By W. Dan Lee, Esq.
(Admitted in California, Illinois, Washington D.C.)
Q1. Why was the Yellow Envelope Act (amendment to the Labor Union and Labor Relations Adjustment Act) passed in Korea?
A. To prevent general contractors from evading responsibility and to protect subcontractor workers equally. It designates both general contractors and subcontractors as “employers,” thereby strengthening workers’ rights.
Q2. What does this law have to do with Korean companies expanding overseas?
A. Because the law’s intent is to expand general contractor liability, foreign courts—including those in the U.S.—may use it as persuasive reasoning, arguing: “Even Korea recognizes this principle.”
Q3. Does the U.S. have a system similar to the Yellow Envelope Act?
A. Yes. The U.S. already has the joint employment doctrine. If a general contractor directly or indirectly controls the working conditions of subcontractor employees, it is considered an employer.
Q4. What legal responsibilities arise if joint employment is recognized?
A. The general contractor and subcontractor share joint liability for all labor law violations, including unpaid minimum wage, overtime, safety regulations, discrimination, and wrongful termination.
Q5. Does the general contractor also bear responsibility in union matters?
A. Yes. If subcontractor employees form a union, the general contractor must participate at the bargaining table. Saying “that’s the subcontractor’s issue” is not legally valid in the U.S.
Q6. Can the Korean headquarters (general contractor) be drawn into U.S. litigation?
A. Yes. If a class action is filed in the U.S., the Korean headquarters may also be summoned as a defendant. The Yellow Envelope Act could be used as a legal tool in U.S. courts to emphasize general contractor liability.
Q7. On what basis do U.S. courts determine whether the general contractor is an employer?
A. If it has authority to control, or actually controls, key working conditions such as scheduling, work assignments, and safety management, it will be deemed a joint employer.
Q8. What risks do companies face in U.S. litigation?
A. Beyond monetary damages, they face prolonged class action lawsuits, reputational damage, and loss of investor confidence—risks that can cause severe business harm.
Q9. What common misconception do Korean companies have?
A. Many believe dividing responsibilities between general contractors and subcontractors reduces risk. In reality, under U.S. joint employment, risk is expanded, not reduced.
Q10. Then what should Korean companies do?
A. Not seek loopholes, but focus on strict compliance and transparent labor-management relations. The guiding principle is simple: if you exercise control over workers, you must also bear responsibility.