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Lado’s victory and demise weren’t without their lessons

by Patrick Budmar

Special To The Japan Times

With decreasing salaries and eroding job security, it may seem as if little has improved for instructors working in Japan’s eikaiwa (English conversation) industry.

Full-time contracts, which are needed for enrolment in the shakai hoken (health and pension) program, remain elusive. However, there was a brief moment in 2007 when that could have changed.

While large eikaiwa schools such as Nova focused on the quantity of students, small companies such as Lado International College of Japan catered to a niche customer base that concentrated on quality.

Named after Robert Lado, an American expert on modern linguistics who received a honorary doctorate from Sophia University in Tokyo, the eikaiwa school grew to have 4,000 students studying across four locations: Osaka, Nagoya and the Shinjuku and Ginza areas of Tokyo.

In addition to the connection with Lado, the institution used its strong link to Georgetown University in Washington, D.C., to stand out in the market.

David Kleyn, the operations manager and head recruiter at Lado from 1996 to 2006, says the company enjoyed a good reputation as a conversation school and strong candidates would apply for work.

“We were fortunate in that Lado offered an above-average work environment: schedule flexibility, overtime and a basic remuneration package,” he says. “This allowed us to select the best applicants and then only hire the best of the short-listed applicants.”

Lado schools in Japan were mostly run in an autonomous manner. Teachers and staff were in control of everything from scheduling and teaching lessons to payroll and administration.

Not only was management largely absent at Lado, but Louis Carlet, executive president of Zenkoku Ippan Tokyo General Union (Tozen), says it was “pretty much unnecessary.” [Tozen also represents workers at The Japan Times.]

“It also meant the teachers and staff socialized and worked well together,” Carlet says. “This made it very easy to build solidarity between the teachers and staff.”

A setup like this is largely unheard of at most eikaiwa schools, where the instructors and staff are often separated.

Carlet says this typical approach usually leads to Japanese staff identifying with corporate management, while teachers may feel “exploited and left out.”

“Teachers often get paid more, but without shakai hoken, job security and bonuses or severance pay. So both sides tend to feel short-changed,” he says.

The casual work environment at Lado came to an end when the company’s ownership changed hands and the new management decided they wanted to get involved in the running of the schools.

The new management also decided to make other changes, such as introducing teacher evaluations, which Carlet says “caused an uproar” among the workforce.

Instructors responded by turning to Tozen, then known as the National Union of General Workers (NUGW) Tokyo Nambu, to form a local chapter of 52 members within the union in early 2007.

Although the General Union in Osaka was not directly involved with the Lado union in Tozen, it provided additional assistance.

The Lado union approached the company with a set of demands expecting a big fight, but Carlet, who was the case officer, says the negotiations resulted in a swift victory.

On April 2, 2007, Lado management and the union signed seven labor-management agreements (LMA) that effectively changed the status of all instructors from temporary to permanent. Additional victories were won for the Japanese staff.

Winning permanent employment for all teachers at an eikaiwa company was unheard of at the time, and what made it more significant was that no lawyers were consulted and the case never went to court.

As for how the victory over Lado came about, Carlet says it was due to nearly all of the instructors and all of the staff unionizing and showing solidarity.

“When management offered something good for teachers but not for staff, the teachers protested,” he says. “When the company offered goodies to the staff but not to the teachers, the staff refused to budge. It was truly beautiful — and how a union ought to function.”

At the time, the win against Lado was labeled as “historic” by the union, and hopes were high that this would lead to a domino effect for further reforms in the eikaiwa industry.

“It would have served as a fantastic illustration of what a union can do, particularly when staff and teachers join forces,” Carlet says.

In the wake of the win, however, Carlet was informed by Lado management that it could not pay wages and asked for a delay, which the union agreed to.

When the deadline for payment passed, union members went on strike in both Tokyo and Osaka on April 4, though it would also be the same day Lado declared bankruptcy in the Tokyo District Court and shut down operations.

Terrie Lloyd, author of the “Terrie’s Take” insider newsletter on JapanInc.com, estimated Lado’s debt at the time to be in the range of ¥1.8 billion to ¥3.3 billion.

Lloyd had in fact received an insider tip at the start of 2007 that Lado was in trouble, but he was initially hesitant to take the information at face value.

“Japan was still in recovery mode, the economy started to turn around mid-2004, and so there was high demand for bilingual employees,” he says. “Career development was one of the main target demographics for Lado.”

Looking back, Lloyd says Lado had likely been in financial trouble for quite some time, and had heard of “aggressive” sales techniques being employed in order to keep the business afloat.

While the union can not be blamed for Lado’s poor financial state at the time, Lloyd speculates the union asking for more money may have contributed to the company’s demise.

“It’s a hard call when employees know they are right, but don’t press their case so that they can keep their jobs,” he says. “Because of likely feudal, defensive attitudes by the management, they may never have been allowed to learn the real situation even if they had been more compromising.”

Carlet, however, says the union knew Lado was in trouble during the negotiations, and that may have been the reason why it wanted to settle so quickly.

He denies that the union was the proverbial straw that broke the camel’s back, and instead characterizes the union victory as “the last chance to save the company.”

“The reason the company went bankrupt was that the new management interfered too much and made too many bad decisions,” he says. “With the LMAs, we had a chance to turn the company around and it didn’t cost the company anything.”

Kleyn admits that Lado had been struggling “for some time” under the original management, and the situation did not improve after the company was sold and received new management.

“The new management was fantastically arrogant,” he says. “Some destructive and costly decisions were made and the end result was failure.”

Carlet instead puts the blame on Lado’s decision to license Marvel’s Spider-Man character for marketing and promotion purposes, a costly move that Lloyd also expects was the main cause of the school running out of cash.

The union’s victory over Lado and the subsequent closure of the company only generated a modest amount of attention at the time, an outcome Lloyd attributes to the small size of the company and affected students.

When the Nova collapse happened six months later, an event in which 4,500 instructors and 2,000 staff members lost their jobs nationwide, Lado was completely forgotten.

In hindsight, Carlet says Lado’s demise foreshadowed Nova’s, and there were similarities in the bankruptcies of both companies.

Lloyd was also not surprised that Lado and Nova went bankrupt in the same year, though he clarifies that “one did not cause the other.”

The economy experienced a mild recovery in 2006 and 2007 but, Lloyd says, the previous decade had seen a shift away from full-time contracts and toward employing teachers part-time and on temporary contracts to teach children, a highly sought-after market for English schools considering the falling birth rate.

“The market segment pressures were certainly there, so these two companies went under and others were forced to consolidate or seek new funding,” he says. “At the same time, both companies had internal problems.”

Despite the win by the Lado union, the resulting bankruptcies of both Lado and Nova caused the operators of English schools to become more cautious and did not help change other companies’ employment practices.

Lloyd’s observation is that the government is likely aware of the current situation, but prefers not to do anything that may “gut the English school market.”

“Learning English is a strategic objective for the government, and so they have decided to leave things the way they are,” he says.

The only major change Lloyd has seen in the eikaiwa market since then has been in the way students pay for their lessons, namely the tactic of paying lump sums up front that has been mostly eradicated , though that was related to Nova and not Lado.

As for how differently things would be if Lado had not gone under after the labor win, Carlet hoped it could have inspired more people to band together with their coworkers to build a union.

“I think it would help us build the union much stronger, something that of course could still happen,” he says.

Send comments on this topic and story ideas to community@japantimes.co.jp.

  • Mario Leto

    I was the founding president of the Lado union and would like to clarify a couple points. First and foremost, the union was not simply asking for more money. The union was asking for benefits, openness, equality, a share in the decision-making, and–this is important–a look at the company’s finances. The union was willing to work WITH the company if proof of the company’s declared financial difficulties was shared with union officials. This simple yet potentially job-saving demand was never met. As equally important is the union’s decision to strike AFTER finding out about the company’s intent to declare bankruptcy the following day. This too is important. The union did not precipitate bankruptcy. Declaring bankruptcy had already been decided. In fact, the union’s decision to strike most likely saved students millions of yen: The company had been signing contracts and taking money the very morning of the strike, knowing full well that bankruptcy was to be declared the following day. Also consider that the union had forestalled going on strike several times previously in the interest of finding a solution to the stalled negotiations. Management gave nothing. Unfortunately, some would like to blame the union for the company’s demise, but that is clearly not the case. The only regret we the union had was not acting more swiftly and decidedly. If such had been the case, even more time, money, and professional integrity could have been saved.

  • Tony Dolan

    “Tozen, then known as the National Union of General Workers (NUGW) Tokyo
    Nambu, to form a local chapter of 52 members within the union in early
    2007.” NUGW Tokyo Nambu and Tokyo General Union (Tozen) are and have always been completely separate organizations. The Lado branch was part of NUGW Tokyo Nambu. Tozen wasn’t founded until after the dispute at Lado.

  • happyjapan

    This is a terrible article, and Lloyd is a disgrace for pushing the exploitation of foreign workers. Blaming workers demands to become permanent employees as being the reason for bankrupting a company is hogwash.It’s the law. Therefore, if it was enforced, ALL companies and employees working full time would have to do it, thus negating any commercial advantage. Also, authorities are perfectly happy to take eikaiwa employees taxes and mandatory health contributions, so not safeguarding foreign teachers’ rights and entitlements is pure hypocrisy.
    The REAL reason why the Japanese government are “reluctant” to enforce giving eikaiwa teachers full rights is that they don’t want to deal with foreigners staying in Japan long term. It’s racism pure and simple. They are more than happy to support eikaiwa employers who siphon off massive profits, bankrupt the company and then blame employees for asking for fairly minimal protections.
    The bottom line is that the eikaiwa industry is an exploitative, racist system, and people should simply not work in it. They shouldn’t come here to work and they should leave if currently here. What I do agree with Lloyd about is that the government is aware of the situation in eikaiwa and will do nothing to change it. There you have it. The ONLY way that the Japanese government will enforce workers’ rights is that if they HAVE to in order to attract foreign teachers.