By W. Dan Lee, Esq.
(Admitted in California, Illinois, Washington D.C.)
Korea’s Yellow Envelope Act (amendment to the Labor Union and Labor Relations Adjustment Act) abolishes the distinction between general contractors and subcontractors, imposing liability on anyone who substantially controls or directs workers. While the law applies within Korea, it can have unforeseen consequences for Korean companies operating in the United States—because the U.S. already has a well-established joint employment doctrine.
Case 1: The Georgia EV Battery Plant Enforcement
Recently in Georgia, large-scale immigration and labor enforcement took place at an electric vehicle battery plant involving Korean companies. General contractors, joint ventures, subcontractors, and staffing agencies were all entangled, and hundreds of workers were investigated for identity and work authorization issues.
What’s notable is that enforcement did not stop at subcontractors or staffing agencies. U.S. authorities asked: “Who actually assigned, directed, and controlled the workers?” In some instances, engineers dispatched from Korean headquarters entered on B-1 business visas but performed installation and commissioning work themselves. Such conduct was deemed unauthorized employment and became a target for enforcement.
The message is clear: investment is not a shield, and if headquarters leaves traces of controlling on-site labor, the general contractor cannot escape liability.
Case 2: Applying the Yellow Envelope Act to U.S. Subsidiaries
Normally, labor law liability in the U.S. is confined to the local U.S. subsidiary. However, if the Korean parent company retains ownership and personnel authority and intervenes in labor, safety, or working conditions, the U.S. subsidiary may be viewed merely as a subcontractor.
In such cases, U.S. courts could interpret the employees hired by the U.S. subsidiary as being under the direct or indirect control of the Korean parent company. Furthermore, subcontractors managed by the U.S. subsidiary could also be argued to fall under the Korean parent’s control.
When the reasoning of the Yellow Envelope Act combines with the U.S. joint employment doctrine, arguments that “the Korean parent is also a joint employer” gain significant weight. In a U.S. class action, plaintiffs could credibly argue: “Even Korea recognizes parent company liability, so why should the U.S. deny it?”
Case 3: Korean Parent at the Union Bargaining Table
The U.S. National Labor Relations Board (NLRB) recognizes any entity with authority over working conditions as a bargaining party. Thus, if employees of a U.S. subsidiary form a union, the bargaining counterpart is not limited to the subsidiary.
If the Korean parent company is effectively setting HR and labor policies, unions can demand that the Korean parent also sit at the bargaining table. This is not just a legal issue but one that can affect corporate image, labor relations, and even the global business strategy of the company.
Conclusion: A Misconception Korean Parents Must Avoid
Many Korean companies believe that once they establish a U.S. subsidiary, legal responsibility will be confined to that entity. But the moment the Korean headquarters exercises substantive control, the structure shifts from liability separation to liability expansion.
The message of Korea’s Yellow Envelope Act and America’s joint employment doctrine is the same: “Whoever directs or controls workers will be held responsible to the very end.”