Redefining “Employer”: Protecting Workers in Complex Supply Chains

Who counts as an employer?

It may seem a straightforward question, yet across Asia, the answer has a significant impact towards millions of workers. Traditional labour laws have often defined an “employer” in the narrowest sense, limiting it to the party that signs the contract or issues the pay cheque. However, the working environment today is far more complex, with work often outsourced through multiple layers of subcontractors, which obscures the direct employer-employee relationship.

Due to this limited legal definition, workers who attempt to organise or demand their rights, such as better working conditions or remedies, face significant obstacles because it is often unclear who the responsible employer is, with each party arguing that there is no direct contractual relationship. As a result, accountability is often fragmented, and workers’ rights remain precarious with no access to remedy, particularly in industries with complex subcontracting structures.

In August 2025, South Korea achieved a major legislative advance with the passage of the reformed Yellow Envelope Act. The law broadens the definition of “employer” to include any entity that has substantial control over working conditions.[1] This expanded definition includes parent companies, platform operators, and subcontractors, even if they are not party to the direct employment contract. This change aims to close long-standing protection gaps, allowing workers in indirect employment arrangements, such as subcontracting, to negotiate collectively with the principal employers who effectively shape their work terms.

This broader definition is especially important across developing countries in Southeast Asia, where contractors and subcontractors are based and play key roles in these layered work arrangements. For example, in Malaysia’s construction and electronics sectors, contractors frequently recruit and manage migrant workers through multiple layers of subcontractors[2], which means workers may never know which company ultimately employs them or is responsible for their working conditions. When abuses occur, responsibility is usually shifted along the subcontracting chain, with each party deflecting blame, creating significant barriers for workers seeking remedies.

Moreover, the prevailing economic volatility, which has forced brands to cancel or reduce orders, further encourages exploitative environments where factory owners cut costs by limiting the overtime, raising production targets, and laying off workers, often without proper compensation and severance.[3]

Redefining “employer” across Southeast Asia and beyond could mean the difference between precarious survival and dignified work for millions. It would give workers the ability to organise and bargain directly with those who truly determine their wages, working hours, and conditions. At the same time, it would encourage global brands and local operators to take proactive measures, including better monitoring, stronger compliance, and meaningful engagement with workers to address and remedy the harm.

Thus, accountability would no longer stop at the lowest rung of the supply chain; it would extend upward, ensuring that both global corporations and local contractors and subcontractors are answerable for the conditions under which their products and services are produced.

Sources:

[1] https://www.business-humanrights.org/zh-hant/%E6%9C%80%E6%96%B0%E6%B6%88%E6%81%AF/s-korea-landmark-labour-law-reformyellow-envelope-law-curtails-corporate-damages-claims-against-unions/

[2] https://www.researchgate.net/publication/281736757_Migrant_Labour_and_Issues_on_Outsourcing_System_in_Malaysia

[3] https://cleanclothes-ea.org/node/84