Rising Profit-Sharing Demands Spark Widespread Concern
The debate surrounding the ‘Yellow Envelope Act,’ a proposed amendment to labor laws, initially raised significant concerns among businesses about a potential surge in strikes. Following two failed attempts under the Yoon Suk-yeol administration, the legislation finally passed through the National Assembly and took effect on March 10th.
What began as a theoretical concern during the legislative process is now becoming a tangible reality, with Samsung Electronics serving as a prominent example. The central question at the heart of this debate is whether performance-based bonuses should be classified as wages, a matter that has seen varying interpretations.
Legal Precedents and Labor’s Argument
The Supreme Court has previously ruled that business performance-based bonuses, derived from operating profits, cannot be considered ‘wages.’ This decision was based on the reasoning that the criteria for determining these bonuses are not directly linked to labor provision. Instead, they are significantly influenced by other factors that are difficult for laborers to control.
Conversely, labor unions contend that these bonuses, despite their name, are paid out repeatedly each year and should therefore be considered wages. Even amidst these legal discussions, the Samsung Electronics labor union was able to negotiate substantial performance-based bonuses, reportedly in the hundreds of billions of won. This success is attributed, in part, to the Yellow Envelope Act. It is argued that even in cases of illegal strikes, it is practically difficult for employers to seek damages from employees.
Government Clarification and Practical Realities
The Ministry of Employment and Labor has clarified that the Yellow Envelope Act does not provide an exemption for illegal strikes. Instead, it outlines the framework for damage compensation. The ministry asserts that it is an excessive claim to argue that employers should not bear responsibility for damages resulting from illegal strikes.
While the ministry’s explanation may be theoretically sound, it falls short when considering the practical realities of strikes. The Yellow Envelope Act mandates that the proportion of liability for damages be determined based on factors such as the laborer’s position and role within the union, the extent of their participation in the strike, their involvement in the occurrence of damages, the wage level, and the amount of damages sought. In practice, with numerous individuals participating in strikes, often masked, it becomes virtually impossible to precisely assess each person’s contribution to any resulting damages.
Expanding Demands and Future Uncertainty
Following the Samsung Electronics labor union’s successful strike to achieve their demands, other labor unions are now following suit. The Minju and KCTU-affiliated Seoul Transportation Labor Union initiated a strike on March 27th, demanding a 15% wage increase, adherence to a 40-hour work week, expansion of direct payment systems for clients, and improvements to standard wage and fee structures. They have since secured a commitment to an 8% wage increase from January 2028, the realization of standard wage and fee adjustments, and the establishment of legal standards for the inspection of retired taxi drivers’ equipment and a revised fee system.
Furthermore, the Seoul Metropolitan Area General Logistics Workers’ Union, affiliated with the Korean Confederation of Trade Unions, has scheduled a general strike starting April 8th. This union plans to proceed with an indefinite strike if a settlement on transportation fees for the current year is not reached.
If logistics services are not provided, construction sites for Samsung Electronics and SK Hynix could face disruptions. Labor unions in sectors such as automobiles and shipbuilding, which are currently in wage negotiations, are also demanding a portion of operating profits or net profits as performance-based bonuses. Should these demands not be met, strikes could occur at any time.
The biotechnology sector, including companies like Samsung Biologics and Celltrion, is also experiencing demands for profit distribution. If all companies were to concede to labor union demands this year, it is anticipated that new demands will arise next year. If such a situation repeats annually, it raises questions about which companies would choose to build factories and conduct business in South Korea.
While the protection of labor rights is essential, the current labor-management landscape appears to be heavily skewed in favor of labor unions, perhaps excessively so.
