People who work freelance are on the increase as forms of labor in Japan become more diverse. Since they are treated as individual business proprietors, however, freelancers are not fully covered by protective measures under labor laws. An experts panel of the Fair Trade Commission released a report this month calling for application of the Antimonopoly Law to protect the rights of freelance workers against unfair practices by businesses that use their services.

The FTC report, which will effectively serve as a guide for administrative action on such practices, is an important first step to protect the rights of freelance workers. But further steps should be explored to create an environment in which freelancers can give full play to their potential — a must as the nation faces the tightening manpower shortage amid the rapidly graying and shrinking population.

Freelance workers engage in a variety of jobs, from translators and IT engineers to writers, designers and animation artists. Athletes who belong to professional sports teams, entertainers on contracts with production offices, as well as some construction workers not in the employment of companies are also included. The number of freelance workers, including corporate employees who engage in side jobs, is estimated at more than 10 million. One forecast says that their number will increase by 3.5 million between 2015 and 2030.

Since they are not considered as workers employed by companies, freelancers are not fully covered by protections under labor legislation such as the Labor Standards Law. While freelance workers often find themselves in a weak position vis-a-vis the businesses that use their services, it has so far been left unclear whether the Antimonopoly Law, which prohibits companies from concluding contracts with others in unfair terms by taking advantage of their superior position, can be applied to those businesses. As it is, customs and practices that are uniquely specific to individual industries hold sway over the relationship between freelancers and businesses. In the entertainment industry, for example, it is commonly reported that entertainers get blacklisted the moment they end their contract with a talent agency.

A web-based survey conducted recently by the FTC on freelance workers, to which nearly 550 people responded, showed examples of unfair treatment by the businesses that use their service. About 60 percent of the respondents said they experienced some form of disadvantage in their transactions. More than 30 percent complained that companies that offered them work did not specify all business terms, such as rewards, when awarding contracts. Roughly 10 percent said companies told them not to do business with other firms in the same industry while they are on contract.

In hearings conducted by the FTC, people in the entertainment industry cited action taken by a production office when one of its entertainers tried to leave. To prevent the entertainer’s departure, the company applied pressure on another office to which the entertainer planned to move, banned use of the same stage name and distributed false information to tarnish the entertainer’s image. People from the sports industry spoke of penalties in a certain sport imposed on an athlete who moves to another team without the original team’s consent, such as a ban on competing for a certain period after the transfer.

The report released Feb. 15 by the FTC panel clarified that businesses imposing extremely disadvantageous terms on freelancers, such as low compensation, is in violation of the Antimonopoly Law. Those businesses abusing their upper hand in bargaining with freelance workers to cause them harm, or trying to restrict the freelancers’ transactions with other parties by imposing excessive confidentiality duties on them, will be problematic under the law, the panel said.

The panel also said that companies colluding with each other to fix contract terms with freelancers, such as compensation, or restrict their transfers to other firms can lead to problems under the law. In judging restrictions imposed by sports teams and entertainment offices on moves by their athletes or entertainers to other organizations, however, the panel indicated that consideration will be given to their need to recoup the costs spent in cultivating their skills and talent.

The FTC is expected to call on related industries to review their practices and take voluntary action to correct their ways in line with the panel’s report. That should serve as the first step for protecting freelance workers. The government should then probe conditions for freelancers in greater detail and explore what action, including legislative steps, should be taken to improve their lot.

Making sure that the rights of freelancers will be protected by law should encourage more capable company workers to strike out on their own to give full play to their skills and talent. More such opportunities may alter the labor value of many Japanese — who have long considered it a virtue to graduate from a good university, go to a big company and stay there until retirement. As Japan grapples with the declining working age population, greater diversity in ways of working is needed to meet manpower needs. Protecting the rights of freelancers will be a significant step in that effort.

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