Vol.33-No.08 August 1,1994
Takashi Araki
Associate Professor
University of Tokyo
I. Introduction
In Japan, temporary work 
rendered by a person sent from a temporary agency to a client company is called "dispatched work." Since the legalization of worker dispatching by the enactment of the Worker Dispatching Law of 19851 (hereinafter "WDL"), the worker dispatching industry expanded rapidly. In 1992, the number of dispatched workers was 654,000, up from 145,000 in 1986. Though the number itself accounts for only about 1% of the total workforce in Japan, the nature of this type of employment relationship is unique in terms of the duration of contract (a contract for an indefinate or definate period), the duration of work (full time or part time), and the parties concerned (bilateral or trilateral relations)2. Government regulation of dispatched work also draws attention because such regulations extend to several areas of labor legislation, such as labor market regulations, individual employment relations law and collective labor relations law.
The development of the worker dispatching industry leading up to the enactment of the Labor Dispatching Law of 1985 and its content has already been discussed by previous authors3. This article attempts to clarify the characteristics of the regulation from a comparative perspective through a review of the formation of the regulations.
II. From Prohibition to Legalization
Until 1985 worker dispatching activities were prohibited as labor supply business under the Employment Security Law of 19474. Behind the prohibition of such labor supply business was the harsh exploitation of workers by labor-suppliers before World War II. Therefore the legalization of worker dispatching agencies with the enactment of the Worker Dispatching Law caused severe criticism.
Reality, however, went far beyond ideological discussions. The underground, or legally questionable, worker dispatching industry expanded rapidly in the late 1970s and the early 1980s because it met the needs of both employer and employee, especially for females and older persons. On the one hand, to slim down the workforce and to save personnel expenses, employers wanted to contract out certain categories of work, such as technical work, professional work or clerical work, which can be performed well by external labor. On the other hand, female workers who had difficulty in finding suitable jobs to utilize their education or abilities and who were unable to, or at least reluctant to, join the severe competitition for promotion among male regular employees, welcomed dispatched work as a new alternative mediating private life and working life. Dispatched work also provided employment opportunities to those older workers who would otherwise have had difficulty finding a job.
At the same time, inherent problems of dispatched work, such as a lack of employment security and ambiguity of legal responsibilities of both the dispatching agency and the client company, called for proper regulations to protect those atypical workers. Considering these developments in practice, the government reversed the prohibition policy and enacted the Worker Dispatching Law to legalize and properly regulate the worker dispatching industry.
III. Factors Affecting the Regulations
Several factors were considered in the process to legalize and regulate dispatched work.
(1)Legalization as a New System of Adjustment of Labor Demand and Supply
First, dispatched work was recognized as a new employment system facilitating the proper adjustment of labor demand and supply. Though dispatched work was understood to be one form of traditional labor supply businesses, under certain conditions, it was separated from the notion of labor supply business and excluded from the prohibition5.
Dispatched work is a triangular relation among a dispatching agency, a dispatched worker and a client company. However, this employment relationship must be distinguished from other similar forms of triangular employment relations, namely subcontracting or "contract for work"6, fee-charging employment placement7 and transfer of workers8. Though theoretical distinctions are possible9, it is not easy to demarcate these other forms of employment from dispatched work10.
1. Specification of prohibited and allowed activities
In many European countries, dispatched work is allowed when there exist objective grounds to utilize temporary employment, e.g., for the purpose to replace a permanent worker who takes maternity leave for several months11. The unique character of the WDL lies in the specification of those activities allowed as well as those prohibited12.
The WDL stipulates two standards to permit worker dispatching (Art. 4 par. 1): i) activities which require special knowledge, technique or experience , and ii) activities which require special management of the worker because of the characteristics of the form of employment. At present a Cabinet Order designates 16 forms of work: 1) computer programming; 2) machinery design and drafting; 3) machinery operation for producing sounds and images for broadcast programs; 4) production of broadcast programs; 5) operation of office machinery; 6) interpretation, translation and shorthand; 7) secretarial work; 8) filing; 9) market research; 10) management of financial affairs; 11) the drafting of foreign exchange documents; 12) the presentation and explanation of manufactured goods; 13) tour conducting; 14) cleaning of buildings; 15) operation and maintenance of building equipment; and 16) building receptionist and guide.
Most of these activities require relatively high skill or experience. The last three forms of work (14-16) are allowed because these activities are not suitable for regular employees, who are hired fresh from school and supposed to develop their career through in-house training and education. In addition, workers engaged in these activities require special treatment because their working location or working hours are different from those of regular employees13. These restrictions are closely related to the consideration not to erode the position of regular employees and established employment practices.
2. Two types of worker dispatching business
The WDL admits two types of dispatching business and establishes corresponding regulations. Regular employment type worker dispatching (specified worker dispatching), where a dispatched worker is hired on a permanent basis, is required to notify the Labor Minister. The second type is registration type worker dispatching (general worker dispatching14), in which the agency has workers register with it in advance and concludes an employment contract with the worker at the request of a client company. This type of worker dispatching is more unstable because employment relations depend on the contract between a dispatching agency and a client company. Therefore, rather than mere notice, permission from the Labor Minister is required. If the dispatching agency violates the conditions attached to the permission, the Labor Minister may revoke the permission.
(2) Protection of Dispatched Workers
The tripartite relationship of dispatched work calls for the clarification of contractual relations and responsibilities under protective laws among the three parties.
1. Regulation of dispatching contracts and their relation to employment contracts
The WDL requires clarification of the content of a dispatching contract between a dispatching agency and a client company. The dispatching contract must prescribe the content of work performed by dispatched workers, the location of the workplace, the individual who gives direction to the dispatched worker, the period of worker dispatching, the time at which work begins and ends daily, matters related to health and safety, persons who are responsible for the worker dispatching at the dispatching agency and client company, and conditions for overtime (Art.26).
Though working conditions of dispatched workers are regulated by employment contracts between a dispatching agency (employer) and a dispatched worker (employee), those conditions are in fact fixed by the dispatching contract between the dispatching agency and the client company. The same goes for the employment security of dispatched workers. Theoretically, the cancellation of a dispatching contract in the middle of its term does not affect the employment contract between the dispatching agency and the dispatched worker because the employment contract lasts until the fixed expiration date15. In reality, it is feared that the dispatching agency (employer) cancels the employment contract at the same time as the cancellation of the dispatching contract. Therefore the WDL prohibits discriminatory cancellation of the dispatching contract based on nationality, creed, sex, societal status, union activities, etc. (Art. 27).
2. Shared responsibilities of a dispatching agency and a client company under labor protection laws
Since an employment contract is concluded between a dispatching agency and a dispatched worker, in principle, the dispatching agency has responsibilities as an employer under labor protection laws. However, actual work is done under the direction of the client company. Therefore some provisions of protective laws apply not to the dispatching agency but to the client company (exercise of civil rights, working hours, hazardous work, mine work, etc.). Furthermore, responsibilities for equal treatment, prohibition of compulsory labor, prohibition of apprenticeship abuse and regulations on health and safety are borne by both the dispatching agency and the client company.
This allocation of employers' responsibilities is needed to ensure the protection of dispatched workers under the tripartite relations of dispatched work.
(3) Impact on Regular Employment
The third factor influencing the regulations of the WDL is not to erode or adversely effect the regular employment relationship. As mentioned above, one of the reasons for restricting permitted work to those jobs requiring special skills or special treatment of employment is to prevent dispatched personnel from invading and replacing regular full-time employees. The restriction on the period of worker dispatching (nine month to one year according to the type of work) reflects the same consideration.
The renewal of dispatching contracts is, however, not restricted. Some foreign legislation transforms the temporary work relationship into a direct employment relationship between a client company and a dispatched worker when the client company renews the dispatching contract in order to avoid hiring regular employees. The WDL does not contain such provisions.
IV. Characteristics of the Regulation of Dispatched Work in Japan
Viewed from a comparative perspective, some comments can be made concerning the characteristics of the regulation of dispatched work under the WDL. In an international context, the regulation of worker dispatching can be categorized into three groups: prohibition (Italy, Spain), non-regulation (U.S.A., U.K., Denmark, Ireland), and regulation (Belgium, Germany, France, the Netherlands, Portugal)16. Japan belongs to the last category. In some respects, however, compared to those European countries with regulatory legislation, Japan's regulation of worker dispatching is different. The most significant point is that in Europe dispatched work is treated one form of unstable fixed term employment, whereas in Japan it is regarded as a new form of employment and treated accordingly.
Both in Europe and in Japan, the impact of dispatched work on regular employment has been considered. Since European countries have strict restrictions on the utilization of fixed term contracts, dispatched work, which is temporary in nature, is subject to the same regulations. Objective reasons for using temporary work are required, and the renewal of dispatched work is severely restricted in an effort to avoid replacing regular employees. When a contract for dispatched work is renewed repeatedly, direct contractual relations are imposed between the client company and the dispatched worker, by analogy, as a fixed term contract even though there exists no direct contractual relationship between them.
In Japan, where fixed term contracts can be utilized without any objective reasons and their renewal is also generally allowed17, the WDL adopts a different approach to accommodate both the growing worker dispatching industry and traditional regular employment. The WDL confines permitted work to those jobs which require special knowledge or technique and those which require special treatment in employment.
These restrictions tend to result in a dispatched worker being a technically skilled professional. It is reported that the typical temporary worker in France and Germany is a male blue-collar employee18. The Japanese counterpart, however, is a female white-collar worker. In short, dispatched work in Japan is not unskilled or "cheap" labor and is distinguished from so-called part-time work.
Due to the so-called long-term employment practice19 in Japan, the external labor market is less active relatively to other industrialized nations. Therefore females or older persons who had once quit their jobs and later reenter the labor market confront immense difficulties to find suitable jobs in which they can utilize their experience and education. Worker dispatching agencies function efficiently in adjusting labor demand and supply in such an area where the traditional labor market institutions do not function well. Through such a segregation, regular employment and dispatched work can co-exist as far as permitted work is concerned.
Will the present situations remain in the future? The answer is probably no. The problem lies in the type of work not on the list of permitted dispatched jobs. Since the distinction of dispatched work from other forms of tripartite work patterns is very delicate, the dispatched worker relationship is quietly expanding into other areas of employment. In business circles there is a strong opinion that the present restriction to 16 works is too narrow and not realistic.
On the occasion of legalization of dispatched work, the constitutionality of the prohibition of labor-supply businesses was not discussed very much. Recently, however, some contend that the narrow restrictions on permitted jobs raise constitutional questions because they intrude upon the constitutional right of freedom to choose an occupation without due grounds20. Political pressure to deregulate the Japanese market may also encourage reconsideration of the restriction on dispatched work.
Recent amendments of the Older Persons Employment Stabilization Law in June 1994 lifted the occupational restriction on worker dispatching for those older than 60. This may be the first step toward the reconsideration of Japan's unique restriction on worker dispatching.
1 July 5, 1985 Law No.88
2 As for the features of such atypical employment see Bruno Veneziani, The New Labour Force, in Roger Blanpain & Chris Engels, Comparative Labour Law and Industrial Relations in Industrialized Market Economies, pp.203f. (1993).
3 Yasuo Kuwahara, What does the Increase of Temporary Workers Bring to the Japanese Employment System?, Japan Labor Bulletin Vol.24 No.2 p.5 (1985); Akira Watanabe, Employee Dispatching Business Law, Japan Labor Bulletin Vol.24 No. 11 p. 5 (1985); Akira Watanabe, Outline of Government and Ministrial Ordinances for Implementing the Employee Dispatching Business Law, Japan Labor Bulletin, Vol.25 No.7 p.6 (1986).
4 The sole exception to the prohibition was labor-supply business by labor unions with the permision of the Labor Minister (Art. 45 the Employment Security Law). However, unions have been less active in the labor-supply business because most labor unions in Japan are enterprise based unions organizing employees of an individual firm only. See Akira Takanashi (ed), RODOSHA HAKEN HO (WORKER DISPATCHING LAW), pp.83 (1985).
5 Art. 5 par. 6 of the Employment Security Law stipulates that the term "labor supply" in this Law means having workers work under the direction and orders of another person based upon a supply contract, and does not include those corresponding to labor dispatch as stipulated in Article 2, item 1 of the Worker Dispatching Law.
6 Under the contract for work arrangement, workers are subject to the direction of the contracted person, namely his direct employer, whereas under the dispatched work arrangement, workers are subject to the direction of the client company, not that of the direct employer of the employment contract.
7 Japan ratified ILO Convention No.96 concerning Fee-charging Employment Agencies and, in principle, private fee-charging placement services are prohibited. Fee-charging replacement is differnt from worker dispatching in that a fee-charging replacement agency has no employment relations with a job seeker.
8 According to the Ministry of Labor, a transferred employee has double contractual relations with the original company and the receiving company, whereas a dispatched worker has no contractal relation with the client company.
9 See in detail, Akira Watanabe, Employee Dispatching Business Law, Japan Labor Bulletin Vol.24 No. 11 p. 5 (1985).
10 As for the same situation in EU countries, see Roger Blanpain (ed.), TEMPORARY WORK AND LABOUR LAW OF THE EUROPEAN COMMUNITY AND MEMBER STATES, pp.5 (1993).
11 Id., TEMPORARY WORK AND LABOUR LAW OF THE EUROPEAN COMMUNITY AND MEMBER STATES, p.10 (1993).
12 Port transport services, construction work and other works specified by Cabinet Order are prohibited.
13 Rodosho shokugyo antei kyoku (the Ministry of Labor, Employment Security Division), JINZAI HAKEN-HO NO JI-TSUMU KAISETSU (SHINTEI-BAN) (PRACTICAL COMMENTARY ON THE LABOR DISPATCHING LAW, NEW EDITION), p.54 (1987).
14 Precisely, the general worker dispatching is a dispatching business other than the specified worker dispatching which hires regular employees only. Therefore a dispatching agency that has both regularly employed dispatched workers and registered workers is regarded as a general worker dispatching agency, and thus is subject to the regulation for the registration type dispatching.
15 For the rest of the term of the employment contract, the dispatching agency will be obliged to dispatch him or her to another company or to guarantee the full or partial income that the worker would have had according to Art.536 par. 2 of the Civil Code or Art. 26 of the Labor Standards Law. The WDL itself has no provisions concerning this issue.
16 Cf.Roger Blanpain (ed.), TEMPORARY WORK AND LABOUR LAW OF THE EUROPEAN COMMUNITY AND MEMBER STATES, p.4 (1993).
17 Under established case law (Toshiba Yanagimachi Factory case, Supreme Court, July 22, 1974, Minshu Vol. 28, No.5, p.927), however, to refuse to renew repeatedly renewed fixed term contracts can be regarded as an abuse of the right.See Takashi Araki, Developing Employment Law in Japan, part 2: Legal Problems Concerning Non-Regular Employees, Labor Issues Quartely, No. 21, p.15 (1993).
18 Masahiko Iwamura,Furansu no Hitenkei Koyo (Atypical Work in France), Ninon Rodo-ho Gakkai-shi vol.81 p.106 (1993) ; Yoichi Shimada, Furansu no Haken Rodo-hosei (Legal system regulating dispatched work in France), Kikan Rodo-ho Vol. 169 p.29 (1993) ; Katsutoshi Kezuka, NISHI DOITSU NO RODO JIJO (Labor Situations in West Germany) pp.172f (1989).
19 As for the long-term employment practice and its legal analysis see Takashi Araki, Flexibility in Japanese Employment Relations and the Role of the Judiciary, in Hiroshi Oda (ed.), JAPANESE COMMERCIAL LAW IN AN ERA OF INTERNATIONALIZATION, pp.249 (1994).
20 Masaru Anzai, Rodosha Haken-ho Minaoshi no Shuyo Mondai (Main Issues for the Revision of the Worker Dispatching Law), Kikan Rodo-ho No.169 p.11 (1993). Art. 22 par. 1 of the Constitution stipulates that every person shall have the freedom to choose and change his residence and to choose his occupation to the extent that it does not interfere with the public welfare.
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