Vol.38-No.9 September 1,1999
Two bills to amend the Employment Security Law of 1947 (hereinafter ESL ) and the Worker Dispatching Law of 1985 (hereinafter WDL ) were passed by the Japanese Diet on June 30, 1999. The revision of the ESL has lifted general prohibition on private fee-charging placement businesses and has placed private placement services as a coexisting player with public placement services engaging in the supply-and-demand adjustment of the Japanese labor market. The current WDL designates 26 dispatchable types of work which can be dealt with by the dispatching agencies. The revisions to the WDL have abolished such restrictions on dispatchable work types. Therefore, these revisions, both of which are scheduled to take effect within 1999, denote a drastic modification of the Japanese labor market regulations.
This article analyzes the background to the 1999 reforms, explains the contents of the 1999 revisions(1) of the ESL and the WDL, and makes brief comments on the significance of the new labor market policy envisaged by the 1999 reforms.
2. Background to 1999 Reforms
The reforms were driven by various factors such as deregulation drives in Japan, international trends including the adoption of ILO Convention concerning Private Employment Agencies Convention (C-181, 1997), Japan's record high unemployment rate, and structural changes to the Japanese labor market which necessitate a new form of safety net.
2.1 Deregulation Drives under the Economic Slump in JapanAs the author's previous article(2) in the Japan Labor Bulletin explained, labor market regulations were one of the major targets of the Japanese government's deregulation policy. In the beginning, labor related regulations were regarded as social regulations, and thus were beyond the scope of the deregulation campaigns. However, faced with tardy recovery from the business slump after the bubble boom, it was thought that the inactive external labor market was impeding the flow of workers from declining industries to emerging new businesses and slowing the restructuring of the economy. Since 1995, therefore, the government explicitly named labor market regulations, especially regulations on fee-charging placement services and worker dispatching businesses, as an urgent target for deregulation.
2.2 International Trends and the Adoption of ILO Convention No. 181International deregulatory trends also spurred on Japan's domestic deregulation drive. Many European countries changed their regulatory attitude towards fee-charging placement services and worker dispatching services (temporary services) since the late 1980s.
On June 19, 1997, the International Labor Organization also revised the Convention on Fee-Charging Employment Agencies Convention (revised) (C-96, 1949) which prescribed the principle of the state monopoly of employment placement services, and adopted the Private Employment Agencies Convention (C-181, 1997) which dropped state monopoly principle and recognized the important role of private employment agencies in the labor market.
The content of the ILO's Private Employment Agencies Convention was referred to and taken into consideration in the deliberations of the 1999 revisions of the ESL and the WDL.
2.3 Functioning the External Labor Market as a New Form of Safety Net
Since Japan reached a record-high unemployment rate (4.1%) in April 1998, it broke new records almost every month (4.9 % in June 1999). It was thought necessary to activate the external labor market, especially the middle and old white-collar workers market, to absorb the unemployed. Though public employment security offices have functioned well for the placement of blue-collar job seekers in the past, in accordance with the increase in the number of white-collar workers, their function is diminishing and currently only 20 percent of new recruits come via public employment security offices. It was thus thought necessary to encourage the utilization of private fee-charging placement services which provide consulting and market research taking the individual job-seeker's characteristics into consideration.
More fundamentally, if the structural changes in Japan's economy inevitably cause the increased dismissal of employees, it is vitally important to provide an active external labor market. Traditionally, restricting dismissals was the employees' safety net. In the era of restructuring where dismissals are inevitable, an active labor market which can provide the unemployed with suitable new employment opportunities swiftly and smoothly functions as a new safety net. Various employment opportunities and career development choices which an active external labor market can provide are also important for a diversified Japanese work force.
In response to these factors, the ESL and the WDL were drastically revised.
3. 1999 Revisions of the Employment Security Law
The 1999 revisions of the ESL are comprehensive and cover various subjects. Major reforms include the following:
3.1 From State Monopoly to Co-existence System of Employment Placement Service
Under the current ESL of 1947, employment placement services were, in principle, monopolized by the state, i.e. by public employment security offices. Private employment placement businesses were generally prohibited and exceptionally allowed for 29 permissible occupations(3) designated by the Enforcement Ordinance of the ESL with a permit from the Labor Minister (Art. 32, Para. 1, ESL of 1947).
The general prohibition on private fee-charging placement services was de facto lifted by the revision of the ESL Ordinance (not ESL itself) in 1997(4) . Though the current ESL of 1947 ostensibly maintains the general prohibition on private placement services, the 1997 revision of the ESL Ordinance regards all occupations as permissible except for those specifically prohibited occupations by the Ordinance.
As far as deregulation of the scope of permissible occupations is concerned, therefore, the 1999 revision of the ESL is confirmatory rather than creative in nature(5) .
However, it is important that the 1999 revision of the ESL has manifestly recognized a change of the basic idea of the Law. Under the revised ESL, private employment services shall function not as a supplementary service to but as a coexisting mechanism with the public placement service for the proper and swift adjustment of the supply and demand in the Japanese labor market (Art. 1, ESL of 1999). Public and private placement services are to cooperate with each other in order to attain the proper and swift adjustment of the supply and demand of labor force (Art. 5-2, ESL of 1999).
3.2 Relaxation of Fee-Charging Employment Placement Service Regulations
3.2.1 From Positive List to Negative List System
Corresponding to the change of the basic idea of the ESL, regulations on fee-charging placement services have been relaxed in a drastic way. General prohibitions on fee-charging private placement services are abolished (Art. 30, ESL of 1999). Though a fee-charging private placement service is still required to obtain a permit from the Minister of Labor, there is no occupational restriction anymore except for port transport, construction and other designated occupations by the administrative order (Art. 32-11, ESL of 1999). Therefore, the current so-called positive list system in which permissible occupations were enumerated by the administrative ordinance has been changed into the negative list system which removes general prohibitions and lists prohibited occupations individually.
3.2.2 Clarification and Simplification of the Administrative Procedures
Under the current system, unclear administrative discretion and procedural complexity was criticized. The ESL of 1999 clarifies requirements for obtaining a permit from the Labor Minister and excludes administrative discretion by inserting a provision stipulating that the Labor Minister must provide a permit when the submitted application meets the requirements (Art. 31, ESL of 1999). The new Law also contains numerous provisions to clarify administrative procedures concerning a permit, disqualifying causes, and the revocation of a permit (Art. 30, 32-4 to 32-10, ESL of 1999).
The valid period of a permit is currently restricted to one year but, under the ESL of 1999, it is valid for three years for the first permit and good for five years for the renewed one (Art. 32-6, ESL of 1999).
3.2.3 Regulations of Placement Fees
As for regulations of placement fees from job offerers, the ESL of 1947 set a stringent upper limit on chargeable fees until March 31, 1997. The 1997 revision of the ESL Ordinance partially relaxed the regulations(6) . The 1999 revision has succeeded the 1997 revision.
The ESL of 1999 stipulates fee-charging employment placement agencies shall not receive actual expenses or other commissions or compensation under any guise whatsoever, apart from the two following cases: 1) charging fees with an upper limit to be determined by the administrative order and 2) charging fees based on a chargeable fee table submitted to the Labor Minister (Art. 32-3, Para. 1, ESL of 1999). In the second type of fee, there is no upper limit regulation on the chargeable amount or percentage of fees. In principle, private fee-charging placement agencies cannot charge job seekers any fees for placement services under the ESL of 1999 in the same way as the current regulations. However, an administrative order can allow charging job seekers in exceptional cases where it is deemed necessary to do so in the light of job seekers' interest (Art. 32-3, Para. 2 Proviso, ESL of 1999).
3.3 Regulations Concerning Personal Information and Secrets
In accordance with the individualization and increased interests in privacy protection, the ESL of 1999 introduces regulations on personal information and secrets. Public employment security offices are required to collect, keep and utilize a job seeker's personal information(7) within a limit of being necessary to perform their functions (Art. 5-4, ESL of 1999). Furthermore, a duty is imposed to employees and ex-employees of fee-charging placement agencies to keep individual's secret obtained in the course of performing their functions (Art. 51 Para. 1).
A violation of this duty is sanctioned by fines up to ¥300,000 (Art. 66, No. 9, ESL of 1999). Employees and ex-employees of public employment security offices, fee-charging and non-fee-charging placement agencies also owe a duty not to disclose personal information obtained in related to their business though there is no criminal sanction for its violation (Art. 51 Para. 2, 51-2, ESL of 1999).
3.4 Strengthening of Implementation Mechanism
In order to secure implementation of the new regulations, the Labor Minister can issue an order to redress fee-charging agencies' violations of the Law and related administrative orders (Art. 48-3, ESL of 1999). Job seekers are entitled to report the fact that a fee-charging agency has violated the Law and/or other administrative orders (Art. 48-4, ESL of 1999). Fines against violations are also aggravated (Art. 63 to 66, ESL of 1999).
4. 1999 Revisions of the Worker Dispatching Law
4.1 Developments of Worker Dispatching Regulations and Deregulatory MeasuresUntil 1985, worker dispatching businesses (temporary work business) sending their workers to a client company to conduct work under the direction of the client company was prohibited under the ESL of 1947 as one form of the labor supply business. In practice, however, underground or legally questionable dispatching businesses spread under the guise of contract work which is differentiated from the labor supply business. In order to properly regulate these businesses and to provide legal protection for dispatch workers, the Worker Dispatching Law of 1985 (WDL) was enacted(8) .
The WDL of 1985 did not liberalize dispatched work completely but lifted the ban solely for 16 allowable types of work designated by the Cabinet Order to avoid eroding regular employment (so-called positive list system). Allowable types of work were those requiring professional knowledge, skills or experience (e.g. computer programmers, production of broadcast programs, interpretation, translation and shorthand, etc.) and those necessitating special employment management (e.g. cleaning of buildings, operation and maintenance of building equipment, etc.) .
After the enactment of the WDL of 1985, business circles criticized that the present restriction of allowable work to 16 types of designated work was too narrow and did not match real situations in practice. As a result of such criticism, the government deregulation plan listed the WDL as one of the primary targets in labor laws.
Before the 1999 revisions, several deregulatory measures had been already taken. First, in 1994 when the Older Persons Employment Stabilization Law was amended, the general occupational restriction on worker dispatch was lifted for those older than 60 and only listed activities were prohibited (Negative list system: port transport services, construction, guard services and production services).
In a similar vein, the 1996 amendment of the Child Care and Family Care Leave Law lifted restrictions on activities when a worker is dispatched to replace a worker who takes child or family care leave on the condition that the dispatched period is not longer than one year (Art. 40-2, the Child Care and Family Care Leave Law). Thirdly, in 1996 a Cabinet Order added 10 new allowable activities and widened one activity which was already allowed under the previous regulations. In total, therefore, 26 forms of activities are allowed under the current WDL(9) .
In spite of these partial deregulatory measures, pressure for deregulation of worker dispatching increased in government and business circles. After a heated debate in the Employment Security Council, a tripartite advisory body in which labor market policies are deliberated, as well as in the Diet, drastic revisions to the WDL were adopted.
4.2 Contents of 1999 Revisions
The 1999 revisions of the WDL, among other things, contain the following three major reforms. Firstly, the new WDL has drastically relaxed regulations of worker dispatching businesses by lifting restriction on allowable activities designated by the Cabinet Order and by simplifying administrative procedures. Secondly, the new WDL treats dispatched work as a temporary adjustment mechanism of supply and demand of labor force, and thus, under the new Law, the worker-dispatching period is limited to one year strictly with the exception for currently allowed worker dispatching. Thirdly, the 1999 reform has strengthened dispatch worker protection.
4.2.1 Relaxation of Worker Dispatching Regulations
The 1999 revisions have dropped the current positive list system enumerating allowable types of work and have adopted the negative list system naming prohibited types of work. Art. 4 Para. 1, WDL of 1999 lists port transport, construction, guard services and others designated by the Cabinet Order as prohibited types of dispatched work. Art. 4 of the Supplementary Provisions of the revised WDL also prohibits production work for the time being. Therefore apart from these types of work enumerated in the negative list, worker dispatching has generally been liberated.
However, the 1999 revisions are not a total deregulation of the worker dispatching business. Worker dispatching agencies for registration-type worker dispatching(10) must obtain a permit from the Labor Minister in the same way as under the current WDL (Art. 5). The revised WDL has added a new requirement that an agency should not be established for supplying dispatched workers exclusively to a specific client (Art. 7, Para. 1, No 1).
The procedures for obtaining a permit (Art. 5 Para. 2, Art. 16 Para. 1) and those for modifying the content of the permit (Art. 11 Para. 1, Art. 19 Para. 1) have also been simplified. However, to prevent abusive usage of dispatch workers, the revised WDL has added new disqualifying reasons: those who has been penalized within five years by committing a violent crime or by violating social insurance regulations (Art. 6 Para. 1 No. 1 and 2).
4.2.2 Dispatched Work as Temporary Work
When the general restriction on types of allowable dispatched work was abolished, it was feared that dispatch work might replace and erode regular workers' employment. To avoid such situations, the Law characterizes newly admitted dispatched work without work-type restriction as work forces to meet temporary needs and treat it as temporary work in a strict sense.
The revised WDL prohibits a client company from receiving a dispatch worker at the same post in the workplace for more than one year continuously (Art. 40-2 Para. 1). To a client company violating one-year limitation, the Labor Minister can provide necessary guidance and suggestion (Art. 48 Para. 1).
When the client company still continues the violation or is feared to do so in spite of such Labor Minister's guidance and suggestion, the Labor Minister can advise the client company to take necessary measures to redress the violating situation (Art. 49-2 Para. 1). Furthermore, the Labor Minister can advise the client company to employ the dispatched worker if the worker want to be employed at the client company (Art. 49-2 Para. 2(11) ). The Labor Minister can publicize the name of the company which have not followed the Minister's advice (Art. 49-2 Para. 3).
The one-year limit also applies to a dispatching agency. A dispatching agency must not dispatch its worker after the date of which a client company would violate the one-year period limitation if it receives the dispatched worker (Art. 35-2). A violating agency can be penalized by fine up to ¥300,000 (Art. 61 No. 3). A client company must inform the dispatching agency of the date on which receiving the dispatched worker shall constitute the violation of Art. 49-2 Para. 1 at concluding dispatching contract with the agency (Art. 26 Para. 5). When a client company does not inform of the said date, the dispatching agency may not conclude a dispatching contract with the client (Art. 26 Para. 6).
The one-year limitation of dispatch period, however, does not apply to the following three cases of dispatching: 1) the currently permitted 26 types of dispatchable work; 2) work for starting, transforming, enlarging, reducing or abolishing business which is scheduled to be terminated within certain period; and 3) work to replace an employee at the client company who takes maternity leave and child care leave (Art. 40-2 Para. 1 No. 1 to No. 3).
Since the second and third exemptions are rather exceptional, there will be two major types of dispatch workers: currently permitted dispatch workers with special skills or knowledge whose dispatch period at a client company is not necessarily confined to one year(12) , and newly admitted temporary dispatch workers whose dispatch period is restricted to less than one year.
4.2.3 Strengthening of Dispatch Worker Protection
18.104.22.168 Proper Working Environments for Dispatch Workers
The revised WDL has also strengthened dispatch workers protection. First of all, in order to assure appropriate working environment of dispatch workers, a dispatching agency must inform a client company whether the dispatched worker is enrolled in social and labor insurance or not (Art. 35 No. 2), and a client company must endeavor to ensure a proper working environment and afford facilities such as clinics and dining rooms which are usually accorded to the client's employees (Art. 40 Para. 2).
22.214.171.124 Dispute Resolution Procedures
Second, dispute resolution procedures are improved. A dispatch worker can report to the Labor Minister the fact that a dispatching agency or client company has violated provisions of the WDL and its administrative orders. Retaliatory treatment against the reporting worker is prohibited (Art. 49-3). Employment Security Offices are to counsel a dispatch worker and provide necessary advice and other assistance (Art. 52). Dispatch work counselors are to be nominated to counsel dispatch workers (Art. 53).
126.96.36.199 Regulations on Personal Information and Secrets
In recent years, leakage and dissemination of personal information of dispatch workers made the headlines and realized the necessity of legal regulations on personal information. Accordingly the revised WDL introduced provisions requiring proper administration of personal information and secrets.
As one of the requirements to obtain a permit for registration type worker dispatching, an agency must have taken necessary measures to administer personal information(13) properly and to keep dispatch workers' secrets secret (Art. 7 Para. 1 No. 3).
As for personal information, a dispatching agency is required to collect, keep and utilize it within a limit of being necessary for business purposes (Art. 24-3). Accordingly, the administration of personal information is added to the duty of the responsible employee designated by the dispatching agency (Art. 36 No. 4). Client companies often request photos of dispatch workers or interview prior to concluding a dispatch contract with the dispatching agency. Since complaints have been made that they select dispatch workers for their looks and other non-performance related reasons, the revised WDL creates a duty of a client company to endeavor not to engage in such actions for the purpose of identifying dispatch workers (Art. 26 Para. 7).
As for dispatch workers' secret information, the revised WDL has established a more stringent duty. A duty not to reveal secrets obtained in the course of performing its functions is imposed on a dispatching agency, its proxy, and its employees. The same applies to a person who ceases to be a dispatching agency, its proxy, and its employee (Art. 24-4)
188.8.131.52 Application of Sexual Harassment and other Special
Provisions to Client Companies By an amendment of the House of Representatives, client companies are regarded as employers in the sense of Chapter three of the Equal Employment Opportunity Law (Art. 47-2). As a result, provisions concerning sexual harassment (Art. 21, EEOL), and special arrangement of working hours and job assignment for pregnant employees for health checks and following instructions based on its outcome (Art. 22 and 23, EEOL) apply to client companies.
4.3 Remaining Issues
There are several issues which were not clarified by the 1999 revisions of the WDL. For instance, the supplementary resolution adopted in the Labor Committee in the House of Representatives requires the Ministry of Labor to establish a guideline including the following: When a client company terminates a dispatching contract with a dispatching agency mid-term, the former should find new work opportunity, provide 30 days notice or 30 days wages. As for the interpretation of the one-year limitation of the dispatching period, the Social Policy Committee of the House of Councilors requires the Central Employment Council to clarify the criteria to decide the same post and the meaning of receiving a dispatch worker more than one year continuously .
These issues are to be clarified by the guidelines issued by the Ministry of Labor before the two revised Laws will take effect by the end of 1999.
5. Implication of the 1999 Reforms to the Japanese Labor Market and Employment Relations
Finally several comments on the significance and implication of the 1999 reforms can be made.
5.1 Deregulation or Relaxation?
First, the basic raison d'etre of the 1999 revisions was deregulation and to activate the external labor market. However, the legislature thought that once rules were revised, the adopted new rules should be strictly implemented for the improved functioning of the labor market. Therefore the 1999 revisions contain in some parts strengthened regulations concerning implementation of the Laws. Furthermore, to prevent harm caused by deregulation, the revised Laws also introduced new regulations such as protection of personal information and secrets, strengthened dispute resolution procedures, and a maximum duration of dispatch work. Therefore the 1999 reforms of ESL and WDL are not simply a form of deregulation but rather a mixture of both relaxing the current regulations, and introducing new regulations.
5.2 Policy Shift from Employment Security to Labor Mobility?
Second, it is important to note that Japan has started to activate the external labor market. The argument that activating the external labor market functions as a new form of safety net for employees in the era of restructuring is especially noteworthy. Then, has Japan dropped its traditional employment security oriented policy(14) and shifted to a mobile labor market policy completely? The author's opinion is in the negative.
It is true that Japan's employment policy is shifting its emphasis from avoiding dismissals and securing employment to smooth reallocation or transfer of work force without unemployment. Typically, the government is introducing and enlarging subsidies to employers who accept middle and old employees over 45 years of age to encourage work force mobility without unemployment. However the government continues to provide traditional subsidies to maintain redundant employees though those for declining industries are reducing. It is more precise to state that the Japanese government is adding expenditure to encourage labor mobility in order to cope with increasing unemployment while maintaining traditional employment securing policy. Case law rules restricting dismissals both for individual reasons and for economic reasons also remain intact. In the light of such total picture of employment policy, therefore, the 1999 reforms activating the external labor market can be evaluated as! a part ial adjustment of Japan's employment policy which has, in the past, been too slanted towards employment security or the internal labor market.
5.3 Implication of Worker Dispatching Deregulation to Employment Practices
Thirdly, however, the 1999 reforms, especially those of the WDL, may have a significant impact on future employment practices in Japan. Whereas the revisions of the ESL were basically a confirmation of the 1997 deregulation measures implemented by the ESL Ordinance, the 1999 revisions of the WDL were substantial and fundamental. It denotes a significant policy change of Japan's unique treatment of worker dispatching.
In legalizing and regulating dispatched work, how to mitigate its impact on regular or typical employment is the most significant concern in advanced countries. In most European countries, dispatch work is called temporary work and subject to similar regulations and restrictions as fixed term contracts. By contrast, the WDL of 1985 adopted a unique approach to avoid the erosion of regular employment. Instead of confining dispatch work to temporary demand, the WDL of 1985 confines dispatchable work to those jobs which require specialized knowledge or skills and those which require special treatment in employment. These restrictions tend to result in a dispatch worker being a technically skilled professional. Though typically a temporary worker in European countries is a male blue-collar worker, the Japanese counterpart is a female white-collar worker(15) .
The 1999 revisions of the WDL have drastically changed the policy. Like European policy, the revised WDL generally treats dispatched worker as a temporary work force to meet temporary demand of less than one year. Currently dispatch workers enjoy a considerably higher wage level than part-timers because the dispatching business was confined to jobs requiring special skills and knowledge. However, under the revised WDL abolishing restrictions on dispatchable work and imposing short-term employment, there is a fear that dispatch work will turn out to be cheap labor without employment security.
Therefore it remains to be seen whether the 1999 reforms concerning worker dispatching will be able to strike a good balance between the regular workers' interest in employment security and the dispatch workers' interest for employment opportunities and better career development.
(1) Some parts of the new regulations amended by the 1999 revisions are, however, not clear at this moment since the details will be prescribed by the enforcement administrative orders.
(2) Takashi Araki, Changing Japanese Labor Law in Light of Deregulation Drives: A Comparative Analysis, Japan Labor Bulletin vol. 35, no. 5, p.5 (1997) [http://www.jil.go.jp/jil/bulletin/year/1997/vol36-05/06.htm]
(3) 29 permissible occupations included artists, nurses, designers, housekeepers, cooks, models, interpreters, etc.
(4) See Takashi Araki, supra note 2.
(5) Some parts were newly liberalized by the 1999 revisions. For instance, under the 1997 modification, fee-charging placement of those who have not yet passed one year after their graduation from school was still prohibited if the placement was for clerical and sales jobs. This restriction has been abolished by the revised ESL.
(6) Concerning the reasons and details of the 1997 relaxation, see Araki, supra note 2.
(7) Art. 4 No. 9, ESL defines personal information as information which concerns individuals and enables to identify an individual by itself or by collating with other information.
(8) See Takashi Araki, Characteristics of Regulations on Dispatched Work (Temporary Work) in Japan, Japan Labor Bulletin vol. 33 no. 8, p. 5 (1994). [http://www.jil.go.jp/jil/bulletin/year/1994/vol33-08/05.htm]
(9) Araki, supra note 2.
(10) The WDL admits two types of dispatching business and establishes corresponding regulations. Regular-employment-type worker dispatching (specified worker dispatching), where a dispatch worker is hired on a permanent basis, is required to notify the Labor Minister. The second type is registration-type worker dispatching (general worker dispatching [Precisely, an agency dealing both regular-employment-type and registration-type dispatching is regarded as general worker dispatching]), in which the agency has workers register with it in advance and concludes an employment contract with the worker when he/she is dispatched to a client company. The second type of worker dispatching is more unstable because the existence of employment relations depends on the contract between a dispatching agency and a client company. Therefore, rather than mere notice, a permit from the Labor Minister is required (Art. 5). If the dispatching agency violates the conditions attached to the permiss! ion, th e Labor Minister may revoke the permit (Art. 14).
(11) This paragraph was inserted by the amendment in the House of Representatives (the Lower House).
(12) Current regulations stipulate a one-year term as the maximum period for most permissible worker dispatching. However, renewal of these one-year contracts is not prohibited though dispatching agencies are advised not to continue dispatching the same worker to the same post at the client company for more than three years by administrative guidance.
(13) Alike in the ESL, personal information in the WDL is defined as information which concerns individuals and enables to identify an individual by itself or by collating with other information (Art. 7 Para. 1 No. 3).
(14) For details of the development of Japan's employment policy and its characteristics, see Takashi Araki, Promotion and Regulation of Job Creation Opportunities, National Report: Japan, in International Society of Labour Law and Social Security, XIV World Congress of Labour Law and Social Security Theme I, pp. 385 (1994).
(15) Takashi Araki, supra note 8.
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