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Labor law reform raises rather than relieves workers’ worries

by Hifumi Okunuki

A new specter hangs over Japan: the specter of insecure employment. The source of this insecurity is the August 2012 reform of the Labor Contract Act related to fixed-term employment. Due to take effect April 1, the thrust of the reform is as follows:

1. Workers employed on fixed-term contracts for five years must be granted open-ended employment if they apply for it (Article 18).

2. Establishes clear legal parameters for refusing contract renewal, or yatoidome. (Article 19). (Note: This has already gone into effect.)

3. Prohibits groundless linking of fixed-term employment to unfair working terms (Article 20).

Workers with open-ended (kikan no sadame no nai koyō) and fixed-term employment (yūki koyō) face disparities that don’t logically follow from the simple fact that open-ended employment has no end date. The first is pay. Employers tend to pay their yūki koyō workers a good deal less than their permanent workers. Fixed-term workers tend to be given less professional responsibility, fewer or no promotions, and less or zero pay hikes, bonuses and severance pay.

Japan’s largest retailer reportedly pays winter bonuses of between ¥400,000 and ¥500,000 to many of its permanent staff, and ¥20,000 to fixed-term employees doing the same work. On top of that, fixed-term workers face layoff anxiety each time their contracts come up for renewal, effectively meaning it’s impossible for them to make any long-term plans in their lives.

The original purpose of yūki koyō was presumably to enable employers to find workers to complete work projects that themselves were of fixed duration. In that way, the term of the contract would reflect the time-fixed nature of the work itself.

Yet companies routinely use temporary contracts for work that continues far beyond the end date. They do this to slash labor costs and to shirk all social and economic responsibility for their employees — a responsibility that firms are expected to take seriously in Japan.

Last August’s reform purports to “relieve the nonrenewal anxiety of workers on fixed-term contracts, rectify unfair working conditions justified by the fixed-term relationship, and to realize a society where workers can keep working without anxiety.”

However, even before it kicks in, many employers are bludgeoning the spirit of the reform. Far from increasing job security, companies are scrambling to set up mechanisms to kick out their workers before five years elapses. Employers are citing the new law to justify three-year limits on renewals, and even no renewals at all.

Gone are the days when employers equated “human resources” with “human treasure,” punning on the word jinzai — the days when treating workers with dignity and respect was the secret of corporate success. Overseas commentators once heaped praise on the three sacred treasures that sustained postwar Japan’s rapid economic growth: lifetime employment, seniority pay and company unions (see Ezra F. Vogel’s 1979 book “Japan as No. 1″).

Japanese workers were often disparaged abroad as “economic animals.” But the trade-off was that in exchange for bearing long working hours and the arbitrary dictates of the employer, and with the support of the “three treasures,” the fanatical salaryman could count on “secure, permanent employment.”

Those days are gone. As of March 1, the ranks of fixed-term workers stood at 14.1 million, or more than 25 percent of Japan’s total workforce of 54.52 million, according to a Ministry of Internal Affairs and Communications study. With 1 in 4 workers on a fixed-term contract, such a basic desire as job security is edging out of reach, and workers are more atomized than ever. This does not bode well.

And that’s not all. In addition to job security, the principle of equality between worker and employer, a founding principle of Japanese labor law, has been reduced to a husk of its former self. Imagine the effect nonrenewal anxiety hanging over the heads of workers must have on their workplace behavior and relationship with management. They will have to put a great deal of effort into making sure they stay on their boss’s good side.

This state of affairs naturally casts a dark shadow over union activism. Can workers in fear for their jobs band together and raise their voices to assert their rights? Some may have the courage, but many others will take the safe, silent route.

So on top of everything else, this legislation will have a chilling effect on union activism among those on fixed-term contracts. One unionized company has even resorted to putting all new hires onto six-month contracts with no renewal whatsoever. The purpose is to prevent further unionization from gaining a foothold.

Those who will work only six months at a company are unlikely to join a union and fight for better conditions. So the employer now simply sits back and waits for existing members to fall away due to natural attrition. Few drafters of this reform considered the potential abuse of fixed-term employment for the purpose of union-busting.

Having read this far, you will be forgiven for thinking that yūki koyō has no up-side. However, looking at the glass half-full, if you somehow make it to the five-year mark, you will find yourself in a tenured position, unable to be dismissed without legitimate reasons according to the law and social norms. For the employer, this amounts to a loathsome shackle that prevents easy layoffs.

The new law also makes nonrenewal — yatoidome — illegal if there is good reason to expect renewal. What constitutes “good reason” belongs to the notorious gray zone of Japanese law, meaning different judges will rule differently. The law also prohibits unreasonably low working conditions for fixed-term employees compared with regular employees. Again, “unreasonable” remains undefined.

At the end of the day, I believe the reform is irredeemable. To really fix things, we need to prohibit fixed-term employment itself (in most cases) — what is called “regulating at the entrance.”

Let’s look at a legal case study.

The plaintiff started with a six-month contract, then a yearlong one, with publisher Akashi Shoten. Three months into the second contract, the plaintiff and 21 other employees unionized. The plaintiff became an executive of the local union.

When the next renewal period came around, Akashi Shoten management offered the plaintiff a contract with an explicit nonrenewal clause. The plaintiff tried to negotiate a renewal without the new clause, but management held firm. The plaintiff signed the contract but later sued to overturn the nonrenewal.

Tokyo District Court ruled on July 30, 2010, that the plaintiff had in effect been compelled to sign the contract with the nonrenewal clause. The judge also ruled that the yatoidome was invalid as it lacked objective grounds according to social norms, meaning the same bar had to be used as for a dismissal of a permanent employee.

Although not taken up by the court, the publisher also discriminated against other union members and executives. Many were shocked that Akashi Shoten — this paragon in the arena of human rights, famous for protecting the weak and fighting discrimination — was in fact union-busting.

It’s important that we learn from examples of companies using fixed-term contracts to crush unions. Naturally, the best way to fight back is to unionize — and fast.

Hifumi Okunuki teaches constitutional and labor law at Daito Bunka University and Jissen Women’s University, among others. She also serves as paralegal for Zenkoku Ippan Tokyo General Union. On the third Tuesday of the month, Hifumi looks at famous cases in Japan’s legal history to illustrate important principles in labor law. Send your comments and ideas to community@japantimes.co.jp .