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The Special Dismissal Zone: where legal protections no longer apply

by Hifumi Okunuki

I couldn’t believe my ears when I heard about the government’s recent proposal to set up a Special Dismissal Zone on Japanese territory. “A what?” I hear you cry.

The Shinzo Abe government wants to make Japan “the most business-friendly climate in the world.” In May, he set up a National Strategy Special Zone Working Group, made proposals to local governments and corporations, and announced that special zones, or tokku, for health care, agriculture, education and other areas will be established.

The plan is to be submitted to an extraordinary session of the Diet in autumn as the Industrial Competitiveness Strengthening Bill. Most controversially, a so-called Special Employment Zone is among the options being considered, an idea that has already been dubbed the Special Dismissal Zone, or kaiko tokku, by the media.

Currently, throughout Japan, employers must overcome several high hurdles before they can dismiss an employee legally. In short, you can’t fire someone without a damn good reason.

The thinking for the Special Dismissal Zone, however, is that rules about sackings would be relaxed roughly to the point of “employment at will,” as is practiced in some parts of the United States. Within the zone, the idea is that if the worker and employer agree ahead of time on what behavior warrants dismissal, then such a dismissal under those circumstances will always be permitted, regardless of bothersome legal protections outside the zone. For instance, if employer and employee agree that the worker can be dismissed for turning up late once, then the employer can legally sack that worker when he clocks in at 9:30 for the very first time.

A second special feature of this zone would be that work hours would not be restricted for employees earning above a certain salary — currently set at about ¥8 million a year. That means employers could theoretically make their employees work all night and not pay them a single yen for the overtime. Such a high salary is safely beyond the grasp of most of us working stiffs, but keep an eye out for that falling floor — and watch out as that zone spreads.

A third sweetener for these business oases: The “five-year rule” wouldn’t apply if foreign workers make up more than 30 percent of an employer’s work force. This rule refers to the change to the Labor Contract Law (Article 18) that gives workers the chance to win permanent status if they stay with an employer for more than five years. I spoke about the problems emerging with this legal change in March (“Labor law reform raises rather than relieves workers’ worries,” March 19). Whatever the shortcomings of this reform, the special zone would suspend this protection to all company employees if a firm’s gaijin quota tops 3 out of 10.

Responding to the announcement of the kaiko tokku plan, Osaka’s firebrand mayor, Toru Hashimoto, on Sept. 11 announced that Osaka Prefecture and Osaka city will jointly submit a proposal to the Cabinet Office to set up a zone that would encourage performance-based wages, to be called the Special Challenge Zone. This zone would include Osaka’s economic heart, the Midosuji area. Companies paying above a certain wage would enjoy relaxed work-hour restrictions and the right to fire at will.

Osaka prefectural Gov. Ichiro Matsui stressed that the zone would only affect elite workers. “This is for highly skilled professionals, not for low-income workers,” he said. “This enables mismatches between employer and employee to be rectified by moving around high-income, highly skilled, self-confident workers. This is not for workers barely making ends meet.”

For workers, these plans come as a bolt out of the blue. What is going on here? Well, according to the government, clarifying dismissal rules will boost the development of new industries and attract start-up and foreign firms, creating a healthy investment climate in Japan for the world’s corporations.

Many business and political leaders whinge about how hard it is to fire someone in Japan. “It is harder to dismiss a worker in Japan than in any other country in the world,” they whine. “Japan is going to be left behind.” Is that really the case?

Article 16 of the Labor Contract Law states: “A dismissal is invalid and the right to dismiss has been abused when it lacks objective, rational grounds and cannot be deemed reasonable according to social norms.” I took this up in my February 2012 column (“Oversleeping radio anchor set tough precedent for firing staff,” Feb. 28, 2012).

In Japan, case law often leads to laws being rewritten. The wording of Article 16 has its origins in a Supreme Court case brought against Nippon Salt Manufacturing in 1975. The gist of the ruling was that employers cannot fire workers whenever they please. Since workers earn wages that form the basis for their livelihood and enable them to raise families, unchecked dismissals could lead to the breakdown of the family unit and cause instability even within society as a whole. Wages are the basis of workers’ livelihoods, so sackings should be avoided — that was the thinking behind this legal principle of kaikoken ranyō hōri, or abuse of the right to dismiss.

Business leaders and some politicians counter that the principle has left Japanese workers overprotected, and that it damages Japan’s competitive edge in the world. I must disagree strongly. Establishing the principle that you cannot dismiss a worker without good reason stabilizes industrial relations, places limits on the exercise of runaway, arbitrary power by employers, and helps preserve social harmony.

During Japan’s period of dramatic postwar economic growth, companies rallied under the slogans of “lifetime employment” and “your company is your family.” Jobs were far more secure back then. Granted, the slave-like treatment of workers during that time tarnishes the sheen of job security, but at least workers were not treated as disposable objects, to be used then tossed away like garbage.

The government and business community are swearing up and down that the new zones will only apply to elite, high-income workers. But I have no doubt that if we deregulate dismissal in these zones, the deregulation will break out into the wider world. This in turn will encourage workers to see each other as rivals rather than comrades, enemies rather than allies. When that day comes, who will be laughing from their high perch? The answer is too obvious to state.

More than 35 percent of workers in Japan are in irregular or contingent employment. Income is declining while the number of work hours and the number of workers not enrolled in the shakai hoken health and pension scheme continue to rise.

As Japan ages, more and more workers must provide nursing care to parents on top of tough, long-hour jobs. More employees are taking time off work, resigning or even killing themselves due to depression, which is now considered by some to be the national disease.

The last thing Japan needs is a Special Dismissal Zone to make workers more miserable than ever.

“Taking back Japan” is one of the Abe government’s favorite catchphrases. Around town, you see this phrase in bold letters splashed across huge posters depicting the prime minister gazing into the distance, the Hinomaru flag fluttering in the background. But I cannot see where Abe’s eyes are looking. From and to where does he want to “take Japan back”?

Hifumi Okunuki teaches at Sagami Women’s University and serves as the executive president of Tozen Union (Zenkoku Ippan Tokyo General Union). She can be reached at tozen.okunuki@gmail.com. On the third Tuesday of the month, Hifumi looks at cases in Japan’s legal history to illustrate important principles in labor law. Send your comments and story ideas to community@japantimes.co.jp.

  • Yuki

    I agree that these guys are pretty radical and dangerous. They should disband their own parties, start their private businesses incorporating their policies and see if they can thrive or not first.

  • JS

    In fact, Special Dismissal Zones already exist in Japan, where the current Japanese labor and employment laws, and their employee protections do not seem to apply. However, these Special Dismissal Zones seem to be limited only to foreign workers. This is true even in the case of non-Japanese workers who are permanent regular full-time Seishain employees, are long term residents of Japan, and have Japanese Permanent Resident status.

    I once worked for a large Japanese company in Tokyo which employed several foreigners. I was shocked when a top senior Japanese manager there told me that executive management at the company did not feel that non-Japanese workers at the company enjoyed the same protections under Japanese labor and employment laws, as were given to Japanese workers under the labor law.

    This was especially shocking to me since the non-Japanese workers at the company he was referring to who he felt were not covered under Japanese labor and employment laws were all permanent regular full-time Seishain employees.

    Sure enough, shortly after this conversation, some of the permanent regular full-time Seishain employees, who all happened to be non-Japanese, were dismissed by the company. This happened after new executive management sent by the head office decided to purge the company of non-Japanese employees. The company had no legal justification, reason or rationale to dismiss these non-Japanese employees, other than its belief that it could get away with it because it felt that the Japanese courts would be sympathetic to the company if the dismissed employees litigated their unfair dismissal.

    It was only later when it became apparent how this large Japanese company felt that it could contravene and violate Japanese labor and employment laws with impunity, and get away with it. One of the dismissed employees decided to file an unfair dismissal lawsuit against the company. The way this non-Japanese Plaintiff was treated by the Japanese legal system was horrendous. There was pressure, coercion and procedural errors and “mistakes” made at every step of the legal process to try to disadvantage the Plaintiff. The Plaintiff’s lawyers were severely pressured by the judges to settle out of court with the Japanese company, in lieu of paltry compensation offered to the Plaintiff by the company.

    It seems that the Japanese courts did not uphold and apply the Japanese labor and employment laws, or case law precedent in this instance. In addition to this, the sheer number and magnitude of procedural irregularities during the trial meant that the non-Japanese Plaintiff never stood a chance of receiving a fair hearing within the Japanese legal system. The case is currently on appeal in the Japanese Supreme Court.

    So, the Special Dismissal Zone seems to be already in place for non-Japanese workers. The question for the Japanese to ask themselves is, is this someting they want for all Japanese employees?

  • Damn-Skippy

    It is funny, already my employer violates some of the edicts that worry the author:

    “That means employers could theoretically make their employees work all night and not pay them a single yen for the overtime.”

    “This rule refers to the change to the Labor Contract Law (Article 18) that gives workers the chance to win permanent status if they stay with an employer for more than five years.”

    And I was rejected from joining our workplace union.

  • 思德

    I came from a “dismiss at will for any reason” state in the US. A company I worked for had to end an advertising department that was providing jobs for some 80 teens (canvassing) but it simply wasn’t performing anymore as they had basically exhausted all the regions to canvass and you don’t want people to be sick of your company. The crew leaders who were making a living were moved into other marketing work in the company. It sucks, nobody in management wanted to cut those jobs, but it needed to happen. That is the real world. If the business loses money on payroll it doesn’t need to, it means it can’t expand or invest in the future. If might not have been able to open a branch in another area that created a number of other quality jobs. People act like there is some Jobs Inc that is the only place you can ever get jobs and if Jobs Inc is stupid and fires you for being a minute late, there are no other jobs out there.

    Moreover, people act like a company building a reputation of being a garbage employer doesn’t affect the company. It does. Competent people will be paying attention, and will go elsewhere. They will be only able to pick over what’s left of the talent pool. Turnover will be high. It will start to affect the operations of the company. The problem is that the “cost” to the company is in potential terms, which people don’t like; people want to see *punishment* for a company being stupid. They want to see the company under duress for their decision immediately, but life doesn’t work that way.

    Regarding wage hours, I’ve known two people who make over 50k a year and I’ve also known a number of managers. If your wage starts to creep above 50k, work starts to take on more qualities than just “that place I go to make money”. it becomes more than this neat and tidy thing that ends when you clock out because you don’t get so good at something that you can be paid a high salary without it being important to you, or at least I would hope so.

    There are cultural factors at play in the Japanese workplace as well, though. I am sure there are control and power games that happen here that would never happen in the US because the workforce there is overall intolerant (or, less tolerant) of certain behavior by management.