Seoul: An administrative agency recently determined that four public institutions are the de facto employers of subcontracted workers, marking a significant development in labor relations. The ruling is the first to recognize the "employer status" of principal contractors over subcontracted workers since the revised Labor Union and Labor Relations Adjustment Act, also known as the "Yellow Envelope Act," came into effect on March 10.
According to Yonhap News Agency, the Chungnam (South Chungcheong Province) Labor Relations Commission ruled on April 2 that the four public institutions qualify as employers under the trade union act concerning unions of subcontractors providing cleaning, security, and facility management services. The institutions identified as employers are the Korea Institute of Nuclear Safety, the Korea Atomic Energy Research Institute, the Korea Asset Management Corp., and the Korea Research Institute of Standards and Science, all now required to engage in direct collective bargaining with the unions of their subcontractors.
The decision effectively nullifies the government's previous guidelines. In February, the Ministry of Employment and Labor issued guidelines stating that it is challenging to regard work instructions given to simple service contractors as grounds for recognizing employer status. However, the regional labor commission based its recognition on the public institutions' involvement in safety management and personnel deployment.
Despite the ministry's interpretation, which made it difficult to recognize the government as an employer, the regional labor commission's decision implies that even the government and ultimately the president could be deemed employers. The KCTU's Public Services and Transportation Workers' Union argues that "the ultimate employer is the president."
If a principal contractor whose employer status has been recognized refuses collective bargaining, it could face criminal penalties for unfair labor practices. This ruling is expected to lead to increased demands by subcontracted workers' unions for collective bargaining with public institutions, government agencies, and potentially the private sector.
Disputes over employer status are likely as subcontracted workers' unions and principal contractors remain at odds. Either party may appeal the regional labor commission's decision to the central commission and pursue administrative litigation if dissatisfied, suggesting prolonged disputes.
Ambiguity in the law's interpretation could complicate collective bargaining, especially regarding wage increases. Subcontracted workers' unions may demand that principal contractors increase spending on safety measures and might also seek wage increases, citing safety concerns. KCTU-affiliated unions are reportedly encouraging subcontracted workers' unions to demand wage increases from principal contractors, dismissing the ministry's interpretation that wages should be negotiated between subcontractors and their unions.
The regional labor commission's ruling foretells potential confusion. According to the ministry, approximately 800 subcontracted workers' unions have requested collective bargaining with principal contractors. If required to negotiate individually with multiple unions, a principal contractor may face frequent labor disputes, limiting its business operations.
The "Yellow Envelope Act" was pushed through by the pro-labor ruling party despite concerns about its potential issues. The government must enact supplementary legislation to mitigate the law's side effects, establish clearer guidelines, and ensure compliance. A comprehensive review of the law is necessary to address these challenges.