[Edaily Reporter Byung-ho Jang ] Concerns are mounting that tensions between workers and small business owners could deepen as the government pushes to introduce the “Presumption of Employee Status” system following the “Yellow Envelope Act.” Critics have pointed out that as lawsuits increase between small business owners and workers—the “weaker parties”—the burden on both sides will actually grow, while only lawyers stand to benefit.

According to political circles on the 2nd, an amendment to the Labor Standards Act that includes the “presumption of employee status” is currently pending in the National Assembly. Under this system, individuals who provide labor to another person’s business—such as freelancers, platform workers, and special employment workers—are presumed to be employees if they dispute their employment status, and the employer must provide evidence to the contrary. Currently, the party claiming to be an employee must prove that they are subject to the employer’s direction and supervision.

The government is pushing for the introduction of this system with the aim of protecting those who, despite having freelance contracts, actually work like employees. In particular, it views “fake 3.3 contracts”—where workers are contracted as self-employed individuals and 3.3% is withheld from their compensation as business income tax to avoid paying severance pay and social insurance premiums—as a problem. The Ministry of Employment and Labor is pushing for legislation within the year, citing the need to protect the rights of 8.69 million non-standard workers.

The business community fears that if the burden of proof regarding employee status shifts to employers, disputes over employee status will increase after termination. They argue that if workers are recognized as employees, not only severance pay and statutory allowances but also issues related to social insurance premiums and tax settlements may arise, potentially concentrating the burden on small businesses that lack the resources to handle legal challenges.

These issues were also raised during the “Yellow Envelope Act Season 2” forum held that day at the National Assembly Members’ Office Building by Rep. Park Soo-min of the People Power Party and the Economic and Social Research Institute. Professor Kwon Hyuk of the Graduate School of Labor Studies at Korea University, who delivered the keynote address, pointed out, “What we need to focus on in South Korea’s labor relations is not the relationship between labor and management at large corporations, but the relationship between small-scale self-employed individuals and workers—the ‘weaker parties.’” He added, “The issues facing these weaker parties are not simply a matter of expanding labor laws; they are problems that the state and society must step in to address.”

Professor Kwon emphasized that the presumption of employment applies not only to large corporations but also to small business owners, and he criticized the proposal, saying, “This would only be a good solution for small-time lawyers.” He also argued that autonomous work is on the rise due to the spread of the digital and platform economy, stating, “If the way people work in the digital environment has changed, the way we protect them must also change.”

The concerns raised by companies and small business owners were also specific. Kim Hong-sung, head of the Labor-Management Relations and Legislation Team at the Korea Employers Federation, pointed out that if a tutor working under a freelance contract is recognized as an employee in a severance pay lawsuit, companies with similar contracts might be forced to change their workforce management practices. He expressed concern, saying, “Ultimately, this will lead to a reduction in jobs within this industry.” Lim Su-taek, Senior Vice Chairman of the Federation of Small Business Owners, also reported that when he explained to private academy operators in Yongin City the potential burden of severance pay and the four major social insurance premiums, they reacted by asking, “Would it be better to just close down now?”

Opinions were also raised that, rather than shifting the burden of proof, procedures for securing evidence should be improved. Byeon Jae-hyun, Director of the Future Thinking Job Center, cited cases where workers found it difficult to obtain data because access to work systems was blocked after retirement, and pointed out that orders to submit documents and requests for data from labor inspectors should be more actively enforced.

Rep. Park stated, “Freelancers, platform workers, and workers in special employment arrangements must be protected,” but criticized the “presumption of employment” system, saying, “It is a greater cause for concern.” He pointed out that the ambiguous implementation guidelines of the “Yellow Envelope Act” are fueling legal disputes, remarking, “A world where only lawyers benefit has dawned.” He went on to criticize the legislative approach of forcing workers into the framework of existing laws without establishing specific protective measures tailored to diverse forms of employment, arguing that the passage of the “presumption of employment” bill must be blocked.

After the forum, Rep. Park met with reporters and stated regarding the currently proposed bill, “We will block its passage in the Labor Committee.” The People Power Party also plans to take action. Jeong Jeom-sik, the People Power Party’s floor leader, stated, “For small business owners, even dealing with a single dispute is no easy task,” adding, “We must reflect the characteristics of each industry and clearly define the scope of application and criteria. The People Power Party will also make every necessary legislative and policy effort.”