Five Months In: What Actually Happened on the Ground
On March 10, 2026, the amendments to Articles 2 and 3 of the Trade Union Act — widely known as the "Yellow Envelope Act" — took effect. Three changes matter most:
As of July 3, 2026, 1,168 subcontractor unions had filed collective bargaining demands with 441 prime contractors. The press framed this as a large-conglomerate issue, but the operational burden lands squarely on the SME suppliers below them. To respond to a bargaining demand, a prime contractor needs its suppliers' data on working conditions, HR authority, and subcontract operations — and that request flows straight down the chain.
Three Ripple Effects on SME Suppliers
1) Risk-averse restructuring of supply relationships
To reduce the odds of being deemed an employer, prime contractors are scaling back on-site subcontracting, cutting resident headcount, and tightening unit prices and contract terms. Suppliers with a high share of on-site staff feel it first — through reduced volumes, delayed contract renewals, and stricter quality and performance clauses.
2) More demands for working-condition and HR records
To demonstrate that it does not control or determine working conditions, a prime contractor must document the supplier's chain of work instructions, attendance and evaluation authority, and wage-setting structure. If the submitted documents diverge from actual practice, they become evidence *supporting* employer status. Alignment between paperwork and shop-floor reality is now a supplier concern, not just a client one.
3) Delivery disruption and loss-sharing during industrial action
When industrial action occurs at a prime contractor's site, the supplier absorbs the production stoppage and delivery delay. Most subcontracting agreements never list industrial action as a force majeure event, so the dispute starts with a basic question: who bears the loss?
A Three-Step Response Roadmap
Step 1 — Diagnose: map contract structures and real-world relationships
Classify subcontracting, dispatch, and on-site cooperation agreements by type, then examine the actual command-and-direction relationship rather than the contract language. Item by item, check who issues work instructions, who controls attendance, who holds HR and evaluation authority, how work reassignment is approved, and how far the client's systems are used — and flag the high-risk zones.
Step 2 — Revise: rewrite the contract clauses
Spell out the notification and cooperation procedure when a bargaining demand arrives, the scope and limits of data disclosure, delivery extensions and loss allocation during industrial action, and mutual defense obligations in an employer-status dispute. Blanket clauses such as "submit all requested materials upon request" work against suppliers — narrow them to specified categories.
Step 3 — Prevent: standardize labor management
Bring work rules and employment contracts into line with current law, and keep work-instruction, attendance, and evaluation records consistently under the supplier's own name. Pair this with unfair-labor-practice training for supervisors, covering statements about union membership and prohibited disadvantageous treatment.
Questions We Hear Most Often
Q. If our employees join bargaining with the prime contractor, who is the employer?
Under the employment contract, the supplier remains the employer. But where the prime contractor substantially controls or determines a given agenda item, it can become a bargaining party for that item. Because the answer varies by issue, sort out who responds to what on an item-by-item basis as soon as a demand arrives.
Q. Can bargaining be put on hold until the Labor Relations Commission rules?
Even where employer status is genuinely contested, an outright refusal carries unfair-labor-practice risk. The safer route is not refusal but written notice that the matter is pending review, backed by a record of response dates, reasoning, and internal deliberation.
Q. Does this apply to workplaces with fewer than 30 employees?
The amendments to employer scope and dispute scope carry no size threshold. Small workplaces, however, are more often affected indirectly — through their contracts with prime contractors rather than through their own unions.
Building Labor Risk into Your Management System
Embedding controls beats one-off firefighting. ISO 45001 (occupational health and safety) clarifies on-site management accountability, while ISO 37301 (compliance management) fixes the review cycle and named owner for labor compliance — and both produce documentation you can hand straight to a client conducting due diligence. An annual or semi-annual labor audit plus a functioning internal grievance channel remains the cheapest way to resolve issues before they escalate into external proceedings.
Talk to KITIM
The Korea Institute of Technology Innovation Management (KITIM) supports SME suppliers across three stages: contract-structure diagnosis → work rules and employment contract overhaul → an ongoing labor risk monitoring framework. We tailor the work to your situation, from reviewing how subcontracting actually operates, to handling client data requests, to linking the effort with ISO 45001 and ISO 37301 certification. If you have already received a bargaining or data request from a client, talk to us before you decide how to respond. Request a free diagnosis through the consultation form on the KITIM website.