SPECIAL TOPIC

Vol.35-No.06 June 1,1996

Procedures for Resolving Individual Employment Disputes Hiroya Nakakubo Associate Professor of Law Chiba University

2. Significance of Courts in Japanese Employ-ment Law
It is noteworthy that the courts have played a crucial role in the formation of Japanese employment law. Most important is the judicially created doctrine of "abusive" dismissal. When the employment contract is without a fixed term, the employer has the right to dismiss the employee for any reason, so long as a 30-days' notice is given as mandated by Article 20 of the Labor Standards Law. Labor statutes do prohibit dismissal for certain discriminatory reasons, but there is no general requirement of "just cause" for termination. In practice, however, the court requires just cause and takes into consideration the various circumstances to examine whether the dismissal is objectively justified. If there is insufficient justification, the dismissal in question is declared null and void as an abusive exercise of a right. (Nihon Salt Manufacturing Co. case, Supreme Court, April 25, 1975, Minshu 29-4-456; Kochi Broadcasting Co. case, Supreme Court, January 31, 1977, Rodohanrei 268-17).
The doctrine of abuse of rights, which relies on a general clause in the Civil Code, is also applied to other employer actions. For example, the employer has the right to discipline the employee for misconduct in accordance with the work rules, but the court frequently strikes down a disciplinary measure as abusive, deeming it too severe or not following due process. The employer's right to transfer the employee is being abused if there is no legitimate business need for the transfer in question, or if its impact on the employee's life is extraordinarily serious (Toa Paint Co. case, Supreme Court, July 14, 1986, Rodohanrei 477-6).
The courts addressed sex discrimination in termination by invoking the standard of "public order and good morals" in the Civil Code, declaring the "resignation-upon-marriage" rule for women null and void as a violation thereof. Likewise, a discrepancy in the mandatory retirement age between men and women was declared null and void (Nissan Motor Co. case, Supreme Court, March 24, 1981, Minshu 35-2-300). These decisions were eventually incorporated into the Equal Employment Opportunity Law of 1985.
Another important doctrine of judicial invention deals with the employer's revision of work rules. In 1968, the Supreme Court held that employees are bound by revised work rules even when they provide for less favorable terms than those which previously existed, so long as the revised rules are "reasonable." (Shuhoku Bus Co. case, December 25, 1968, Minshu 22-13-3459) This decision was criticized for lack of legal grounds, but the Supreme Court has since endorsed the rationale repeatedly. In the test of "reasonableness," the degree of necessity for the employer to implement the change is balanced against the extent of disadvantage inflicted on the employees. The fact that most employees in the establishment agree in support of the change may be deemed an indicator of such reasonableness.
Furthermore, tort action has been taken against an employer in various aspects of employment. A recent Supreme Court decision, for example, held the employer liable for damages for spying and alienating some employees because of their political beliefs as a tortious infringement upon their human dignity (Kansai Electric Power Co. case, Supreme Court, September 5, 1995, Rodohanrei 680-28). Similarly, some district courts have awarded tort damages to victims of sexual harassment. In fact, the tort clause in the Civil Code is so abstract that any illegal conduct of the employer may be challenged thereunder.

3. Difficult Venue for Achieving Justice
While an increasing number of employees are suing their employers, such a means to obtain justice is not easy. Above all, judicial procedures are painfully slow. Hearings are held in a sporadic manner, as infrequently as less than once a month for each case. In 1994, it took an average of 15 months for a district court to dispose of a regular procedure case, including withdrawals and settlements, and cases pending at the end of the year were 18.5 months old (Table 3). The situation has improved considerably since 1990, when the figures were 25.2 months and 26.9 months respectively. Nevertheless, simple cases aside, two years before a district court would hardly be surprising. If an appeal is taken eventually to the Supreme Court, the litigation time would amount to five to ten years. Petitions for preliminary injunction are processed more quickly, of course, but more than one year may be needed in a complicated case.

Other factors also fail to make the courts look inviting in the eyes of employees. Japanese cultural norms do not encourage people in general to bring a legal action in order to resolve a dispute, much less against their employer. Lawyers are scarce and hard to find; the approximate number of practicing attorneys at law is only 15,000, and they are required to refrain from advertising their services. There is neither a specialized labor court nor any special procedure for labor-related cases. Professional judges of the ordinary court decide a labor case the same way as in any other civil case. The lack of a discovery procedure makes it difficult for an employee to obtain evidence in the employer's possession. The substantive rules depend so much on vague notions such as "abuse of a right" and "reasonableness" that the final outcome is too often unpredictable. Even when a tort is found, the remedy is rather modest; damages for pain and suffering are usually no more than a few million yen. There are no punitive damages in Japan. In the Kansai Electric Power case mentioned above, each plaintiff was awarded 800,000 yen for pain and suffering plus 100,000 yen for attorney's fees, which are recoverable only in a tort case. This was the Supreme Court's holding in 1995, 24 years after the suit was initially filed.
Thus, only determined employees would venture to pursue justice in the courts. It often seems that plaintiffs are suing the employer not so much for recovery of economic interests as for self-esteem. This should help explain why the number of employment litigation in Japan is quite small in comparison with other developed countries. Even if the legal procedures were made more accessible, however, some employment disputes are so elusive by nature that they are not likely to be neatly resolved by judicial judgment.

4. Recourse to Administrative Agencies
When an employment dispute involves violation of the Labor Standards Law, the Minimum Wages Law, or the Industrial Safety and Health Law, an employee may report such violation to the Labor Standards Inspection Office. Approximately 3,300 Labor Standards Inspectors are stationed at 343 offices throughout Japan. They may inspect the workplace, direct the employer to correct violations if any, and refer the matter to the prosecutors office in an egregious case. However, besides being understaffed, the Inspection Office lacks the authority to act on behalf of the employee. A violating employer may be cited, but the employee must initiate a civil action to be made whole, unless the employer complies in the face of possible prosecution. Moreover, when the employee feels that he/she has been terminated without just cause, for example, the Inspection Office is of no use because such a matter does not involve the Labor Standards Law or any other statute within its competence. This fact surprises many employees who are unfamiliar with labor laws. It was only as recently as this spring that "employment conditions counselors", who hear employees' grievances at large, were assigned to a handful of Inspection Offices on an experimental basis.
As for disputes concerning sex discrimination, the Equal Employment Opportunity Law provides the Director of Prefectural Women's and Young Workers' Office with the authority to give advice, guidance, and recommendations to the parties involved. Despite the weak provisions of the Law ("duty to endeavor" clauses regarding hiring and promotion; no penalty even for violation of "prohibitory" clauses), the Directors are resolving a number of disputes through this advisory channel. When a dispute does not end amicably, the Director may refer it to the prefectural Equal Employment Mediation Commission upon the request of either party. However, mediation cannot be initiated unless the other party provides consent under the Law. The result is that there has been only one case of initiated mediation since the enactment of the Law in 1985. In the first-ever mediation case in Osaka Prefecture, which involved allegations of discriminatory placement and promotion, the Mediation Commission issued a settlement proposal in February 1995, only to be rejected by both parties. Mediation failed, and the complainant employees filed a lawsuit against the employer.
Many prefectures and cities offer counseling services for employees. The Tokyo Metropolitan Government is remarkably aggressive in this regard. At its nine labor offices, the staff not only receive by far the largest number of inquiries, but also engage in conciliation in suitable cases, which is unheard of elsewhere. Although they have no legal enforcement power, they hear the parties' assertions and give advice in any type of employment dispute. In 1994, they facilitated conciliations in 1,103 cases and achieved an impressive success rate of 73.7 percent. It is unfortunate that other prefectures are not equipped with resources to do likewise.
Certainly, every prefecture has a Local Labor Relations Commission for adjustment (conciliation, mediation, and arbitration) of labor disputes. However, rather than being a tool for individual employees, this tripartite body only has jurisdiction over "collective" disputes involving trade unions under the Labor Relations Adjustment Law. The number of such disputes has declined so that in four prefectures in 1994 there were no adjustment cases for the Commission.

5. Voices for Reform
Today, many agree that there should be a better way to deal with individual employment disputes. The Labor Ministry, based on a report submitted by its advisory committee, has begun to post "employment conditions counselors" at the Labor Standards Inspection Offices as mentioned above.
More ambitious is an ingenious proposal that suggests that counseling and adjustment of individual employment disputes should be added to the authority of the Labor Relations Commission. This would revitalize the Commission, whose two main functions, adjustment of labor disputes and redress of unfair labor practices, have been declining in societal significance.
Another proposal urges that the court's civil mediation procedures should be amended to directly address employment disputes. It is a mystery why only a small number of labor cases are currently being resolved through the procedure, but the reform would surely encourage the parties to utilize it.
Regarding formal litigation before the court, the government introduced to the Diet in March a bill to completely rewrite the Civil Procedure Code. Although a special procedure for labor cases is not provided in the bill, it would establish a small claims procedure covering cases whose amount of controversy is 300,000 yen or less. Many employees will find it worth utilizing because the cases are heard and decided there within one day. The bill also contains provisions aimed at expediting the procedure and expanding the parties' right to evidence.
Finally, there is a strong argument that the substantive rights of employees should be clarified and made easier to understand. A body of attorneys representing labor has proposed a draft of the Employment Contract Law, which would codify, and partly modify, judicially developed rules of employment. Although controversial in its content, this seems to be a commendable effort in the right direction.

6. Conclusion
It seems that Japanese employment society has attached importance to the "prevention" of disputes. Traditionally, employers communicated with employees intimately to hear their opinions and obtain their understanding, and employees tended to acquiesce, willingly or unwillingly. This picture is changing today. Employees are increasingly ready to voice their disagreement with their employer. Establishing suitable dispute resolution procedures for such employees, a system which is long overdue, would promote another important social value: the "fair resolution" of disputes.

Reference

H. Yasueda et al., Roshi Funso no Kaiketsu Shisutemu (Mechanisms of Industrial Dispute Settlement), Nihon Rodoho Gakkaishi (Journal of Labor Law) No.80, 1992.

A. Hamamura, Rodokeiyaku to Funso Shori Seido (Labor Contract and Systems for Individual Dipute Resolution), Nihon Rodoho Gakkaishi (Journal of Labor Law) No.82, p.131, 1993.

K. Kezuka et al., Kobetsu Funso Shori Shisutemu no Genjo to Kadai (Current Situation and Problems of Individual Dispute Resolution System), Japan Institute of Labor, Research & Study Report Series No.65, 1995.

N. Kataoka et al., Roshi Funso to Ho (Labor Disputes and the Law), Yuhikaku Publishing Co., 1995.

Minji-Soshoho An (Civil Procedure Bill), Jurisuto (Jurist) No.1088, p.139, 1996

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Special Topic Title Index - Labour Law and Social Policy