Special Topic

Vol.39-No.8 August 1, 2000

     This paper will first clarify the kind of legal problems facing teleworkers without employee status in Japan, and will then examine regulations to solve these legal issues.

2.0 Current and Future Status of Telework
     According to a survey carried out by the Japan Institute of Labour in 1997, the number of teleworkers without employee status is estimated to be around 174,000. These teleworkers are mainly in the publishing, printing and information service sectors, performing work such as word processing, data input, design, programming, translation and system design. The 1997 survey found that those who typically engage in telework were females with young children who had assumed the responsibility for child care in their family. The survey also found that teleworkers have a relatively high educational background, that they had work experience as employees, and that they had left their previous job for personal reasons, such as marriage, childbirth or child care.

     It is expected telework will become a common work style. There are several reasons for this. First, telework makes it possible to balance work with personal needs or family life. Secondly, telework can create job opportunities. This is particularly applicable to the handicapped and the elderly who thus far face difficulty in searching for and finding jobs because of their restricted physical mobility. Furthermore, working at home can relieve the burden of commuting, and improve the quality of life.

     Today's enterprises are departing from traditional ways of working that involved regular employees working together in the same workplace at the same time. Flextime systems, employing temporary workers, and outsourcing are becoming commonplace. Associated with these changes are developments in the area of personnel management reflecting a move away from a seniority-based evaluation system toward a results-oriented one. These developments have resulted in an increase in the number of enterprises that intend to utilize telework, particularly in highly professional fields.

3.0 Legal Problems Related to Telework
     Legal problems related to telework can be divided into two types. The first concerns the content of the contract between the teleworker and the ordering enterprise. The second type of legal problem concerns matching supply and demand.

3.1 Problems Regarding the Content of Contracts
     Four problems can be identified in relation to telework contracts. First, the terms and conditions of contracts may not be sufficiently precise or detailed at the time of concluding. Regulations regarding labor contracts are contained in the Labour Standards Law (LSL) which requires employers to provide a clear statement of working conditions (Article 15), and to inform the workers of the collective agreements and work rules indicating working conditions (Article 106, Paragraph 1). However, this kind of regulation is lacking for teleworkers. Since the law does not stipulate that the terms and conditions of telework contracts need to be clear, there exists some danger that disadvantageous conditions may be forced ex post facto on the weaker party of the contract, the teleworker, by the ordering enterprise. It has been reported that such problems have already occurred, particularly in determining the amount of reward.

     Secondly, many telework contracts contain inappropriate terms and conditions. An interim report on telework problems published by the Ministry of Labour in 1999 cited some examples. One enterprise forced a teleworker to accept a performance of service without payment to compensate for damage the teleworker had previously caused by a delay or a defect. The enterprise inserted a clause according to which the teleworker was responsible for any damage arising from delays, regardless of negligence on the part of the teleworker. The enterprise broke off the contract unilaterally after continuous revisions. The terms of completion of the contract had been set so that they could not be achieved without excessively long labor.

     As far as the contents of labor contracts are concerned, there are protective regulations, such as the setting of minimum wage by the Minimum Wages Law, the ban on predetermined indemnity by Article16 of the LSL, and the requirement that 30 days' advance notice be given in the case of dismissal under Article 20 of the LSL. However, these protective regulations do not cover teleworkers that do not have an employee status.

     Certainly, at least in regards to the determination of reward, it may be basically a question of freedom of contract, and accordingly the law should refrain from regulatory intervention in this matter. However, in the case of telework contracts, there may be a notable gap in the level of information held by the contractual parties. This would mean that the justification for entrusting the determination of reward totally to the contractual parties is insufficient, if not entirely lacking, since the party with more information could be in a position to exercise freedom of contract in an unjustly advantageous manner. Such a situation justifies legal intervention to correct the imperfect functioning of freedom of contract.

     The third problem concerns health protection for teleworkers. It has been reported that teleworkers suffer from a high incidence of eye fatigue, lumbago and stiff shoulders as a result of engaging in computer work over long periods of time. This problem is not isolated to teleworkers; it also occurs in those employees who work in business offices using a computer for long periods. In Japan, these occupational safety and health matters are covered by the Doctrine of Duty to Care for Safety and Health, outlining the employer's responsibility to care for the physical and mental well being of its employees. However, teleworkers without employee status, by definition, do not have an officially recognized “employer” who is responsible for their health. Inevitably, occupational health problems are the responsibility of teleworkers themselves*. Moreover, from the viewpoint of privacy protection, it may not be acceptable for an enterprise to exercise a duty of care for teleworkers whose workplace may be located in family or private space.

     Nevertheless, an ordering enterprise will have to pay some attention to the health of its teleworkers. For example, setting terms of delivery of the telework that are difficult to meet may seriously influence the health of teleworkers, forcing them to work for a long time and/or late at night. Of course, the settlement of the terms of delivery can be freely determined by agreement, and a teleworker may refuse to conclude any contract with harsh terms.

     The situation for workers with employee status is very different. They enjoy the legal, somewhat paternalistic, protection of the LSL. For example, if an employer intends to order overtime work, Article 36 requires that an agreement be concluded between the employer and the representative of the majority of workers in the workplace, even if individual workers accept overtime work. Article 37, Paragraph 3, requires an employer to pay increased wages for night work (work performed between 10:00 p.m. and 5:00 a.m.) and this regulation can deter employers from requiring excessive overtime work. Considering the careful attention given to employees' long hours of work or night work, as described above, and the other health-related responsibilities of employers prescribed by the law, it can be said that more care should be taken of the health of teleworkers without employee status.

     The final problem relating to telework contracts concerns privacy protection for teleworkers. Current information technology has made it easy to register, conserve, diffuse, publish, modify and even distort personal data. Given that telework must be accomplished with the use of a computer and e-mail, special care should be taken of the personal data of teleworkers.

3.2 Problems Matching Supply and Demand, and the Intermediary Agency
     First, it should be noted that the skills or abilities of teleworkers do not always satisfy the needs of the ordering enterprises. Failure to achieve a match between the teleworkers' skills and the telework tasks required by the enterprise creates problems for both parties. For example, if a teleworker's skills are not at a sufficiently high level, the enterprise may be compelled to reduce the reward previously promised in accordance with the quality of the result. This, in turn, is a cause of discontent for the teleworker, whose stability of income becomes insecure.

     Secondly, in the underdeveloped telework market the mechanisms for matching supply and demand do not function properly. Therefore, both teleworkers and ordering enterprises have no choice but to resort to personal connections. For example, the main source for finding telework is an introduction by friends and acquaintances. Moreover, many telework contracts are concluded between teleworkers and their previous employers. These facts explain why telework contracts have not been widely diffused.

     Despite this, some telework agencies have been established, often by teleworkers themselves. These agencies collect orders from various enterprises and redistribute the work to individual teleworkers. An agency system is to the teleworkers' advantage, because it can secure a more stable supply of work and augment the quantity of orders. Furthermore, ordering enterprises benefit from this system because the agencies usually check the results of each teleworker's output before handing it over to the ordering enterprise. This provides a strategy for quality control.

     However, one problem is inherent in the agency system. The contractual relationship between the ordering enterprise, the agency, and the teleworker is so complex that it is difficult to identify who should assume responsibility for legal problems regarding a contract. For example, which party should assume responsibility for a delay: the agency or the teleworker? In addition, the possibility of exploitation by an intermediary person must be taken into account. In normal labor contracts, Article 6 of the LSL regulates this matter.

     A third problem is that ordering enterprises, which often expect a high level of ability and specialization from teleworkers, experience dissatisfaction when the quality of work is uneven. This problem derives mainly from the fact that it is difficult for teleworkers to acquire the necessary information on the needs of ordering enterprises. Even if the information can be acquired, teleworkers have few opportunities to obtain the training necessary to raise their level of ability and skill to that requested by the enterprises. In addition, because there is no system to evaluate the ability of teleworkers, both ordering enterprises and teleworkers become dissatisfied; in particular, many teleworkers complain that their customers underestimate their abilities.

4.0 The Concept of ‘Worker' in the LSL: Coverage of Protective Regulation
     Article 9 of the LSL prescribes that “worker” shall mean one who is employed at an enterprise or place of business and receives wages therefrom, without regard to the type of occupation. The characteristic of the regulations of the LSL, which is also common to other so-called labor protective laws such as the Minimum Wages Law, is to apply a series of uniform legal protective measures to people defined as “workers.” Article 9 determines the range of people to whom the LSL is applicable, and those who are not defined as “worker” in the LSL are excluded from the legal protection embodied in this law.

     The terms used in Article 9 of the LSL are so ambiguous that they do not distinguish “worker” from “non-worker.” However, case law governing Article 9 provides some critical factors to determine the qualifications of “worker.” These factors include: whether he/she can refuse in practice to accept the work; whether and to what extent he/she can freely decide on when and where to work; whether and to what extent the employer supervises and controls the process of accomplishing the work; whether he/she can entrust to others the order received; which party — worker or employer — must bear expenses for materials or utensils used in accomplishing the work; and whether remuneration is paid for the accomplishment of the work itself or only on completion.

     Judging from the case law mentioned above, it is unlikely that a teleworker qualifies as a “worker” in the LSL. There are a number of reasons for this. Teleworkers usually work at home; they can accept or refuse an order freely, in the sense that there is no “legal” rather than economic compulsion for a conclusion or continuation of a contract; they have discretion over how, when, and where the work is carried out; they purchase telework equipment such as computers at their own cost.

     It would not be appropriate to exclude people who are engaged in telework from legal protection on the grounds that they fail to qualify as a “worker” under the LSL. The justification for labor protective regulations is grounded in the substantial inequality of the contractual parties, employer and employee. Therefore, it is indefensible that legal protection is denied to teleworkers who are in a position similar to normal wage-workers in that a contract is concluded between people whose bargaining powers are notably different.

     Indeed, even under actual laws, a “non-worker” is not always excluded from legal protection. For example, the Workmen's Accident Compensation Insurance Law recognizes special admission into workers' accident compensation insurance for certain categories of the self-employed (Article 27 et seq.). Moreover, although homeworkers were not considered “workers” under the LSL, in 1970 the Industrial Homework Law was enacted, extending some degree of legal protection to homeworkers. Teleworkers who are engaged in industrial production at home may qualify as homeworkers and thereby enjoy legal protection. However, many teleworkers, who work in the service sector or are engaged in information-related activities, are not covered by the Industrial Homework Law. The methodology of legal regulations, by which legal protection is in principle reserved for people defined as a “worker” and is extended in an exceptional way to some people in a situation similar to “worker,” such as the self-employed and the homeworker, should be called into question.

     When the LSL was enacted in 1947, the object of legal protection was principally blue-collar workers in manufacturing sectors. It was not difficult to treat these workers as a uniform entity as they shared similar economic and social situations. As workers' economic conditions have generally improved and their interests have diversified, their need for legal protection and their economic necessities have become more divergent. Some workers now have bargaining power equal to that of their employers. In this situation where there is an equal balance of power and information between employee and employer, and consequently where the application of freedom of contract may not cause serious problems, it would be appropriate to deny the application of the LSL. On the other hand, legal protective regulations should be extended to workers such as teleworkers who are not covered by the LSL, notwithstanding their notable disparity in bargaining power compared with the other contractual party. This means there is a need to rearrange the application of the LSL based on protection for workers.

     It should be noted that LSL regulations are accompanied by administrative supervision of the employer and penal sanctions for any employer who contravenes the rules prescribed by the law. In the current legal context, difficulties arise in the application of such regulations to teleworkers because they are not in an employment relationship, and in this sense they do not have an “employer.” Needless to say, it would not be appropriate to place the same level of responsibility for complying with protective laws on the ordering enterprise that contracts the teleworker as on an enterprise that hires workers in a labor contract.

     There is support among Japanese labor law scholars for a new, flexible approach to labor regulations. According to this view, labor protective law regulations do not necessarily need to be accompanied by administrative supervision or with penal sanctions. Some matters, for example, the ban on predetermined indemnity, do not require severe control or sanction. In addition, for white-collar employees whose future career is in practice secured, there must be room for deregulation, such as contracting out. This new legal trend is a good one; the LSL and other labor protective laws should be revised in the direction of such deregulation or flexible employment options. Currently, introduction of regulations that do not include administrative supervision and penal sanctions into the Japanese labor law system is under discussion. This new approach to regulation can be called a private law-oriented regulation, in the sense that provisions laid down by the law are enforced only by the contractual parties, or a civil court judge in cases where conflict arises.

     In April 2000, a law relating to consumer contracts was enacted in order to resolve various problems that have been caused by differences in bargaining power or information gaps between enterprises and consumers. Although the application of this law specifically excludes labor contracts, the problems addressed by this new law have much in common with those of labor contracts in that, as the weaker party of the contract concluded with an enterprise, a worker can be compared to a consumer. The consumer contract law will become a model for legal regulations for the contract of telework and may cause an active discussion of modifications to legal regulations for labor contracts.

5.0 Implications of ILO Conventions
     While not yet ratified by Japan, the International Labour Organization (ILO) Convention No.177, titled the “Convention concerning Home Work,” adopted in 1996, should be helpful to the discussion of placing legal regulations on telework. This convention is aimed at people without employee status (Article 1 (b)).

     First, it should be noted that this convention requests each nation to promote equality of treatment between homeworkers and other wage earners (Article 4). The precedent for these provisions can be traced back to Convention No.175 adopted in 1994, which intends to establish equal treatment between part-time workers and full-time workers. Both conventions aim to improve the position of under-protected workers, extending them a protection thus far reserved for full-time workers or workers with employee status.

     Of course, it is difficult to apply equal treatment of some conditions and terms to teleworkers based only on Convention No.177. However, this convention provides the justification for a legal intervention aimed at improving the working conditions of teleworkers and the alignment of the level of legal protection of teleworkers to that of other workers.

     In this light, what matters is the right to organize. To improve the economic or social position of teleworkers, it is vital for them to collaborate. In fact, Convention No.177 requires the promotion of equal treatment in relation to “the homeworkers' right to establish or join organizations of their own choosing and to participate in the activities of such organizations.” These provisions in particular have made it difficult for Japan to ratify this convention. According to the prevalent theory in Japanese labor law, the right to organize and the right to act collectively, both of which are guaranteed under Article 28 of the Japanese Constitution, would be denied to workers without employee status. However, this theory is not self-evident. At least from an economic point of view, it is difficult to distinguish an employee from a self-employed person or a tiny enterprise whose existence is dependent on trade with larger enterprises. It is time to re-examine the dogma that attaches employee status to the right to organize and the right to act collectively, and extend those rights to workers other than those with employee status.

     Article 4 of this convention requires the promotion of equal treatment in relation to “protection against discrimination in employment and occupation; protection in the field of occupational safety and health; remuneration; statutory social security protection; access to training; minimum age for admission to employment or work; and maternity protection.” While regulations on “minimum age for admission to employment or work” may be easily introduced into Japanese law, regulations on “statutory social security protection” will be difficult to fulfill because it would require a radical revision of the Japanese social security system, under which the contribution of the employer is taken for granted.

6.0 Conclusion
     Considering the problems faced by today's teleworkers, there is an imperative to improve their legal situation. Under the current labor law system, particularly the regulation system of the LSL, it is difficult to extend the same or similar legal protection that workers with employee status enjoy to teleworkers without employee status. For this reason it is important to continue examining the teleworker problem from a general perspective based on a completely new concept of labor protective laws, which will enable the introduction of more flexible and more appropriate legal regulations in Japanese labor law.

Note:
*However, it should be noted that according to the Supreme Court decision, the duty to care for safety is recognized when the parties have entered into relations involving special social contracts on the good-faith principle. On the basis of such reasoning, an ordering enterprise cannot necessarily escape the duty to care for the safety and health of teleworkers.

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