The past year has been anything but business as usual for the financial industry. Faced with a frosty economic climate, financial service companies have been busy chopping dead wood. Last year, 200,000 financial service jobs ended up on the cutting block worldwide.
In Japan, that meant layoffs at famous firms including Morgan Stanley, Citigroup, HSBC Holdings, Mizuho Financial Group, and the not-so-famous, such as Spanish bank Bilbao Vizcaya Argentaria.
At Goldman Sachs Japan, things became so unusual that some of its staff even took the remarkable step of unionizing after the firm’s attempts to force workers to voluntarily resign — and thus sidestep the notoriously tough restrictions on layoffs under Japanese labor law — apparently backfired. Instead of quitting, the company’s actions spurred some employees to heed the call for workers of the world to unite, and they formed what’s believed to be Goldman Sachs’ first-ever employee union.
Goldman, known for its close connections to governments and the most powerful corporations, has been cutting jobs worldwide. According to Bloomberg Businessweek, the financial giant eliminated 2,400 jobs in 2011 in response to a 26-percent drop in revenue. Goldman Sachs Japan representatives declined to divulge how many of its 1,300 employees have received pink slips.
The first round of layoffs at Goldman Japan occurred in June 2011. Adam, an employee fighting dismissal who asked to use a pseudonym to offer the union’s side of the story, says that many of those let go were workers who took paid vacation or unpaid leave following the Great East Japan Earthquake of March 11. After the disaster, Goldman Japan refused to allow employees to work remotely and told those who wanted to be with their families to take vacation time or unpaid leave, CNBC’s NetNet blog reported.
“Almost anyone who took time off from the company after the earthquake is no longer around right now,” says Adam, who claims to know four such workers who lost their jobs with Goldman in June. A second round of layoffs took place between mid-August and mid-September.
Adam speculates that since Goldman aimed to cut 10 percent of its global staff, Goldman Japan is looking to do its share, cutting about one-tenth of its workforce. “As far as I know they distribute the numbers quite evenly.”
The chilly business climate also led to an icier approach when laying off personnel.
“There has been an intensity and viciousness that has become noticeable,” says Timothy Langley of Langley Esquire, a former U.S. lawyer who has consulted with some of the laid-off Goldman Japan employees.
The turmoil at Goldman Japan highlights differences in the way companies often lay off Japanese and foreign employees, as well as the strict Japanese laws surrounding employee dismissals.
Jun Kabigting, managing director of HR Central K.K., a human resources consultancy based in Tokyo, says the law requires companies to treat Japanese and foreign employees the same. But, because of the stigma to losing a job in this country, “Japanese employees will tend to hang on with their jobs.”
Because of this, some companies may offer “extra or more Japanese ways of providing a softer landing for their Japanese employees.”
However, says Kabigting, “Normally, the contents of this package is protected under strict confidentiality agreements, so you won’t find solid evidence on this out there.”
Adam describes how Goldman Japan delivered the pink slips during the last round of layoffs.
First, a manager calls the targeted worker in for a meeting. At the meeting, says Adam, they are told, “Your position has been made redundant, we thank you for your effort. It’s nothing to do with your performance.”
While the worker receives the bad news, Goldman Japan cuts off their access to the company computers. The worker then packs up their personal belongings and meets with an HR representative who collects their employee ID, keys, and security tokens for remote computer access.
Finally, the HR representative gives the worker a “mutual separation agreement,” which contains a checklist of items including the amount of severance pay, company offers of support in job hunting, and a notice not to discuss terms of the dismissal. Workers are given a week to sign the agreement.
Kabigting describes the deals as “an insurance policy against lawsuits for the company” but explains that companies can’t force employees to ink the agreements. During the second round of layoffs, three employees did just that and refused to sign on the dotted line.
The three holdouts soon found themselves fighting a cold war with Goldman. Unlike workers laid off in the first round, says Adam, he and others found it difficult to negotiate better terms for their dismissal. “One moment you are a valued employee and the next moment they treat you as the enemy,” he says.
During phone calls to Goldman Japan, the targeted employees confirmed that their dismissal wasn’t an issue of poor performance. During negotiations to get their job back or a severance package closer to what they believe to be the industry standard — at least one month per year’s service — the company extended the deadline, giving them a month to sign.
However, Goldman Japan failed to significantly improve the severance packages. Adam explains that the company told them to accept the deal because that was what Goldman was offering, and “It’s the same for everybody no matter where they are in the world.”
Adam says that after the month deadline passed, the company suddenly changed the reason for the dismissals and said it was firing people for poor performance. “All they did was said it’s a performance issue and waved some folders in front of us, saying, ‘These are all your performance issues right here.’ “
He adds that the company also began justifying the dismissals by claiming that, because of the high salary they receive, anyone “who joins Goldman Sachs implicitly accepts that they can be fired at any point in time.” Adam counters, “People are paid a higher salary because of their particular skill set, not because of an implicit agreement to allow the firm to fire them whenever they want.”
At the end of December, with negotiations going nowhere, the employees fighting dismissal joined the National Union of General Workers Tokyo Nambu (NUGW).
Asked why he joined the union, Marcus, who also spoke on condition he could use a pseudonym, says he felt overwhelmed and underequipped to fight Goldman as an individual. “It got to the point where I was standing on my own and they were throwing all these people at me — I needed that foundation.”
Adam concurs. “If Goldman Sachs had just treated us with respect and dignity, there would have been no reason to join forces as allowed under Japanese law simply to protect ourselves.”
Goldman Sachs Japan didn’t take kindly to its employees unionizing, says Adam. “That’s when they called the lawyers and tried to fire us.”
Reached by telephone, a Goldman Sachs Japan representative said the company would like to refrain from commenting on the issues raised in this article.
The frozen negotiations heated up with the introduction of the lawyers. “Pretty much once they brought in the lawyers, they turned up the intimidation tactics,” says Adam. “The lawyers right off the bat told us we are bad performers and the company is entitled to fire any employees they see fit.”
According to Langley, Goldman’s choice of law firm, Freshfields Bruckhaus Deringer — “one of the best law firms in the world” — was a “kind of subtle intimidation tactic” in itself. A Freshfields spokesperson declined to comment on the firm’s involvement in the dismissals.
Some of the employees also claim to have faced intimidation from Goldman Japan. One union member’s real estate agent contacted the employee in the middle of January and said that Goldman would no longer serve as guarantor of his apartment, so he and his family would have to move out in February, Adam explains.
Adam also says that the Goldman HR department withheld a verification of employment letter required for a member’s Japanese permanent residence application. When it delivered the initial layoff notice, the company told the employee they would still issue the letter, but the firm failed to approve it after the employee refused to sign the separation agreement.
Goldman Japan also told union members to file their own taxes because they were no longer company employees.
Two months after joining the NUGW, the Goldman employees took the additional step of forming their own union under the Tokyo Nambu umbrella. On Feb. 23, Nambu sent official notice to the company of the formation of the Goldman Sachs Japan Employee Union branch (GSJEU).
The GSJEU consists of workers below management level who are employed by one of the four Goldman Sachs subsidiaries in Japan (Goldman Sachs Securities K.K., Goldman Sachs Asset Management K.K., Goldman Sachs Realty Japan K.K. and Goldman Sachs Japan Holdings, Ltd.). According to a union press release, “This is, as far as we know, the first union in the world consisting of GS employees.” Fearing retaliation from Goldman Japan against undeclared members, the union declined to disclose the size of its membership.
In the middle of January, Goldman Sachs issued the employees with a notice of termination dated Feb. 11. At a meeting last Friday, Goldman Japan representatives and the lawyers reiterated that the terminations had gone into effect. Salaries deposited into the union members’ accounts the same day only paid up until Feb. 11, and the company cancelled their medical insurance.
However, at the end of the Feb. 24 meeting the company said they still hoped to negotiate a monetary settlement with the union members and wanted to hear an offer from the union. The union is also waiting for Goldman Japan to send documentation to the union office formally confirming the employees’ termination.
For Marcus, the manner in which Goldman Sachs is trying to carry out the layoffs is more upsetting than the layoff itself. “I understand that’s how business is, that’s totally fine with me. But just the way it has been handled is just totally unacceptable,” he says. “That’s why I’m still fighting.”
Under Japanese labor law, there are right and wrong ways to fire workers. However, foreign workers may not know their rights. “The Japanese HR deal with Japanese employees a little bit differently,” says Langley, because “the foreign staff generally don’t know any better.”
“The foreigners are at a real disadvantage and the companies use that disadvantage to their maximum benefit,” he adds.
In an editorial for The HR Agenda Magazine titled “Letting Go of Employees: The Japanese Way,” Kabigting, also chief community officer for The Japan HR Society, writes that when laying off workers in Japan for economic reasons, there “must be a business necessity to resort to the reduction of personnel,” and companies must take comprehensive steps before actually laying off workers. Companies should institute a hiring freeze, reduce overtime and executive salaries, transfer employees, not renew those on fixed-term contracts, and solicit voluntary retirement.
With Goldman Sachs setting aside $10 billion for bonuses in 2011, union members feel Goldman Japan has failed to take the necessary steps under domestic law to justify layoffs.
On the GSJEU Facebook page, a union member writes, “Goldman Sachs isn’t going bankrupt by a long shot. Instead, they are globally cutting costs in order to justify mathematical projections that justify top bonuses. This is simply an undeniable fact.”
Similarly, if a company wants to lay off an employee for reasons of poor performance, there are a number of steps that must be followed. According to Kabigting, dismissing a worker for poor performance in Japan is “a long and bloody way to go”. “The burden of proof lies on the employer to prove beyond reasonable doubt that an employee is being dismissed because of poor performance.”
Proof typically requires giving a worker the chance to improve their performance “over a reasonable period, usually several months if not an entire year.” Companies must also observe “progressive discipline” measures such as warnings, suspensions and pay cuts set out in the company’s work rules, says Kabigting.
In the first meeting in the layoff process at Goldman Japan, when employees are informed of their dismissal, “It’s quite clear in the meeting it’s not a performance-based issue,” says Adam. “It’s a redundancy issue. And it’s a mutual agreement, although there is nothing mutual about it.”
In a press release Thursday, the GSJEU argued that the dismissals are without legal merit. “In Japan, there is no rational legal reason for these dismissals, so the four Japanese subsidiaries have instead employed a technique of putting pressure on employees to voluntarily resign. GSJEU is firmly opposed to such measures by the company.”
Asked why Japan Times readers should worry about what happens at Goldman Sachs, Adam says, “For sure, other companies are watching and taking notes from Goldman’s example. This could get significantly worse if it was not brought to light.”
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