[Issue & View] South Korea's strange new reality: Even investment needs union approval

Concerns are mounting in the business community that even high-level corporate decisions could become subject to labor disputes, after Samsung Electronics' largest union announced it would make the planned semiconductor factory in the Jeonnam-Gwangju integrated special city — part of the government's three major mega-projects — a collective bargaining issue.

The revised Trade Union Act, commonly known as the "Yellow Envelope Law," vaguely defines "business management decisions that affect working conditions" as potential subjects of labor disputes, and the ambiguity over its scope is fueling growing confusion on the factory floor.

The situation has created a scenario in which the fate of a national project requiring hundreds of trillions of won could hinge on whether an individual company's union gives its approval.

Business groups are calling on the government to swiftly end the debate by explicitly stating — drawing on precedents from the United States, Japan and other major economies — that management decisions such as new investment and factory construction are not subject to labor disputes.

According to business circles Monday, a key question has emerged since the announcement of the Honam semiconductor mega-project: whether workforce reassignments stemming from the new factory in the Jeonnam-Gwangju integrated special city fall under collective bargaining or labor dispute procedures.

Samsung Electronics and SK hynix have each committed 40 billion won ($29.1 million) — 80 billion won combined — to build four semiconductor fabrication plants on the site of a military airfield in Gwangju, with Samsung Electronics and SK hynix each constructing two.

The project hit an unexpected obstacle, however, when the Samsung Electronics chapter of the cross-enterprise union announced July 13 that 84 percent of its members opposed the Honam semiconductor project and that it would place related matters on the agenda for 2027 collective bargaining.

With the government pressing for speed, industry is watching the situation closely, as bringing the new Honam factory construction to the bargaining table could delay the investment project beyond its original schedule.

The Ministry of Employment and Labor has offered interpretive guidance through its "Revised Trade Union Act Interpretation Guidelines." Under the guidelines, management decisions that reduce or restructure existing employment — such as layoffs and corporate restructuring — may be subject to collective bargaining.

The ministry further specified that workforce reassignments tied to restructuring, as opposed to routine transfers, may also be subject to labor disputes.

However, the ministry concluded that new corporate investment "cannot be considered to directly affect working conditions and therefore cannot be a subject of bargaining."

Workforce reassignments arising from new investment are fundamentally different in nature from layoffs or restructuring, which directly and concretely alter workers' employment status and conditions, and therefore cannot be treated as subjects of labor disputes.

Workforce transfers resulting from a company's investment, new factory construction or capacity expansion are not a reduction or reorganization of existing employment but a routine personnel reallocation to staff a new organization — a purpose and character entirely distinct from restructuring-driven reassignments.

The Supreme Court ruled in 2002 that whether to carry out corporate restructuring is "a matter belonging to the high-level management judgment of those who run the enterprise" and therefore cannot, as a rule, be subject to collective bargaining.

Business groups argue that the same principle should apply to the establishment of new factories, which equally constitutes a high-level management decision rooted in a company's investment and business strategy.

The Korea Enterprises Federation, in a policy recommendation on recent labor issues released Aug. 17, cited established Supreme Court precedent and the Ministry of Employment and Labor's interpretive guidelines to argue that high-level management decisions — such as building a new factory — cannot be subject to collective bargaining.

The cross-enterprise union, however, is holding firm in its position that matters related to the Honam semiconductor project should be placed on the bargaining agenda, rekindling the prospect of a labor-management dispute.

Ultimately, calls are growing for clearer rules to be put in place promptly, explicitly excluding management decisions such as new investment from the scope of collective bargaining.

The Korea Enterprises Federation said the ministry's interpretive guidelines "carry no legal binding force, allowing conflicts on the factory floor to persist," and stressed that "the principle that high-level management decisions such as new factory construction are not subject to collective bargaining must be made explicit."