Work-hour deregulation

The recent flip-flop by the Japanese Trade Union Confederation (Rengo) over a government proposal to exempt certain highly paid and specially skilled corporate employees from work-hour regulations once again sheds light on the lingering concerns over the Abe administration’s key labor deregulation step. Even without support from the nation’s largest umbrella labor organization, the administration appears poised to seek Diet approval this fall for the amendment to the Labor Standards Law, along with a proposed cap on overtime work hours and relevant measures to narrow the wage gap between regular full-time company employees and workers with irregular job status. The proposed scheme needs to be scrutinized from the viewpoint of protecting workers’ interests from labor abuse.

The Labor Standards Law limits work hours at eight hours a day and 40 hours a week. Employers are obliged to pay extra wages at increased rates to employees who either worked beyond these limits or during late-night hours or on holidays. Under the proposed scheme, these work-hour regulations would not be applied to certain workers in the “highly professional” category — those with specialized job skills such as financial dealers, analysts, consultants, and research and development staff who earn ¥10.75 million or more a year. Employees who work under the scheme would not be paid on the basis of the hours they spend at work but for their performance on the job.

An amendment to the labor law to introduce the system was adopted by Prime Minister Shinzo Abe’s Cabinet in 2015, on the basis of discussions by the Health, Labor and Welfare Ministry’s Labor Policy Council, of which Rengo is a member. But the amendment has remained shelved in the Diet for two years due to opposition from labor circles and the opposition camp, which denounced it as a scheme designed to cut the overtime pay for those workers. In early July, Rengo chief Rikio Kozu reached an agreement with Abe to modify the legislation to tighten the requirements on employers to prevent overwork of their employees — and to effectively drop Rengo’s opposition to the scheme in exchange. However, Kozu was later forced into withdrawing the tacit endorsement of the amendment after he faced objections from labor unions under Rengo’s wing.

On the argument that job achievement of white-collar workers does not necessarily correlate to the hours they spend at work, employers have for years advocated creation of a system where certain office workers would be exempt from the work-hour regulations and be paid instead on the basis of their performance. The Abe administration, in limiting the target of the scheme to high-income workers engaged in “highly professional” jobs, said this will enable those employees to perform more efficiently at their own discretion without being constrained by work hours. Given the prevailing practices at Japanese companies, however, doubts persist as to the aims and the effects of the proposal.

The employer’s obligation to pay extra wages for overtime work serves as a disincentive against having employees work beyond the work-hour limits. Since the obligation will be lifted for employees who work under the proposed scheme, their hours could become significantly extended if their employers impose heavy workloads on them. Chronically long work hours are a problem at many Japanese firms — even to the extent where the overwork imperils the workers’ physical and mental health — and the practice of “service overtime,” in which the work-hour regulations are circumvented and employees work beyond regular hours without clocking them, is said to remain rampant. Questions have been raised as to whether the proposed scheme will serve its proclaimed purpose under such labor conditions. The Abe administration should put priority on reducing the work hours of corporate employees in the first place — which it also has pledged to do as part of its labor reform efforts.

One argument made for the scheme is that it will not affect most company workers — since it will be limited to highly paid employees engaged in specialized jobs, who should have broad discretion over the way they work. It must be noted that Keidanren (the Japan Business Federation) requested that company employees who earn at least ¥4 million a year should qualify for such ways of work when a similar scheme was proposed during Abe’s first stint as prime minister between 2006 and 2007. It will not be unimaginable that, once the scheme has been introduced, there will be pressure from employers to lower the income threshold to cover a broader segment of company employees.

These questions over the scheme should be fully discussed and scrutinized when the Labor Standards Law amendment comes up for deliberations in the Diet.