Back in the days when I was a corporate drone in Tokyo, I had a wonderful secretary who had the good fortune to get pregnant. Bad news for me, though, since I had to endure a series of temps, some good, some bad, and one who marinated herself in enough perfume to make everyone ill. But what I found most annoying was that each time the HR department hired a new temp, they never gave me a chance to interview her first — I would show up at work one day and there she would be. Some years later, I finally understand why I was not able to meet the temps first: It would have been against the law.
The use of temporary (or “irregular”) workers is subject to a Byzantine set of statutes, regulations and official guidance that can be a minefield for just about anyone trying to do business or work in Japan, whether they be consultants, multinational corporations or English teachers. Japan is famous for its system of “lifetime employment,” though in addition to being a misnomer (because of relatively low mandatory retirement ages at most institutions), it is a status many workers do not actually enjoy. Nonetheless, the rules of employment law in Japan have developed largely around this system, in which workers are hired right after they graduate from high school or college and remain with the same company for decades. Essentially, employees are a long-term fixed business cost, and efforts by companies to expand their work force without expanding fixed costs have been the subject of a game of regulatory cat and mouse between employers and labor bureaucrats for over two decades.
Under the lifetime employment system, workers are not hired to perform a particular set of tasks or to fill a specific position, but rather to be a part of the corporate culture for a significant portion of their lives. As a result, the employment relationship is not defined in terms of workers performing specific tasks for a specific amount of pay over a set period of time. Rather, it exists as a changing relationship spanning decades that may involve different roles, departments and geographical locations. In this relationship the only real constant is that the employer tells the employee what to do and the employee follows these instructions. Who tells workers what to do, therefore, is a critical starting point for a great deal of Japanese employment law and regulation.
Dawning of the temp age
Being an employer in Japan involves a panoply of duties relating to workplace safety, how salaries are paid, pension and welfare contribution, and so forth. In the same way, being an employee involves being able to assert a wide variety of rights against one’s employer. Any arrangement under which an employee of Company A is being told what to do by anyone other than Company A is problematic because it muddies who is responsible to whom for these rights and duties. Not only that, such arrangements may also be illegal, since Japan’s Employment Security Act contains a basic prohibition on “renting out” one’s work force. Accordingly, telling someone to perform tasks for which they are paid — even if it is by someone other than the person giving instructions — may result in an employment relationship being found to exist where none was ever intended (by the putative employer, at least).
Because of this very basic legal issue, until the 1980s it was essentially illegal for a human resources company (or a “temp agency,” as some such companies are called in the West) to dispatch its employees to work at the direction of another company’s management, even on a temporary basis. Interestingly, one of the impetuses for change was the need to re-employ the very people who had traditionally been excluded from the lifetime employment system: women who were expected to work as office ladies for a few years until they married a male coworker and quit. It was these same women who had many of the skills that Japanese companies increasingly required as they became more active internationally from the 1960s — the ability to speak or type in English, to function as Western-style secretaries and so forth.
Under the Dispatched Workers Act of 1985, such “temporary” worker arrangements are permitted, but only for workers dispatched by licensed providers (full disclosure: I act as an outside director for Manpower Japan, a human resources company that provides such services) and only within the framework established by a seemingly impenetrable thicket of regulations. These rules are intended to ensure that the rights and duties of the dispatching company (the employer), the client company and dispatched workers are clearly defined and allocated.
The crucial 26 categories
Yet despite being provided for now by law, dispatched worker arrangements remain a highly regulated exception to the underlying principle that remains at the heart of employment law in Japan: Employees should not be told what to do by anyone other than their employer. Put another way, an arrangement meeting the many requirements of the Dispatched Workers Act is likely to be the only way for employees of Company A (the temp agency) to be told what to do by Company B (the client); any other arrangement is likely to be illegal.
Added layers of complexity arise from the fact that at first the Dispatched Workers Act only provided a limited exemption for workers having a defined set of specialized skills. The logic here is that providers of dispatched workers are providing specific skills which the client company requires. So long as the workers has those skills, the client cannot reject them for other reasons (e.g., doesn’t fit the corporate culture, etc.) like they would in a regular employment relationship — hence the prohibition on interviewing temp secretary candidates.
The list of skill sets was subsequently expanded to 26 categories, some of which, such as “filing” or “operation of office equipment” (80s-speak for “computers”), are showing their age. Further deregulation resulted in the overall system being changed from a “positive list” of exceptions (meaning that dispatched workers could only be used to fulfill the tasks on the list) to a “negative list” under which, other than types of work on a prohibited list (including those performed by lawyers, dockworkers, security personnel and construction workers), any tasks could be performed by temps.
Until 2004 manufacturing was on the prohibited list, and its removal was one deregulatory measure that allowed some Japanese manufacturers to keep making things in Japan. It also enabled the same companies to rapidly slash labor costs by terminating temporary workers in response to the global financial crisis that followed, an outcome that led to widespread concern about the social problems associated with the growing use of temporary workers and the increasing reliance of many households on so-called “irregular” employment. These concerns came into sharp focus with the 2008 Akihabara stabbing spree by a depressed manufacturing temp.
The three-year limit
Despite it being permissible for employers to use temp workers to perform most tasks, the regulations retain a distinction between the 26 categories of work involving “specialized skills” and other tasks. This creates a compliance headache for providers and users of temp workers alike. This is because temp workers can be used to perform tasks within the 26 categories indefinitely (making the commonly used Western term “temp” somewhat misleading), but for other types of work there is a three-year limit.
In other words, if companies need general workers for a prolonged period, the law expects them to hire more permanent employees. A noble goal, but in practice the distinction makes it necessary to keep track of what “26-category” workers are doing every day. If they spend too much time engaged in “non-26-category” work — taking out the trash or tidying up the conference rooms — they may become subject to the three-year maximum employment period, which applies not to the temp worker him/herself, but the tasks they perform (i.e., the three-year period cannot be reset just by hiring a different temp to perform the same duties). Once this period is reached, the temp agency is required to terminate the contract with the client company (and thus the temp); once it is exceeded, the client company may be subject to a legal obligation to offer the temp a permanent job.
Furthermore, because the details of the 26 categories are filled in largely by regulatory mandate rather than statutory law, a sudden change in regulatory policy can have significant ramifications. This was demonstrated recently when employment regulators decided that in order to qualify as “operating office equipment” (and thus being a 26-category task subject to no limits on the length of employment), temp workers had to be “thinking” when they performed tasks on a computer, not just doing mere data entry. How to manage compliance with this new requirement is a bit of a puzzler, of course, meaning that for many companies it may be safer to simply terminate contracts for workers approaching three years of service (some of whom may have developed useful expertise in a custom in-house IT system), not because of poor performance but because the company cannot afford to convert their budget for temps into an additional permanent head count to comply with this new interpretation.
The wrong type of hat
By now many readers may be thinking “Well, so what?” if they neither use nor supply temporary workers. Unfortunately, there is a host of related compliance issues outside of the regulated dispatched worker industry that may apply to anyone involved in the service sector in Japan.
One way for companies to manage their costs is to outsource specific tasks or functions to outside service providers. This is a common and legitimate business practice. But it is also possible to use the appearance of such an arrangement to avoid the restrictions imposed on dispatched workers. Questionable manufacturing outsourcing arrangements were reportedly used by some companies to keep costs down even before manufacturing was removed from the “negative list.” Such “disguised” outsourcing or contracting arrangements are illegal. The trouble is that it is often extremely difficult to clearly delineate legitimate business-to-business services from arrangements the main purpose of which is to circumvent the law.
Outside contractors and other business service providers generally offer an expertise that some companies do not want the expense of maintaining in-house, whether it is bookkeeping, plant-watering or IT system support. Since they are the experts, however, other than providing the service or accomplishing the result requested by the client (“Keep our plants alive,” etc.), they should not be subject to detailed instructions from client managers or employees.
Imagine you are in a fast-food restaurant ordering a hamburger. So long as you are just looking to pay ¥500 for a hamburger and a side of fries, you are a client and the restaurant is a provider of goods (the hamburger) and services (food preparation). However, if you go into the kitchen and start telling the restaurant workers when to flip the patties and how many pieces of lettuce to put on each bun, you are starting to act like an employer.
Unfortunately many business situations are not so clear-cut. An IT consulting firm may send engineers in-house with a multinational corporate client for an extended period to work on a systems upgrade or other complex project. These engineers may naturally form a team with client employees, becoming a tightknit group of professionals that goes out drinking together, takes turns being on call for trouble-shooting and — critically — tells each other what to do. This may be perfectly desirable from a business perspective, but it puts the client corporation at risk of being liable for an employment relationship that it did not intend. This risk can be enhanced if, for example, the consulting firm goes out of business leaving its workers with no options but to claim that their real employer was actually the client.
In an effort to provide guidance on the difference between legitimate and illegitimate contracting arrangements, labor regulators have published a list of no less than 27 criteria that need to be met. One of these criteria states that — no joke — contractor workers should not wear the same type of hat as client company employees. Most of the criteria, however, are aimed at ensuring client companies and their employees do not exercise excessive control over contractor workers. Whether they are actually helpful or not, these guidelines represent a host of compliance issues for consultants and other business service providers, since they may require ongoing monitoring of the frequency and nature of communications between contractor employees on-site and corporate clients. Effectively, it is necessary to keep confirming that contractor employees are only being told what type of hamburger to make, rather than when to flip the patties or what type of hat to wear while they do it.
What all this means for ALTs
For those not involved in big business in Japan, this all comes down to a very long-winded explanation of why some foreign language assistants may have come to find themselves in the odd position of being told not to coordinate lesson plans with or take instructions from the Japanese teachers they are supposed to be assisting. This is the relentlessly logical result mandated by the regime described in this article, as it would apply to foreign English teachers employed by commercial language schools who subcontract them out to public schools that don’t want to or can’t afford to hire ALTs directly. After all, a public school teacher telling an ALT subcontractor what to in class is not very different from the employment relationship the public school was probably trying to avoid in the first place.
That a regulatory regime with such admirable goals should lead to such an absurd result in practice may simply be a symptom of a larger social problem: the fraying of Japan’s social contract, which has long been based on the assumption that most families will be supported by a salaryman with lifetime employment. This may no longer be sustainable both for demographic reasons and because fewer Japanese companies may be able to afford lifetime employment in the face of global competition.
No amount of well-intentioned employment regulation can change the commercial and economic realities faced by employers in Japan. They can, however, make it that much harder for companies to actually do business in Japan and discourage them from hiring anyone in any capacity at all, which would be an ironic result indeed.
Colin P. A. Jones is a professor at Doshisha University Law School. Send comments and story ideas to email@example.com