Yellow Envelope Law Sparks Fears of V-Shaped Rebound in Labor Disputes

South Korean industrial sites are experiencing significant turmoil following the implementation of the Yellow Envelope Law, which took effect on January 10, 2026. The legislation, an amendment to Articles 2 and 3 of the Trade Union and Labor Relations Adjustment Act, aims to strengthen the bargaining rights of subcontract workers and limit the ability of companies to seek large damage claims against striking workers.

Data from the Ministry of Employment and Labor indicates that lost workdays due to strikes in 2025 totaled approximately 394,000. This figure represented a 13.8% decrease from the 457,000 lost workdays recorded in 2024. However, We find growing concerns that this downward trend will reverse as the new law triggers an increase in labor disputes.

Immediate Impact on Industrial Relations

The immediate aftermath of the law’s January 10, 2026, enforcement saw a surge in demands for negotiations. Within two days of the law taking effect, 453 subcontractor unions representing 100,000 workers demanded negotiations with 248 primary contractors.

These demands include requests from cleaning and food service unions—which are not directly related to primary contractors’ production processes—for performance bonuses equal to those received by primary contractor employees. Some labor groups have further indicated intentions to target clients of semiconductor plants as negotiating partners.

The surge in activity has shifted the rhetoric of labor movements. The rally cry of Bring out the real boss has escalated to Bring out the president among public sector unions.

Legal and Regulatory Ambiguities

The business community and labor unions have both criticized the government’s implementation of the law. A government decree detailing the legislation, which drew backlash in December 2025, has been accused of creating confusion regarding the scope of employers and subjects of dispute.

Key unresolved issues include:

• How the definition of an employer will be interpreted.
• The strictness with which limits on damage-compensation liability will be applied.
• The process for governing collective bargaining between principal employers and subcontractor unions.

Under current rules, whether a subcontractor union can proceed with separate talks with a principal employer may be decided by a newly created state body or the National Labor Relations Commission.

Political and Corporate Pressure

President Lee Jae-myung has publicly praised a major corporation that preemptively paid equal performance bonuses to subcontractor workers, describing it as a very exemplary case. This company had been targeted by labor groups as a primary negotiation site even before the law was implemented.

Industry observers note that such praise may intensify pressure on companies to comply with unclear standards to avoid becoming a test case for the law’s application.

Historical Context of Labor Disputes

The current concern over a V-shaped rebound in lost workdays follows a period of relative decline. Lost workdays peaked at 2.035 million in 2016 and fell to 862,000 in 2017. Between 2018 and 2021, figures remained between 400,000 and 500,000 before dropping to 344,000 in 2022 and 355,000 in 2023.

The number of labor disputes also showed a downward trend prior to the new law, falling from 223 cases in 2023 to 131 in 2024 and 123 in 2025. In 2025, the manufacturing sector accounted for the largest share of these disputes with 52 cases, or 42% of the total.

Analysts previously attributed this decline to a shift in union tactics, moving away from prolonged strikes toward methods focused on securing practical gains. However, the enforcement of the Yellow Envelope Law is now viewed as a potential trigger that could increase social costs and the frequency of strikes.