Changes in the Scope of the Employer and the Determination of Labor Disputes Under the Amended Trade Union and Labor Relations Adjustment Act

In disputes surrounding the Trade Union and Labor Relations Adjustment Act, conflicts arising from differing interpretations have frequently occurred over questions such as “who exactly qualifies as the employer” and “whether a given matter is subject to a labor dispute.”

As a result, there have been not a few cases in which bargaining itself was deemed unlawful, or in which matters escalated into extreme legal disputes over the lawfulness of industrial action.

This draft interpretive guideline for the Trade Union and Labor Relations Adjustment Act is significant in that it presents the direction and the starting point of the government's reasoning, indicating the standards by which the government intends to view future disputes in order to ease such structural conflicts.

That said, this guideline is at the stage of a ‘draft interpretive guideline,’ not a statute or an enforcement decree, and it may be revised or supplemented through the gathering of labor and management opinions during the administrative pre-announcement period.

In other words, it should not be treated as a settled conclusion at this point, and it is more appropriate to understand it as material for reading the standards by which the government intends to view future disputes.

The draft interpretive guideline for the Trade Union and Labor Relations Adjustment Act presents ‘substantial and concrete domination over and determination of working conditions,’ and in particular ‘structural control,’ as the core standard for determining who the employer is.

This is a standard that goes beyond the level of giving work instructions or exercising management and supervision, and instead asks within what structure working conditions are being determined.

For example, where the following circumstances apply, there is greater room to find that the subcontractor is merely the nominal employer and that the core elements of the working conditions are in fact determined by the principal contractor.

In such cases, the likelihood that structural control over the subcontractor's working conditions will be recognized under the Trade Union and Labor Relations Adjustment Act increases, and the principal contractor may also be evaluated as an employer within that scope.

In determining employer status, the draft interpretive guideline for the Trade Union and Labor Relations Adjustment Act calls for comprehensive consideration of various working-condition areas, including occupational safety, the work environment, and wages and welfare benefits, not just working hours.

This means that the room for workers to take issue with who actually determines their working conditions and to demand bargaining may widen.

For businesses, on the other hand, it suggests that they must examine legal liability and bargaining risk even in areas they had not previously recognized as falling within the role of the employer.

That said, the draft interpretive guideline for the Trade Union and Labor Relations Adjustment Act also made clear that employer status must not be recognized on the sole basis of the existence of a subcontracting agreement.

Its position is that demands to meet delivery deadlines, quality control, and requests to perform work in accordance with purchase orders are regarded as falling within the scope of ordinary contract management and are not evaluated as structural control.

In other words, it emphasizes that not every principal-subcontractor relationship is automatically converted into an employer relationship under the Trade Union and Labor Relations Adjustment Act, and that the key issue is whether an actual control structure exists.

The draft interpretive guideline for the Trade Union and Labor Relations Adjustment Act takes the view that a business-management decision that brings about substantial and concrete changes to working conditions may be subject to a labor dispute.

It made clear that while a change to the corporate organization itself, such as a merger, division, transfer, or sale, is not a subject of bargaining, matters arising in the course of carrying it out, such as layoffs, restructuring, and reassignment, may be subject to collective bargaining insofar as they are directly connected to workers' job security.

This is an interpretation that, to a certain extent, opens up areas that had previously been excluded from the scope of bargaining on the ground of being a “managerial decision,” and it is a change that may expand the possibility for workers to demand prior bargaining and to raise claims for industrial action.

In addition, for businesses, it means a need for risk management, in that not only the managerial decision itself but also the course of carrying it out may affect labor-management disputes and the determination of the lawfulness of industrial action.

The amendment to the Trade Union and Labor Relations Adjustment Act has made clear that the following disputes of interest relating to worker status are also included within the scope of labor disputes.

This means that, beyond the personnel matters of individual workers, disputes relating to the setting of collective standards may be subject to bargaining through a trade union.

It also designates clear violations of a collective agreement relating to working conditions as subjects of labor disputes, thereby establishing an area distinct from formal disputes over rights.

The draft interpretive guideline for the Trade Union and Labor Relations Adjustment Act may have a considerable effect on labor-management relations as a whole, but it must not yet be treated as a settled standard of legal interpretation.

This is because the draft interpretive guideline does not bind the courts, and the ultimate determination of employer status and of whether a matter constitutes a labor dispute is still made primarily on the basis of the facts of each individual case.

There is also ample possibility that the contents will be adjusted through the gathering of labor and management opinions after the administrative pre-announcement.

In particular, businesses that operate subcontracting or consignment structures, and workplaces with collective labor-management issues, may need to closely review the points at issue and their impact at this administrative pre-announcement stage.

Even so, from a business's standpoint, it is difficult to dismiss this draft interpretive guideline for the Trade Union and Labor Relations Adjustment Act as mere reference material.

This is because, when a dispute arises, it may serve as the starting point for how the administrative authorities and the courts view the matter.

Businesses may need to examine employer status and bargaining risk in advance, focusing on the following items.

The draft interpretive guideline for the amendment to the Trade Union and Labor Relations Adjustment Act is still closer to a ‘direction’ than a ‘conclusion.’

That direction, however, is clear, and a change in approach to labor-management relations is being called for from both businesses and workers.

If you need a review of legislative trends relating to the Trade Union and Labor Relations Adjustment Act, a diagnosis of your subcontracting structure, or a review of bargaining risk, 🔗Legal Consultation Reservation, you are welcome to request specific advice.