The government on the 26th released interpretation guidelines for the so-called "the yellow envelope law, a new labor law aimed at strengthening the bargaining rights of subcontract workers" (Trade Union and Labor Relations Adjustment Act amendment), which takes effect on Mar. 10 next year. The law says that if a headquarters can substantively and specifically control and decide the working conditions of a subcontractor, it must bargain with the subcontractor's workers.
At issue was what "substantively and specifically controlling and deciding" means. In response, the government said in the guidelines, "If a headquarters in effect decides core parts of a subcontractor's working conditions, such as working hours, or if workers cannot decide them independently, it can be subject to bargaining."
◇ Department stores must bargain because they in effect decide working days for in-store brand employees
The Ministry of Employment and Labor (MOEL) said, "Even if a headquarters does not give direct orders to subcontractor workers, it can exercise systematic and substantive control through contract terms, detailed work instructions, or automated systems." It also said, "There must be a structure, such as a transactional relationship, that continuously restricts and controls workers' autonomy, rather than the headquarters intervening sporadically or temporarily in the subcontractor's working conditions."
For example, in the Seoul Administrative Court ruling in Oct. that said department stores and duty-free shops are obligated to bargain with in-store brand workers over improvements to working conditions, "structural control" by the headquarters over subcontractor employees was recognized. The court said, "The designation and change of business days and hours by department stores and duty-free shops inevitably exert at least a certain level of influence on workers' working days and hours-related conditions, so it can only be seen as exercising substantive control."
◇ Subcontractors that can hardly survive without headquarters' orders are also subject to bargaining
The labor ministry also plans to examine whether a subcontractor's business is in effect incorporated into the headquarters' business when determining whether the headquarters must bargain with the subcontractor. For example, if a subcontractor produces core parts when the headquarters manufactures a product called A, or if headquarters and subcontractor employees work together, it may be determined that the headquarters must bargain with the subcontractor's union.
In that case, if the subcontractor has its own technology and operates production facilities externally, it may be determined not to be economically dependent on the headquarters and thus not subject to bargaining. Conversely, if most of the subcontractor's sales come from the headquarters and the viability of the company becomes uncertain if the contract with the headquarters is cut, the headquarters must bargain with the union. Earlier, in Jul., the Seoul Administrative Court ruled that Hanwha Ocean had to bargain with in-house subcontractor workers at the Okpo shipyard over performance bonuses, tuition support, and occupational safety agendas, citing that the subcontractor was economically dependent on Hanwha Ocean.
In addition, the labor ministry said whether the headquarters must bargain with a subcontractor may vary by individual issue. The ministry may determine that the headquarters is in a position to substantively decide the subcontractor union's working conditions with respect to performance bonuses, but that does not mean the headquarters must bargain over other welfare items as well.