Yellow Envelope Act and Employer Status of Principal Contractors: A Must-Read If You've Received a Bargaining Demand
What Does "Employer Status" of a Principal Contractor Mean Under the Yellow Envelope Act?
Under the amended law, even a principal contractor that has not directly entered into an employment contract with the workers may be deemed an "employer" if it substantively and specifically controls or decides matters such as wages, working hours, work methods, and safety.
In other words, in determining a principal contractor's employer status under the Yellow Envelope Act, the key factors are whether the subcontracted workers' duties are essential and continuously integrated into the principal contractor's business, and whether the principal contractor exercises substantive authority over hiring, discipline, and working conditions.
What Is the Process for Determining Employer Status?
The process generally proceeds in the following order: a bargaining demand from the subcontractor's union, the principal contractor's refusal, and then an application for remedy for unfair labor practices filed with the Labor Relations Commission.
If, in this process, the principal contractor refuses or neglects the union's demand for collective bargaining without justifiable grounds, this constitutes an unfair labor practice and may be punished under Article 90 of the Trade Union and Labor Relations Adjustment Act by imprisonment for up to two years or a fine of up to KRW 20 million.
Furthermore, if a remedial order from the Labor Relations Commission becomes final through administrative litigation and is still not complied with, the penalty is increased under Article 89(2) of the same Act to imprisonment for up to three years or a fine of up to KRW 30 million.
Ultimately, treating a Labor Relations Commission ruling lightly can result in the representative director or the responsible manager becoming a criminal suspect or defendant.
In fact, we have handled a case that escalated into a criminal matter through exactly this process.
A Success Story: How Decent Helped
[Case We Handled]
Company A (a pseudonym), a principal contractor, was sued for an unfair labor practice after refusing a bargaining demand made by a subcontractor's union on the grounds of the company's employer status under the Yellow Envelope Act, and came to our firm for help.
From the earliest stage of the investigation, Decent organized concrete evidence to clearly distinguish between the bargaining issues the principal contractor had actually controlled and decided, and those it had not.
We also secured materials supporting the fact that the subcontractor had independently made its own decisions on hiring, discipline, and working conditions, and prepared the client for investigative questioning based on these materials.
In addition, we ensured that the arguments made before the Labor Relations Commission and the defense strategy in the criminal case remained consistent with each other from start to finish.
As a result, the representative of Company A received a non-prosecution disposition on the grounds that intent to commit an unfair labor practice was not established.
*This case has been anonymized and reconstructed to protect personal information.
Outcomes may vary depending on the specific facts and evidence of each case.
Why You Should Work With Decent
As this case shows, cases involving a principal contractor's employer status under the Yellow Envelope Act sit at the intersection of labor law and criminal law, so approaching the Labor Relations Commission proceedings and the criminal defense separately can easily result in unfavorable facts becoming fixed before they are properly addressed.
That is why Decent organizes the evidence for substantive control from the Labor Relations Commission stage onward, and, at the investigation and trial stage, designs a defense strategy addressing both the intent behind the alleged unfair labor practice and whether there was justifiable cause.
Because the question of employer status and the question of criminal liability can be argued as legally distinct issues, it is essential to receive assistance from defense counsel with criminal law expertise from the very beginning.
If you have received a bargaining demand from a subcontractor's union, or a notice from the Labor Relations Commission regarding employer status under the Yellow Envelope Act, your options for response will only narrow as time passes.
Before the matter escalates into a criminal risk, review your situation and plan your response together with Decent Law Firm.
