Posco absorbs 7,000 subcontracted workers in first ‘Yellow Envelop’ test

South Korean steelmaker Posco said Wednesday it plans to directly hire approximately 7,000 workers currently employed by its subcontractors, marking the first major case of a large company bringing subcontracted workers in-house following the implementation of the revised labor law.

The measure affects subcontracted workers at Posco’s steel plants in Pohang, North Gyeongsang Province, and Gwangyang, South Jeolla Province.

Posco currently employs about 10,000 workers through partner firms at its two mills. Of those, 7,000 employees who support work directly related to on-site steelmaking operations will be brought in-house.

The remaining 3,000 workers, involved in logistics, transportation and packaging, will remain employed by subcontractors.

The scope of this recruitment carries substantial weight for Posco, whose regular workforce stands at around 17,000 employees. The number of subcontracted workers hired are equivalent to roughly 40 percent of the company’s existing full-time staff.

Posco said it will begin recruitment procedures for subcontracted workers at the steel mills who wish to join the company.

The latest measure is part of the steel giant's broader effort to address concerns over the practice of outsourcing dangerous work and to improve safety at industrial sites. It follows the groupwide plan announced in August last year to overhaul its subcontracting structure, as part of efforts to improve workplace safety.

“Through the direct hiring of employees of partner firms, we will strengthen the industrial safety system and enhance the future competitiveness of the steel business based on a mutually beneficial labor-management model,” a Posco official said.

Representatives of subcontracted workers for Posco welcomed the decision. “We expect the internal conflict caused by the prolonged lawsuit to be resolved,” the official said. “As members of Posco, we will take pride in helping create a safer workplace.”

The latest decision is expected to bring to a close a long-running series of lawsuits dating to 2011, during which subcontracted workers sought legal recognition as Posco employees because they have worked under the direction of the company. The Supreme Court in 2022 ruled that some workers had been unlawfully dispatched and should be directly employed by the company. Posco followed up by subsequently hiring 55 workers covered under that ruling, however, further lawsuits continued to emerge in the aftermath.

The decision also come after a major revision to the Trade Union and Labor Relations Adjustment Act, commonly called the “Yellow Envelope” law, took effect in March.

The revision broadened the definition of an employer to include companies that substantially control the working conditions of subcontracted workers, allowing subcontractor unions to negotiate directly with parent companies.

Posco’s move is widely seen as the first major corporate response to the revised law. Industry observers said the steelmaker appears to have acted preemptively to avoid future labor disputes and legal risks as the new rules strengthen the bargaining power of subcontracted workers and their unions.