Move towards Enactnment of Labor Contract Law: Study Group of Ministry of Health, Labour and Welfare Publishes Interim Report

In Japan in recent years, an increasing number of disputes have occurred over rights and obligations involved in individual labor contracts. This is attributable, among other things, to the fact that the business environment has changed in terms of personnel management, with more individualized or diversified employment patterns and working styles, as well as reconsideration of the seniority wage system. Furthermore, the situation affecting labor contracts has also changed, with the deterioration of the collective barganing mechanism for formulating labor conditions due to a decline in unionization rate. Thus, existing provision of the law and court rules concerning labor contracts are no longer sufficient to reflect the will of workers, protect their rights, or prevent labor disputes, so that it is urgent to set up a new, alternative mechanism.

In April 2004, the Ministry of Health, Labour and Welfare launched the "Study Group for a Future Legal System for Labor Contracts," which discussed and examined the issue over the period of a year, published an Interim Report in April 2005. In order to encourage both labor and management parties to determine labor conditions on an equal footing voluntarily and to prevent labor disputes from occurring, the Report proposes (1) the enactment of a new law (labor contract law), apart from the labor standards law, to define civil rules; and (2) revision of the labor standards law in order to clarify rules concerning labor contracts. The Study Group will complete its final report in September and then engage in further discussion at meetings of the Labor Policy Council, with the attendance of representatives of labor and management, and if the meetings see a consensus, work to have it embodied.

The specific features of the legal structure concerning labor contracts, and of the revised labor standards law presented in the Interim Report, are summarized as follows:

● Legal Structure Related to Labor Contracts

a. Establishment of a system with a permanent labor-management committee monitor and investigate the operation of rules to be used when labor conditions are determined, and represent the interests of workers in a fair manner when the conditions are determined;

b. Use of procedural regulations and presumptive provisions to improve legal predictability concerning individual cases;

c. Establishment of rules concerning requirements for and effects of completion, modification and termination of labor contracts;
- Clarification of rules regarding the tentative decision to hire, probationary period, transfer of workers (transfers within a single company, transfers beyond the boundary of a single company, and transfers of workers, and employment status to another company), disciplinary measures, dismissal, retirement, etc.;
- Drawing up of obligations to pay attention to safety and to protect personal information of workers;
- Consideration of the adoption of a scheme "to change the nature of contracts while continuing employment relations so that the reasonableness of the changes in labor contracts can be disputed while current employment contracts remain effective"; and
- Consideration of the adoption of a scheme to resolve disputes over dismissal on a financial basis.

d. Development of rules regarding the termination of fixed-term labor contracts.

● Revision of the Labor Standards Law

a. Clear statement of the fact that the regulation regarding the upper limit on contract terms is aimed exclusively at avoiding posing restrictions on the retirement of workers;

b. Exclusion of workers who have been tentatively decided to be hired from application of the notification of dismissal system;

c. Revision of regulations regarding the calculation of working hours of those who work in more than one business establishment; and

d. Clear statements of labor conditions, and revisions of the matters to be covered in work rules, and the procedure for drawing up of work rules.

The Ministry of Health, Labour and Welfare has asked for opinions on this Interim Report via its website and will submit a summary of the opinions as reference to the Study Group. In the meantime, Rengo, the Labour Lawyers Association of Japan, and other organizations are calling for: more light to be shed on every point of contention in the Interim Report; making public the recommendations and opinions; and submission of a final report reflecting discussions sufficient to the satisfaction and understanding of workers involved. (The Japan Labor Flash will continue featuring moves towards establishment of a Labor Contract Law.)