By W. Dan Lee, Esaq.
(Admitted in California, Illinois, Washington D.C.)
Korea’s Yellow Envelope Act (amendment to the Labor Union and Labor Relations Adjustment Act) holds both general contractors and subcontractors responsible as employers. This is not very different from the U.S. joint employment doctrine. In the U.S., the moment a general contractor directly or indirectly influences subcontractor employees’ working conditions, it too is deemed an employer and becomes jointly liable.
Thus, if a Korean company builds a factory in the U.S. or operates through subcontracting structures, it cannot avoid legal responsibility by saying “we didn’t hire them directly.” To minimize labor law risks when expanding into the U.S., Korean companies must adhere to several essential principles.
Strict Compliance with Employment and Immigration Rules
The U.S. requires all employers to verify and document each worker’s identity and work authorization at hiring under the Form I-9 system. Even one missing form or late re-verification can result in fines and enforcement actions.
A common violation arises when engineers from headquarters enter on a B-1 business visa but perform actual work such as installation or commissioning. Such on-site work is considered unauthorized employment, and B-1 misuse makes companies a prime target for enforcement. Companies must ensure that the visa type—E-2 (investor), L-1 (intra-company transferee), H-1B (specialty occupation), etc.—matches the actual duties.
Stronger Oversight of Subcontractors and Staffing Agencies
U.S. courts judge liability not by “who pays wages” but by “who assigns, directs, and controls workers.” If a subcontractor violates the law, the general contractor may still be exposed.
Before contracting, companies must review subcontractors’ compliance policies and past violations. Contracts should include compliance warranties, audit rights, immediate termination and indemnity clauses, and flow-down provisions imposing the same obligations on lower-tier subcontractors. Requiring I-9 verification and safety training proof as conditions for site access is also effective.
Wage, Hours, and Break Compliance
Beyond federal law (FLSA), each U.S. state has its own rules. Companies must reflect local requirements on minimum wage, overtime, meal and rest breaks, and paystub details. For projects with public funding, the Davis-Bacon Act prevailing wage rules may also apply.
Compliance with Workplace Safety Rules
OSHA (Occupational Safety and Health Administration) applies the multi-/joint employer policy: any entity that creates hazards or holds authority to correct them can be held responsible. General contractors cannot escape by saying “that was the subcontractor’s responsibility.”
Companies must document their site safety systems, including training, inspections, and corrective action procedures, and ensure consistency between contracts and actual practice.
Internal Controls and Enforcement Response
Companies should conduct regular self-audits of I-9 records, wages, safety, and subcontractor compliance.
They must also prepare a site enforcement response manual, including warrant verification, designated escorts for interviews, record preservation instructions, communication channels with media and consulates, and site access control. Multilingual anonymous whistleblower hotlines help detect issues early and allow for internal correction before escalation.
Leadership and Responsibility Structures
Define clear roles for executives, site managers, HR, safety, and legal departments. A responsibility matrix should identify who makes final decisions in crises.
Inspections and lawsuits do not remain limited to the worksite; they affect corporate reputation and survival. Top management must directly recognize and manage these risks.
Conclusion
The message of Korea’s Yellow Envelope Act and America’s joint employment doctrine is the same: “Whoever controls or directs workers will be held responsible to the very end.”