Human Resource Management Keiichiro HAMAGUCHI

Chapter 5 Employment Contract and Work Rules

(1) Employment Contract Written contracts with detailed working conditions prescription are rare. The conditions in work rules become content of the contract. Place and type of work is not specified in contract, and employers reserve the right to deploy workers unilaterally. Nissan Murayama Plant case (Supreme Court) confirmed it.

(2) Work Rules Employer with 10+ employees must draw up work rules. Employer must consult majority union or majority representative, but consent is not required. Employment contract inferior to work rules is replaced with the latter.

(a) Doctrine on “Reasonable Modification” of Work Rules “Reasonable modification” of the work rules has a binding effect on all workers, including those who opposed the modification (The Shuhoku Bus case). The doctrine is based on concerns of employment security and necessity of adjusting working conditions. Flexible modification of working conditions compensates for the lack of external flexibility.

(b) Criteria for “Reasonableness” Other than disadvantage to workers and compensatory measures, the consent of majority union is important criteria for the “reasonableness” (The Daishi Bank case). Supreme court does not always respect majority union’s consent (The Michinoku Bank case). Report of the Study Group on Labor Contract Legislation advocated that “disadvantageous modification of work rules accepted by majority union should be regarded as reasonable.

(3) Collective Agreement Collective agreement concluded between employer and trade union has normative effect on individual contract. Employment contract inferior to collective agreement is replaced with the latter. Collective agreement with one trade union applies to the members of the union, not to the members of other unions.

(a)Enterprise-level Bargaining and Work Rules Almost all collective agreements in Japan are concluded at the enterprise level. Normative effect of collective agreement invalidates not only disadvantageous but also advantageous contracts. Collective agreements take priority over work rules. When both sides cannot reach agreement, employer can change the work rules unilaterally.

(b) Plural Unionism and Establishment of Uniform Working Conditions Japan has no exclusive representation principle. Even if a company has majority union, minority unions or outside unions have full bargaining and strike right. To establish uniform working conditions, employer first concludes collective agreement with the majority union, then modify the work rules according to the collective agreement.

(4)Flexible Regulation of Working Conditions and the Long-Term Employment System Combination of empty individual contract, reasonable modification of work rules and company-level agreement enables flexible adjustment of terms and conditions of work. Flexible work conditions reflect difficulty of dismissals in long-term employment system. “Functional flexibility” in Japan vs. “numerical flexibility” in US.

(5) Modification of Individual Working Conditions In case of contract specifying place and type of work, flexible modification is difficult. Scandinavian Airlines Systems (SAS) case introduce a notion of a dismissal to change working conditions. Report of the Study Group on Labor Contract Legislation advocated new system for the modification of individual working conditions, which provides a third choice for employees: acceptance of a modification proposal with the reservation.