facing mounting pressure on all fronts. The scope of recognizing employer status for primary contractors is expanding indiscriminately beyond direct production processes to include indirect support work such as security and food service.

Since the Yellow Envelope Act came into effect on March 10, 2026, and up to June 5, a total of 1,137 subcontractor unions—representing 161,830 members—have requested bargaining with 431 primary contractors. Among these, 80 cases have been filed with regional labor commissions, specifically asking for a determination of the primary contractor’s employer status. Of these, 69 cases (86.3%) resulted in a decision recognizing the employer status of the primary contractor and ordering them to enter into negotiations, providing full support for the labor movement’s push to expand bargaining rights.

In line with this trend, the Ulsan Regional Labor Relations Commission recently accepted a request from the Korean Metalworkers’ Union regarding Hyundai Motor Company to correct the announcement of bargaining demands.

As a result of this decision, approximately 1,600 subcontracted workers at Hyundai—including not only in-house subcontractors but also those in security firms, in-house cafeterias, and auto dealerships who handle production, security, food service, and sales work—are now able to negotiate directly with the primary contractor. This is expected to strengthen the bargaining demands of subcontracted unions not only at Hyundai Motor Company but also throughout the entire Hyundai Group, including Hyundai Steel, Hyundai Mobis, Hyundai Glovis, and Hyundai WIA.

Yonhap News Agency

The Central Labor Relations Commission also upheld a previous ruling recognizing the employer status of Hanwha Ocean in an appeal filed by the Metalworkers’ Union regarding a notice of union confirmation for bargaining demands. It further ruled that Hanwha Ocean must conduct collective bargaining with members of Welliv, who operate in-house cafeterias, on issues such as industrial safety.

However, some argue that this is inconsistent with the Ministry of Employment and Labor's guidelines for interpreting the revised Trade Union Act. The guidelines state that, for instance, in-house cafeterias in factories are considered to be under general supervisory authority stipulated by contract, and thus not subject to control over subcontractors. This suggests that the legal relationship created by service contracts is leading to unintended obligations for primary contractors to negotiate with subcontractors.

Such a “relay of bargaining demands” by subcontractor unions is pushing the burden of negotiations on companies to unprecedented levels. The business community is strongly protesting these decisions by labor commissions and preparing legal countermeasures, raising concerns that this could escalate into prolonged legal battles.

Moreover, if indirect support relationships—such as those involving cafeterias and cleaning services, rather than direct production relationships—are also designated as bargaining counterparts, increases in manufacturing costs and labor-management conflict expenses will be inevitable. A representative of the Korea Employers Federation (KEF) warned, “If the scope of collective bargaining counterparts is expanded to include indirect support partners rather than just direct production relationships, confusion across the entire industry surrounding collective bargaining will only intensify.”

This content was produced with the assistance of AI translation services.