No legal cure-all for fixed-term job insecurity

We like to think that work is about more than just making money, but the reality is that most of us have to work to earn our daily bread. A steady job is crucial for our long-term well-being.

In Japan, employment contracts may be either open-ended or fixed-term. Temporary contracts are unregulated except for the length of the term, which can run to a maximum of three years (Article 14 of the Labor Standards Law). The legal principle of “abuse of the right to dismiss” covered in our Feb. 28 column (“Oversleeping radio anchor set tough precedent for firing staff”) applies to open-ended but not fixed-term contracts.

In the case of fixed-term contracts, employers can claim employment naturally finishes with the end of the contract term. They need neither comply with rules for dismissal nor even give notice. In principle, there is no room for debate over the legitimacy of a non-renewal.

But such a principle taken to its logical conclusion would force fixed-term employees to settle for a hopelessly unstable job situation. Employers could use workers all they like while the labor is needed then toss them out when finished.

Such disposability hardly lends itself to a sense of security, and this led to calls for new dialogue on protecting workers from unilateral refusal by management to renew fixed-term employment contracts, a practice called yatoi-dome.

There are three main theories among labor law scholars regarding yatoi-dome:

1) keiyaku shūryou-setsu, or contract termination theory: Employment ends when the contract ends. Period.

2) tenka-setsu, or contract transformation theory: Employment turns permanent after several renewals.

3) jōtai-setsu, or contract circumstances theory: Legal principle of abuse of the right to dismiss applies if circumstances suggest that employment is in effect permanent, even if written contract indicates a fixed term.

The Toshiba-Yanagimachi Factory Case (verdict handed down on July 22, 1974) was the Supreme Court’s first famous precedent in adopting jōtai-setsu. Let’s take a gander:

The seven plaintiffs worked on revolving two-month contracts at the Toshiba-Yanagimachi plant. One of them had been renewed 23 times. They were the main temporary workers involved in making electric equipment, but they did the same work as the permanent staff.

Management refused renewal, citing reasons such as poor performance, background/resume falsification and downsizing. They sued for reinstatement.

Yokohama District Court ruled in 1968 that whereas the original contract term was fixed, their jobs had already lost any semblance of temporary employment and had turned into permanent positions, thereby adopting the tenka-setsu tenet. The judged also reinstated five of them.

In 1970, Tokyo High Court followed by the Supreme Court upheld the lower court’s verdict but switched the justification to jōtai-setsu.

The courts all placed great importance on the fact that the “company didn’t follow procedures to sign a new contract immediately after the end of the previous contract.” In determining if a temporary contract is in effect permanent, courts also place great importance on whether an employer confirms in advance a worker’s intention to renew.

The number of contract renewals is not necessarily a decisive factor, although it is given some weight. It is a myth that employment automatically becomes permanent after a certain number of renewals.

Some courts judged that employers’ actions, comments and/or events at the workplace regarding renewal demonstrated that the worker had good reason to “expect” employment would continue. Other judges determined that no rational grounds existed for such expectation.

Plaintiffs such as part-time university teachers, in particular, have in past cases failed to make the case for permanence because the curriculum varied each year and the number of renewals was made explicit upon hiring.

While jurisprudence offers myriad precedents, no sure measure exists to redress the insecurity of fixed-term employment. A labor ministry deliberative council last December proposed lifting the maximum term to five years, with anything beyond that automatically permanent. Let’s keep an eye on the coming legal debate.

Hifumi Okunuki teaches constitutional and labor law at Daito Bunka University and Jissen Women’s University, among others. She also serves as paralegal for Zenkoku Ippan Tokyo General Union. On the third Tuesday of each month, Hifumi discusses a famous case in Japan’s legal history to illustrate an important principle in labor law.