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Year in review

i Latest legal developments in concurrent and secondary employment

In the 'Grand Design and Action Plan for a New Form of Capitalism'6 and the 'Basic Policy on Economic and Fiscal Management and Reform 2022'7 dated 7 June 2022, the Japanese government decided to promote diverse career development by encouraging people to take on side work (concurrent with their primary means of employment), which is why the number of side workers in Japan is expected to increase in the near future. This section introduces recent related legal developments in this country.

Publication of 'Guidelines for Promotion of Side Work' and subsequent social developments

Since the publication of 'Guidelines for Promotion of Side Work' (the Guidelines) in January 2018, social awareness of side workers has grown, and the number of them has increased. However, the LSA stipulates that employers are to track their employees' total hours worked, including those worked for other employers. This has created a hurdle for companies trying to encourage side work or hire side workers, as it may be difficult for employers to track the hours worked outside of their own companies.8

Therefore, the Guidelines were revised in July 2020 to propose a simplified method of managing the hours worked by side workers, under the following:

  1. any hours worked exceeding the primary employer's statutory limit and those worked for the secondary employer are limited to the standard for overtime work in general, which cannot exceed 100 hours per month and 80 hours on average for several months; and
  2. overtime premiums must be paid by the respective employers.

This method ensures that all employers comply with the LSA without having to track the hours worked by their employees outside of their own companies.

For clarification (as this point is often misunderstood by employers and employees alike), under Japanese law, primary employers are not in breach of the law even if they do not keep track of any secondary employment hours worked and they are also not required to include such hours in their own totals or pay extra wages in such cases. However, if a primary employer does keep track of secondary employment hours worked, then those hours must be included in the primary employer's own totals and extra wages need to be paid as necessary.

Revision of the Guidelines for 2022

The Guidelines were revised again in July 2022 to include a new subsection entitled 'Publication of Information on Side Work' under the 'Actions by Companies' section, which states that companies should publicise whether they allow side work, and if they do allow it with certain conditions, those conditions should be included as well.

This revision is intended to encourage companies to disclose information on how to handle side work in order to promote diverse career development for people who wish to enhance their resumes through appropriate career choices.

Court decision on side work

The LCA states that employers shall take due care to ensure the safety of each employee's life and body, among other things, in accordance with the labour contract. Under the Guidelines, the duty to give due consideration to the safety of side workers may be an issue in cases where the employer is aware that their overall workload and hours are excessive.

On 10 April 2022, the Osaka High Court ruled that an employer had a duty of care to a side worker who entered into a fixed-term labour contract with an entrustee who, through a parent company of the entrustee, was entrusted with the operation of a self-service gas station operated by the entrustor, with whom the side worker also entered into a similar contract to work at the same gas station. The side worker claimed that he developed a mental illness due to working continuously for long periods, and thus claimed for damages from the entrustee and a company that had merged with the entrustor.

The High Court found that although it was the side worker's own decision to work such long, continuous hours, the entrustee failed to address the side worker's resulting mental condition by not ascertaining the work conditions at the entrustor, despite the fact that the entrustee was aware of the side worker's concurrent employment with the entrustor. Therefore, the Court found a breach of duty by the entrustee, who was the side worker's primary employer, while denying a breach of duty by the entrustor, the secondary employer.

Please note that this is a special case where the primary employer could have easily ascertained the work conditions of its employee at a secondary employer since their workplaces were one and the same. However, future court decisions will focus on whether the duty of care for safety differs in cases where the primary employer cannot easily ascertain the work conditions at a secondary employer.

ii Supreme Court case on unfair labour practice

Under the LUA, employers have a duty to bargain in good faith with labour unions, and the Supreme Court, Second Petty Bench decision of 18 March 2022 is a precedent-setting case that addresses the details of that duty.

In the case, a national university submitted a collective bargaining proposal to a labour union formed by faculty members and others employed by the university regarding the suppression of salary increases and the lowering of wages through a revision of the salary system, which the university subsequently enacted without obtaining the union's consent. The union filed a petition for relief with the Prefectural Labour Relations Commission, which issued a good faith bargaining order on the grounds that the employer's actions constituted unfair labour practice, but the employer argued that the issuance of such an order was an abuse of the Commission's discretion and thus should be rescinded.

The Court first held that employers are obligated to bargain collectively in good faith by explaining the arguments for their claims and presenting supporting data as necessary. Subsequently, the Court held that even in cases where there is no prospect of reaching an agreement on collective bargaining issues, the labour union will be able to receive sufficient explanations and presentation of materials from the employer with regard to collective bargaining if it responds in good faith, and it will also be able to recover the union's bargaining power and normalise communication between the parties with regard to general union activities. Thus, the issuance of an order to bargain collectively in good faith contributes to the elimination or correction of the infringement caused by the unfair labour practice in question and to the prompt restoration and maintenance of normal order in collective labour-management relations. The Court then concluded that the Prefectural Labour Relations Commission may issue an order for good faith bargaining even when there is no prospect of reaching an agreement on matters pertaining to collective bargaining.

In light of this case, even when there is no such prospect, the employer should not forcefully carry out collective bargaining on the grounds that an agreement cannot be reached, but it should underline the importance of the collective bargaining process itself and provide the labour union with sufficient and adequate explanations and materials.

Outlook and conclusions

Several years have passed since the outbreak of covid-19 and additional external factors, such as the soaring prices of various goods and services, the conflict in Ukraine and the sharp depreciation of the Japanese yen, and the Japanese economy is still struggling to recover. Dismissals by economically distressed employers due to business downsizing will continue to increase, as will related disputes. In addition, disputes related to the diversification of work styles, specifically over work hours when telecommuting and over the employment status of freelancers, are also expected to increase.

However, the improvement of productivity through digital transformation triggered by the pandemic, such as the increase in telecommuting, will shorten work hours, allowing people to have more private time to start side work or otherwise have more flexible, proactive career paths. This is expected to eliminate the rigidity of employment in Japan, which has been a problem for many years, and increase employment mobility.