CWS 3.0: August 20, 2014

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Japan’s Worker Dispatch Act amendments would ease temp usage restrictions

Amendments to Japan’s Worker Dispatch Act of 1985 are expected to be approved and become effective in 2015, according to international law firm Sidley. These amendments could have a significant impact on the personnel policies and workforce management of companies in Japan. The most significant amendment is allowing companies to staff a greater number of positions with temporary workers for longer (indefinite) periods of time.

In Japan, the act regulates employee “dispatching” arrangements, whereby temporary staffing agencies provide temporary workers, known locally as dispatch workers, to client companies, which supervise and direct the duties of such workers, but are not considered their employers.

Currently, a company generally may not utilize dispatched workers in a specific role for more than three years. The company may not avoid this rule by engaging a new dispatched worker in the same role during the three-year term or after the expiration thereof. In order to retain the dispatched worker in the role beyond this three-year term, the client company must offer direct employment to the worker.

However, the act makes an exception for 26 specialized occupations, such as technological positions, interpreters and other positions requiring specialized skills. The client company may engage dispatched workers in the specialized jobs indefinitely without offering permanent employment to such workers.

Because it often is not clear, though, whether a dispatched worker’s duties qualify under one of the 26 exempted jobs, client companies may risk misclassifying workers and violating the act.

The proposed amendments to the act would make the following significant changes:

  • The distinction between the 26 jobs and other occupations will be abolished.
  • A client company may not utilize dispatched workers for a term lasting longer than three years at each of its business places; however, the client company may engage dispatched workers for subsequent three-year terms, provided that the client company liaises with the company’s labor union (or other representative of more than half of its workforce, as applicable) regarding such an extended dispatching arrangement (though the union or other representative would not have any power to override the client company’s decision).
  • For all occupations, although the client company may not engage a particular dispatched worker in a specific department for longer than three years, the client company may transfer the dispatched worker to other departments for subsequent three-year terms.

Also of note, the amendments will require client companies, not just staffing agencies as before, to give adequate consideration to the provision of education and training to dispatched workers, and all staffing agencies will be required to obtain licensing from the regulatory authority.

Given these proposed amendments, companies engaging dispatched workers should carefully review their contracts with staffing agencies and monitor dispatched workers’ onboarding dates to ensure the proper transition of roles between coming and going dispatched workers, especially for workers in any of the 26 specified job categories, as dispatched workers in those occupations will no longer be able to be engaged indefinitely.