Lecture 4: Fixed-term labor legislation in Japan (Part 3)

February 28th, 2022 [No. 98-2021]

Professor SHIMADA Yoichi,
Faculty of Law, Waseda University

 

 

 

Fixed-term Labor Contracts in Japan

Lecture 4: Fixed-term labor legislation in Japan (Part 3)

 

5. Outline of fixed-term labor legislation (continued)

(5) Right to request conversion to an indefinite-term employment contract

 In the case where a fixed-term labor contract concluded with the same employer is renewed and the total contract term of two (2) or more of such fixed-term labor contracts exceeds five (5) years (limited to the fixed-term labor contracts that were concluded on or after April 1, 2013), if the worker applies for the conclusion of a labor contract without a fixed term before the date of expiration of the currently effective fixed-term labor contract to begin on the day after the said date of expiration, it is deemed that the said employer accepts the said application (“right to request conversion to an indefinite-term employment contract”; Article 18, first part of paragraph (1) of the Labor Contracts Act). As a result, upon termination of the fixed-term labor contract under which the right to request conversion to an indefinite-term employment contract has been exercised, a labor contract without a fixed term will be concluded between the employer and the applicable worker. Meanwhile, an act to switch the employers intentionally with the aim of avoiding the generation of the right to request conversion to an indefinite-term employment contract is considered to be a circumvention of the law and is not accepted.

 Because of the creation of the right to request conversion to an indefinite-term employment contract, it has become more difficult for employers to freely continue renewing their fixed-term labor contracts; in fact, many labor contracts for fixed-term workers have been transferred to contracts without a fixed term. Consequently, it may be said that employment stability has been achieved to some extent. However, from a legal perspective, any other work conditions than the contract term will be maintained. Therefore, the above-mentioned improvement cannot solely resolve all the difficulties of fixed-term workers.

 In the meantime, with regard to the calculation of the total contract term of a fixed-term labor contract, if the term between the expiration date of the preceding fixed-term labor contract and the conclusion date of the following contract (“vacant term”) exceeds the period prescribed by any laws and regulations, the total contract term will be reset once, and the new calculation of the total contract term will start from the date of conclusion of the new fixed-term labor contract (Article 18, paragraph (2), of the Labor Contracts Act). If the vacant term exceeds a certain period of time in this manner (six (6) months if the contract term is one (1) year), the term is called a “cooling-off period” as it has the effect of resetting the previous total contract term. If a vacant term is less than the period of the cooling-off period, all periods of fixed-term labor contracts before and after the vacant term will be included in the calculation of the total contract term. (The vacant term itself will not be included in the total contract term.) A cooling-off period, on one hand, prevents circumvention of the law by having a vacant term that may deliberately impede the accrual of the right to request conversion to an indefinite-term employment contract; on the other hand, it has a purpose of using the fixed-term labor contracts in a flexible way.

(6) Disparity adjustment on work conditions with regular employees

1) Prohibition of unreasonable treatment of fixed-term workers (Article 8 of the Part-Time Workers and Fixed-Term Workers Act)

 An employer must not create differences between the base pay, bonuses, and other treatment of fixed-term workers it employs and the corresponding treatment of its workers with standard employment statuses (regular employees) that are found to be unreasonable in consideration of the circumstances, including (1) the work content (the substance of the duties and the level of responsibility associated with those duties), (2) the scope of changes in work content and assignments (which is called the “system of human resource utilization”), and (3) other circumstances, such as the nature of the treatment and the purpose of such treatment. As a result of the adoption of this regulation, fixed-term workers have become able to fight against disparities in work conditions when there is any disparity in the work content or other matters between fixed-term workers and workers with standard employment statuses. In other words, it may be said that this regulation seeks the balanced treatment that is associated with the difference in work content between fixed-term workers and employees without a fixed term with the intention of gaining fair treatment of part-time and fixed-term workers. For such a purpose, the government has established the Guidelines on the Prohibition against Unreasonable Treatment of Part-Time Workers, Fixed-Term Workers, and Dispatched Workers (hereinafter called the “Guidelines for Equal Pay for Equal Work”) for practical convenience.

 With respect to fixed-term workers, seven Supreme Court decisions have already been made in relation to the former Article 20 of the Labor Contracts Act. Meanwhile, with regard to the decision on the unreasonableness of any disparities in treatment between fixed-term workers and workers with standard employment statuses, whether or not appropriate treatment has been provided is considered in light of the nature, intent, and purpose of each treatment in connection with the disparity in work content of those different types of workers. In such a case, if the work content is the same as that of another type of worker, whether or not the same treatment has been provided is discussed, and if the work content is different, whether or not the treatment has been provided in accordance with such difference is discussed. In particular, the Guidelines for Equal Pay for Equal Work provides for the basic concept in each of the categories of base pay, bonuses, allowances, and welfare programs and educational training.

2) Prohibition of discriminatory treatment against fixed-term workers who are equivalent to workers with standard employment statuses (Article 9): An employer must not subject a fixed-term worker (i) whose work content is the same as that of a worker with a standard employment status and (ii) whose scope of changes in the work content and assignments throughout the entire employment period is likely to be the same as that of such a worker with a standard employment status in light of customary practices at the place of business in question and other circumstances to differential treatment in terms of determination of the amount of wages, implementation of educational training, use of welfare facilities, and other treatment on the grounds that the worker is a fixed-term worker.

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