AMCHAM, ECCK warn S.Korea’s labor bill hinders investment

Major foreign business associations in South Korea have warned that a proposed labor law revision in the country could increase legal exposure for multinational firms and weaken Asia's No. 4 economy's appeal as an investment destination.

The American Chamber of Commerce in Korea (AMCHAM), one of Korea’s prominent foreign business groups, on Wednesday raised concerns that the so-called “Yellow Envelope Act” – recently passed by the National Assembly’s Environment and Labor Committee – could create substantial legal and operational burdens for global businesses, including US firms operating in the country. 

The chamber noted that the proposed law aims to strengthen rights for subcontracted workers, curb companies’ ability to pursue compensation for losses linked to strikes and increase accountability for executives who choose not to engage in collective bargaining.

AMCHAM warned that the combined effect of these provisions would heighten regulatory uncertainty and complicate corporate compliance efforts.

“A flexible labor environment is essential to strengthening Korea’s competitiveness as a business hub in the Asia-Pacific region,” James Kim, Chairman and CEO of AMCHAM, said in a press release.  

“If enacted in its current form, this legislation could influence future investment decisions by American companies considering Korea.”

The chamber added in the statement that it has opposed the bill since its initial introduction last year, citing similar concerns about regulatory unpredictability.

AMCHAM has called for sufficient consultation with industrial stakeholders before the law is finalized.

The warning from AMCHAM follows a similar message issued earlier this week by the European Chamber of Commerce in Korea (ECCK), another major foreign chamber in the country.

ECCK ECHOES THE CONCERN

The ECCK took particular issue with the amendment to Article 2 of the Trade Union and Labor Relations Adjustment Act, which would redefine “employer” to include any person or entity that “substantially and specifically controls” a worker’s conditions, even if not party to a formal employment contract.

The ECCK said this change risks undermining the legal clarity required for business operations and warned that foreign firms could reconsider their presence in Korea due to exposure to potential criminal liability under the legislation.

The ECCK urged lawmakers to reconsider the amendment, warning it could threaten employment prospects for both current and future workers.

The proposed labor law changes have also drawn consistent opposition from Korean business groups since their introduction last year.

Critics argue that the expanded definition of employer and increased liability provisions create unnecessary legal ambiguity.

Write to Si-Ook Ahn at siook95@hankyung.com

Sookyung Seo edited this article.