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Two Japan Supreme Court cases clarify when discrimination against fixed-term workers is OK

by Hifumi Okunuki

June 1, 2018, is a day that will go down in Japanese labor law history. A single day saw two verdicts from two similar cases handed down by the Supreme Court, both based on the 2012 amendment to the Labor Contract Law.

The highest court in the land rarely rules on two cases on the same day, let alone two about the same issue, and on June 2, newspapers around the country — including the Yomiuri, Mainichi, Asahi, Sankei dailies and the Tokyo Shimbun — splashed them on their front pages.

Article 20 of Labor Contract Law prohibits irrational or unreasonable discrimination based on employment status, i.e., against those on fixed-term rather than permanent employment contracts.

Heady stuff, eh? OK, I know it’s not as exciting as Yuya Osako heading in the winning goal in Japan’s World Cup match against Colombia. And it’s not as serious an issue as the deadly earthquake that struck Osaka last Monday. In fact, Article 20 is even overshadowed by the five-year rule of another article (Article 18) in the same law! (See “Are university teachers in Japan covered by the ‘five-year’ rule?” Labor Pains, July 31, 2017.)

But long after these two events are forgotten, the impact of the June 1 verdicts will continue to reverberate for workers across Japan.

The aforementioned newspapers mistakenly explain that the law prohibits disparity between contingent/irregular (hiseiki) employees vs. regularly (seiki) employed ones. In fact, the two relevant groups are fixed-term temporary (yūki) employees vs. permanent (muki) ones. I hereby scold journalists for not using the proper jargon, since their mistakes will be repeated a 1,000-fold by the general public. Article 20 is tricky and complicated, but that’s all the more reason for us to roll up our sleeves and wrap our heads around it (excuse the mixed metaphor).

First let’s look at the text in (unofficial) translation:

Prohibition of working conditions irrationally determined by the employee being on a fixed-term contract

Article 20: In the event that the working conditions in a fixed-term labor contract differ from the working conditions in an open-ended labor contract at the same employer, the disparity must not be irrational in light of the operations, the corresponding level of responsibility, the work duties, the range of possible transfers and other circumstances.

The words hiseiki or seiki appear nowhere in the above text in the original Japanese. Rather, the key terms are “fixed-term labor contract” and “open-ended labor contract” — yūki and muki, respectively. An employer cannot oblige you to endure worse conditions just because your contract has an end date and your co-worker’s doesn’t — unless there is a gōritekina reason.

This “gōriteki” na-adjective comes up everywhere in laws in Japan, so it’s good to get a handle on it. It is often translated as “logical,” “rational” or “reasonable.” Discrimination in Japan is illegal unless there is a logical reason for it.

But what is a reasonable reason for discrimination? One would be that if you were making a film and casting Gandhi, for instance, it would be considered rational to shun a young woman for the part. But firing a woman because she gets pregnant would not be considered reasonable at all.

In Japan, the word “muki” for open-ended or permanent employment is not used so much by the general public. Far more common are “seiki” (regular) or “seishain” (regular employee). When ordinary Japanese hear these words, they think of the following:

Long-term or permanent employment.

Wages paid monthly rather than hourly.

Bonuses and severance pay are in the package.

Upward mobility, including promotions, is part of the package.

Broad range of heavy work and responsibility.

Long hours with some of the overtime pay included in the set salary, which is at least stable.

Technically speaking, however, it’s possible (but rare) to be a seishain on a fixed-term contract. More common are part-time workers enjoying the stability of open-ended employment.

In Japan, the difference between contingent and regular workers goes beyond just work conditions. It can indicate social status and stability, or the lack of them. Those with more stable jobs often ask why some workers are willing to put up with a job with no security: “Why don’t you find a seishain job?”; “Aren’t you ashamed to have such a temp job at your age?”; “Those in fixed-term employment have no future.”

Corporations, however, are falling over themselves to reduce the number of seishain in their employ. Contingent workers today account for 37.8 percent of Japan’ s workforce, according to an internal affairs ministry study that came out last month (www.stat.go.jp/data/roudou/sokuhou/tsuki/index.html) For women, it’s 56.3 percent. From my own union experience, I’d guesstimate that over 80 percent of foreign workers are in fixed-term employment.

As a result, workers of all ages are increasingly desperate to keep their seishain status, to avoid becoming contingent workers. The “precariat” feel they cannot consider raising a family, and are willing to take any job, no matter how hard, provided it is regular, permanent employment.

Men in particular feel they must win the bread and bring home the bacon with regular, stable income that is immune to the vicissitudes of fickle fate, in order to stake out their manhood in our patriarchal society. It’s still easier for a woman to admit to working as a part-timer.

The two cases I will discuss today involve truck drivers.

The Hamakyorex case

One plaintiff worked as a truck driver for Hamakyorex Co., Ltd., a distributor in Hamamatsu, Shizuoka Prefecture, on fixed-term contracts lasting more than five months. He claimed that working conditions that were disadvantageous compared with those of permanently employed drivers doing the same job violated Article 20.

Seishain truckers were paid a clean driving record allowance, special work allowance, lunch allowance, housing allowance, perfect attendance allowance and other allowances that were not paid to the plaintiff or any of the other fixed-term truckers. He did get a transportation allowance of ¥3,000 a month, but that compared to ¥5,000 paid to permanent employees. The big question before the court was whether these differences had a rational (gōritekina) basis.

The Otsu District Court ruled that there was no rational basis for the difference in transportation allowance. The Osaka High Court found no justification for the disparity regarding the clean driving record allowance, special work allowance and lunch allowance. However, the payment of a housing allowance to permanent but not temporary workers was ruled to be rational because the permanent drivers faced the possibility of transfers that would require moving house.

The Nagasawa-Unyu case

Three 60-year-old truckers working on permanent contracts for Yokohama-based Nagasawa-Unyu K.K. retired. They were then “rehired” on fixed-term, one-year contracts. These plaintiffs sued the transportation company for violating Article 20, because as soon as they switched contracts their wages and allowances were cut dramatically. Their total annual salary dropped from over ¥5 million to about ¥3.7 million.

The Tokyo District Court found the cuts to be unreasonable, but the Tokyo High Court overturned that ruling and came down in favor of Nagasawa-Unyu. Then the Supreme Court ruled on June 1 that there was no need to create a discrepancy between temp and permanent truckers in terms of attendance and overtime allowances, and that therefore the disparity was irrational and thus invalid. The Supreme Court found, however, that other allowance disparities were rational because the postretirement employees could — if they met all the requirements — receive a pension in addition to their salaries.

Hmm. That last part of the ruling surprised me, since an external factor that had nothing to do with the company had convinced the court to let the employer discriminate in that way. In Japan, it seems justice has to share the docks with personal need and circumstances.

But what does it all mean?

The highest court gave its first ever judgment on Article 20, but what is really going on? What is the court telling us? How will this affect the future?

Before we go there, remember this article does not mandate parity between fixed-term and permanent employees. What it does prohibit is irrational disparity between two groups of workers doing the same job. Rational disparities are just fine.

Also, please remember that Article 20 does not even address disparities between seishain regular and irregular employees. Many pundits make the double error of saying that the article mandates parity between seishain and other workers.

It is not easy to determine what kind of disparity would be rational. Based on these two verdicts, the deciding factors for determining the rationality of disparity would seem to be: 1) the details of the work; 2) the level of responsibility that work entails; 3) the range of possible transfers; and 4) other circumstances.

Although these rulings don’t augur a bright new future for workers of the world, they do at least put paid to the preconception that the working conditions of temporary (yūki) workers should naturally be lower than those of permanent (muki) employees. They force corporations to reconsider the practice of automatically setting permanent employees’ conditions high and temporary employees’ conditions low and precarious.

I am executive president of a labor union with members from over 25 different countries, the vast majority of whom are on fixed-term contracts. But it’s not as if they chose yūki contracts of their own volition. Want ads for foreign workers to fill permanent positions are exceedingly few and far between compared with those targeting Japanese workers. Although Article 20 gives workers an avenue to challenge unfair disparities once they choose a temp job, foreign applicants are shut out from the sweet permanent jobs right from the start.

That systemic disparity is irrational, unreasonable, illogical — however you want to translate it — and every day I wonder how we can go about ensuring this state of affairs is as temporary as our job contracts are.

Hifumi Okunuki teaches at Sagami Women’s University and serves as executive president of Tozen Union. She can be reached at tozen.okunuki@gmail.com. Labor Pains appears in print on the last Monday of the month. Your comments and story ideas: community@japantimes.co.jp