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Impact of decision over wage disparities

The Yomiuri Shimbun

From left, Tetsufumi Okamoto, Takashi Araki and Tetsuya Hayashi

The Yomiuri Shimbun In its rulings on June 1 regarding two lawsuits over wage gaps between regular and nonregular workers, the Supreme Court urged companies to scrutinize whether the wage disparities are “unreasonable.” As nonregular workers now account for nearly 40 percent of the nation’s workforce, what impact will the rulings have on wages and people’s work styles? The Yomiuri Shimbun asked three experts on the issue. The following are excerpts from the interviews.

(The Yomiuri Shimbun, June 2, 2018)

Good opportunity to correct distortion

It is a step forward that the Supreme Court determined that nonregular employees must also be paid allowances that match the reality of their work. In accordance with this ruling, companies all over Japan will likely move in the direction of eliminating allowance pay disparities between regular and nonregular employees.

The Community Union National Network has about 20,000 members, of whom about 30 percent are nonregular workers. We receive a lot of consultations about allowances, such as commuting and food allowances. Everyone can be said to consider it unreasonable that allowances are not provided to nonregular workers only on the grounds that they are not regular employees, although they work for the same companies. It is hoped that the top court ruling will become an opportunity to correct this sort of distortion.

In contrast, regarding retired employees who have been reemployed, the Supreme Court ruling tolerates the total amount of wages being lowered for reasons such as long-term employment not being anticipated. This is a big problem. As the aging of society advances, many workers have no choice but to work for a long time after mandatory retirement. At the very least, their wages should not be cut in cases where they are doing the same work as they were before retirement.

It is also worrisome that this ruling could spread a trend of allowing wage disparities between regular and nonregular employees.

Even the draft proposal for the government’s guidelines says there is no problem if the wages of a regular employee who may be reassigned or relocated are higher than those of a nonregular one.

But if reassignment and relocation are taken up as factors causing wage disparities, companies only have to pay regular workers allowances for managerial posts or an allowance for a job transfer away from their family when such things actually happen. Discriminating on the basis of the possibility that “it could happen in the future” is unacceptable.

If wage disparities come to be compared item by item, this would have the merit of making it easy for workers to ascertain where differences are, and allowing for more substantial discussions in labor-management negotiations. I absolutely want companies to voluntarily explain the results of comparison to workers.

This is because, from workers’ viewpoint, it’s normal to worry that they’ll be disliked by their company if they ask for an explanation about differences in working conditions. If workers don’t request such an explanation, the matter is not seriously considered, and in the end, current disparities remain as they are. It should be made mandatory for companies to explain differences in working conditions to all workers.

When considering the issue of differences in working conditions between regular and nonregular employees, no attempt should be made to forcibly correct disparities by lowering the working conditions of regular employees. If this happens, the anger of regular employees may not be directed at their company but toward its nonregular employees. As a result, nonregular employees would no longer be able to be comfortable at their workplaces.

Correcting disparities is not a matter of merely calculating every worker’s allowance to make even each. It does not mean anything unless there are more workplaces where all workers, regardless of employment status, can work with a sense of satisfaction.

— This interview was conducted by Yomiuri Shimbun Staff Writer Takushi Kuwahara.

— Tetsufumi Okamoto

Secretary General of the Community Union National Network

A former employee at a printmaking company, Okamoto has served in his current post since 2009. He is 56.

From now on, companies will be accountable

As judicial judgments had been split over whether wage disparities between regular and nonregular employees are “unreasonable,” it is very significant that the Supreme Court has established a framework for making such judgments.

The current situation, in which labor-management negotiations have stalled and lawsuits have been filed one after another, can be expected to improve — and that will lead to progress in rectifying wage disparities between regular and nonregular employees.

In Japan, nonregular employees used to be regarded as people who work to supplement their household finances, such as homemakers. However, as the employment situation has deteriorated since the 1990s, the number of nonregular employees who are breadwinners has increased, resulting in the development of a legal framework to improve their working conditions.

In 2008, the revised part-time employment law came into force as the first legislation banning disparities. However, the law banned wage disparities between regular and nonregular workers when all of the following three conditions were the same: the content of the work; the extent of personnel transfers the workers are subject to; and their employment period. As a result, only about 1 percent of nonregular workers benefited from the revised law, so it did not have a tangible effect.

Reflecting on this experience, Article 20 of the Labor Contract Law took effect in 2013. The article covers a wide range of nonregular employees under the law, but does not demand equal wages between regular and nonregular workers. The law was aimed at recognizing disparities that were deemed “unreasonable” as being illegal, and at realizing well-balanced working conditions overall.

Nevertheless, court interpretations have been divided over the stipulation that disparities “should not be unreasonable,” so the top court’s decision had been long awaited.

This time, the Supreme Court required companies to closely examine whether wage disparities are unreasonable in consideration of the purpose of respective working conditions, including allowances. The rulings, on the other hand, urged companies to take into account not only work content and job transfers, but also conditions such as the reemployment of retired employees, when judging the appropriateness of disparities.

The wage systems for regular and nonregular employees greatly differ at each company, and how to consider the background and purpose of disparities will be an issue in the future.

The Supreme Court can be said to have asked both companies and labor unions to make efforts to properly reflect the voices of nonregular employees on their working conditions.

The government has set a goal of “equal pay for equal work” and a package of work style reform bills have been deliberated in the Diet. The bills also say that judgments over whether wage disparities are unreasonable should be made for each wage item, including base pay and bonuses. In that sense, it seems to be moving in the same direction as the Supreme Court judgment.

Until now, many companies have operated different wage systems for regular and nonregular employees. Even if there is a large disparity, that has been ignored simply because they are “nonregular employees.”

As a result of the top court decision, from now on each company will be held responsible for explaining disparities properly. I hope that a wage system will be established that can accommodate both regular and nonregular employees.

— This interview was conducted by Yomiuri Shimbun Staff Writer Katsuro Oda.

— Takashi Araki

Professor at the University of Tokyo

Specializes in labor legislation and the history of labor policy in the world. He served as chairman of the working conditions section meeting at the Health, Labor and Welfare Ministry’s Labor Policy Council. Araki is 59.

Measures needed to decrease burden on employers

About 46,000 small and midsize companies from all over Japan belong to our conference. Amid the growing number of elderly workers, some companies don’t cut the wages of workers who are reemployed after mandatory retirement and maintain the same working conditions for them. How to deal with such rehired workers who are working in the same way as before retirement is becoming a significant management issue for all companies.

This time, the Supreme Court accepted wage cuts for retired workers who have been reemployed. This is significant because the flexible application of working conditions, in keeping with companies’ circumstances, was accepted. Some small and midsize companies are facing financial difficulties due to the rapid increase in personnel costs.

On the other hand, with regard to the working conditions of regular and nonregular employees, the Supreme Court ruling also determined that employers must consider whether to pay nonregular workers various allowances that have been paid to regular workers, in light of the actual state of affairs for each worker, and prohibit unreasonable disparities between them.

Allowances whose criteria for payment is clear, such as meal and travel allowances, should be provided fairly. With the top court ruling, such a view will likely become the general way of thinking.

However, eliminating disparities in allowances, as well as maintaining wage levels for elderly workers, leads to growing personnel costs. If personnel costs continue to expand, a trend could emerge of hesitating to hire younger people.

Considering the tasks at hand, trusting work to knowledgeable elderly workers may be more efficient, as it can save the effort of training younger workers. However, it will produce a hollowing-out among future generations of workers. If the passing of techniques from one generation to another stops, it could undermine the very backbone of “Japanese-style manufacturing.”

I want the government to create a system that reduces the burden on companies, such as exempting companies from paying workers’ social insurance premiums if they have improved working conditions for nonregular workers.

Also, according to the Supreme Court ruling, a reasonable explanation is necessary when paying regular and nonregular employees differently. Companies have to explain why there is a difference when requested to do so by workers.

In small and midsize companies, there are many cases in which a small number of people work like “multi-skilled employees.” In a context where there is not a clear yardstick, like official qualifications to be a doctor or childcare worker, how to explain the differences in working conditions and win their understanding will become an issue in the future.

In Europe and the United States, a “job-hopping” type of employment has taken hold where experienced workers with specific skills are hired when necessary. In Japan, however, employers have trained employees through such a process as employing new graduates, having them acquire knowledge and skills through various work, and then appointing them to managerial positions.

Considering these circumstances, couldn’t it be said, for example, that it is reasonable to set differences in allowances based upon reasons such as “a higher level of comprehensive ability” or “abundant experience?”

Japanese-style employment has the merit of allowing people to work in a stable manner. To avoid falling into an easy performance-based pay system, discussion needs to be deepened.

— This interview was conducted by Yomiuri Shimbun Staff Writer Takushi Kuwahara.

— Tetsuya Hayashi

Head of the business and labor committee of the National Conference of Association of Small Business Entrepreneurs

Hayashi is also head of the Kagawa Caring Management Center, an elderly nursing care-related company with seven employees, and a certified social insurance labor consultant. He is 61.

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