In Japan, arrangements whereby workers are sent by one company to work under the supervision and direction of another company are generally prohibited unless the arrangement complies with the Worker Dispatch Law. The law has been amended over the years, and there has been talk about further amendments over the past year.
The Law As It Stands
Dispatched workers are employed by third-party dispatching agencies and supplied to utilising companies under a worker dispatch contract. Under such an arrangement, there is no employment relationship between the dispatched worker and the utilising company.
Currently, the general maximum term for which an utilising company may engage dispatched workers for a specific assignment is three years. After three years, the utilising company will have to offer direct employment contracts to the dispatched workers in order to retain them. The utilising company cannot avoid this restriction by engaging new dispatched workers after three years.
However, this maximum term does not apply to 26 prescribed types of professional assignments that require expert knowledge, technical skills or experience (e.g. newscasters and translators). This means dispatched workers in these professional assignments may be retained for an indefinite period without direct employment contracts being offered to them.
Amendments to this law have been proposed, and a draft bill has recently been approved by the Cabinet with the following changes expected to come into force in April 2015:
- For all categories of professional assignments, utilising companies may retain dispatched workers for an indefinite period (i.e. there will no longer be a three year limitation based on the different categories of work assignments);
- However, a three year per dispatched worker limit will be introduced instead. This means for utilising companies to retain dispatched workers for an indefinite period as above, they will need to replace the dispatched workers at least once every 3 years; and
- All third-party dispatching agencies will require a licence.
Good News and Bad News
These amendments are expected to be good news for utilising companies, who will have more flexibility in the use of dispatched workers; however third-party dispatching agencies are likely to face more obligations and scrutiny imposed by the new law. Dispatched workers in the 26 prescribed types of professional assignments are also against the amendments, as they have, until now, enjoyed exemption from the three year restriction periods, but they will be subjected to a three year per dispatched worker restriction under the new law.