Organization and Operation of Labor Unions under Japanese Labor Law

In the Japanese business environment, labor unions play a significant role in corporate management and labor relations. The Japanese Constitution guarantees workers’ rights to association, collective bargaining, and collective action, and laws such as the Labor Union Law are established based on these rights. Therefore, for companies, engaging with labor unions is not a matter of choice but a managerial challenge that must be addressed within the legal framework. A precise understanding of the organizational structure and operating principles of labor unions, as well as the legal regulations that govern them, is essential for building healthy labor relations and managing legal risks. This article focuses on three critical aspects of the organization and operation of labor unions under Japanese labor law: ‘Autonomy of Labor Unions and Their Legal Regulations,’ ‘Union Shop Agreements,’ and ‘Institutions of Labor Unions.’ It provides a detailed explanation from both a legal basis and a practical viewpoint. Through this analysis, we aim to assist corporate managers in strategically building relationships with labor unions while complying with the law.

The Autonomy of Labor Unions and Their Legal Requirements Under Japanese Law

In the Japanese legal system, labor unions are granted a high degree of autonomy. This principle of autonomy is designed to prevent undue interference by the state or employers in the internal operations of unions, ensuring that workers can negotiate with employers on an equal footing. However, in order for a labor union to enjoy the protections provided under the Japanese Labor Union Law, it must meet the stringent requirements set forth by the law. Understanding these requirements is crucial for companies to determine whether the organizations they are dealing with are legally valid negotiating partners.

Article 28 of the Japanese Constitution guarantees workers’ rights to collective association, collective bargaining, and collective action. The Japanese Labor Union Law concretizes these constitutional rights. Article 2 of the law defines a labor union as “an organization or a federation of organizations organized by workers primarily for the purpose of maintaining and improving working conditions and enhancing their economic status.” This definition includes positive requirements that a union must meet to be legally recognized: being worker-led, autonomous, and primarily aimed at improving working conditions.

Conversely, Article 2 of the Japanese Labor Union Law also sets out negative requirements that exclude certain types of organizations from being subject to the law. If an organization meets any of these negative requirements, it is not considered a labor union in the legal sense and cannot receive the strong protections (such as relief from unfair labor practices) provided by the law. For corporate management, understanding these negative requirements is particularly important.

Firstly, an organization that allows participation by those representing the employer’s interests cannot be recognized as a labor union. This includes officers, workers in supervisory positions with direct authority over hiring and firing or promotions, and those privy to confidential matters regarding the employer’s labor relations. The purpose of this provision is to ensure the union’s autonomy and exclude the influence of the employer.

Secondly, organizations that receive financial assistance from employers for their operational expenses are also not recognized as labor unions, in principle. This is to prevent unions from becoming financially dependent on employers and to maintain their independence. However, the Japanese Labor Union Law does allow for some exceptions. For example, employers permitting workers to negotiate during working hours without loss of wages, contributions to welfare funds, and the provision of minimal office space are not considered prohibited financial assistance.

Thirdly, organizations that are solely for mutual aid or welfare purposes, or those primarily aimed at political or social movements, are also excluded from the application of the Labor Union Law.

These legal requirements are not merely definitional. When a company is approached by an organization requesting collective bargaining, verifying whether that organization meets the requirements of Article 2 of the Japanese Labor Union Law is the first step in determining the company’s legal obligations. If the organization allows participation by officers or receives inappropriate financial assistance from the employer, it may not have the legal right to negotiate. Therefore, scrutinizing these requirements is a fundamental part of due diligence in a company’s legal and risk management practices.

Union Bylaws: The Cornerstone of Internal Governance for Labor Unions in Japan

For a labor union to function as a legally valid entity, it is essential to have ‘union bylaws’ that establish the fundamental principles of its organization and operation. These bylaws can be considered the ‘constitution’ within the union, regulating the rights and obligations of members and the decision-making process. Furthermore, the Japanese Labor Union Act obligates unions to incorporate specific democratic provisions into their bylaws as a qualification for receiving protection under the law. Therefore, understanding the content of the union bylaws is crucial for assessing the legitimacy and democracy of the union’s operations.

Article 5, Section 1 of the Japanese Labor Union Act stipulates that for a labor union to participate in procedures prescribed by the law, such as filing for relief from unfair labor practices, it must prove to the Labor Relations Commission that its bylaws conform to the provisions of Section 2 of the same article. While unions with deficient bylaws (non-compliant unions) are restricted from participating in procedures under the Labor Union Act, the protection of individual workers based on Article 7, Item 1 of the law is not denied, and they are also entitled to the protection of constitutional rights to legitimate collective action under Article 28.

The democratic provisions required by Article 5, Section 2 of the Japanese Labor Union Act to be included in the bylaws are the following nine items:

1. Name of the union
2. Location of the principal office
3. Members have the right to participate in all matters of the union and to receive equal treatment
4. No one shall be deprived of membership due to race, religion, gender, social background, or status
5. Officers are to be elected by direct secret ballot of the members (in the case of federated unions, it is also possible to occupy by direct secret ballot of delegates elected by direct secret ballot of unit members)
6. A general meeting is to be held at least once a year
7. Financial reports are to be published to the members at least once a year, accompanied by a certificate from a professionally qualified auditor
8. A strike (labor action) cannot be initiated without a decision by a majority of direct secret ballots of the members
9. Amendments to the bylaws must be supported by a majority of direct secret ballots of the members

These provisions ensure democracy and transparency in union operations. For example, by requiring direct secret ballots by members for critical decisions such as officer elections, strike decisions, and bylaw amendments, the system prevents autocratic management by a few executives and guarantees activities based on the collective will of the members. Additionally, the obligation to publish financial reports ensures transparency in union finances and proper use of union dues.

These bylaw requirements act as a ‘ticket’ for labor unions to gain legal power. When a labor union files for relief from unfair labor practices by employers (such as unjustified refusal to negotiate collectively) with the Labor Relations Commission, the commission first checks whether the union is compliant with the law, namely, whether its bylaws meet the requirements of Article 5, Section 2 of the Japanese Labor Union Act. If there are deficiencies in the bylaws, the application itself may be dismissed. From the perspective of the employer, this means that verifying whether a union’s bylaws meet the legal requirements can be a legal countermeasure when faced with legal action from a labor union. Issues of internal governance within a union are not just internal matters but can also become significant points of contention in legal disputes between labor and management.

The Structure and Authority of Labor Unions Under Japanese Law

Labor unions in Japan establish internal decision-making and executive bodies to achieve their objectives. Understanding how these bodies are composed and what authorities they possess is essential for companies negotiating with labor unions to grasp who the legitimate representatives are and how the union’s intentions are determined through their procedures.

The supreme decision-making body of a labor union is typically the “general assembly” (or convention). Comparable to the shareholders’ meeting in a corporation, the general assembly holds the authority to decide on the most critical matters concerning the union’s operations, such as the union’s policy direction, budget, election of officers, amendment of union regulations, and ratification of labor agreements. According to Article 5, Section 2, Item 6 of the Japanese Labor Union Act, the general assembly is mandated to convene at least once a year.

The “executive committee” is the body responsible for the day-to-day execution of policies decided by the general assembly. The executive committee consists of officers elected at the general assembly, including the chairperson, vice-chairperson, and secretary-general. This committee handles specific negotiation preparations, consolidates members’ opinions, and manages routine union affairs, forming the core of the union’s operations.

Among these officers, the “chairperson” typically plays the role of the highest responsible representative of the union externally. Article 6 of the Japanese Labor Union Act states, “The representatives of a labor union or those authorized by the union have the authority to negotiate with employers or their organizations on the conclusion of labor agreements and other matters on behalf of the labor union or its members.” This ensures that representatives like the chairperson have the legal authority to engage in collective bargaining with employers.

When companies approach negotiations with labor unions, understanding this organizational structure is practically important. Typically, members of the executive committee sit at the negotiation table, holding legitimate authority to negotiate based on Article 6 of the Japanese Labor Union Act. However, their authority is limited to “negotiation authority” and does not necessarily equate to “final settlement authority.”

In many unions, the union regulations reserve the right to ultimately approve any labor agreement settled with the employer to the general assembly, the highest decision-making body. This is a democratic control mechanism to prevent negotiators from compromising against the overall interests of the union members. This structure significantly impacts the negotiation strategy of the corporate side. Even if a tentative agreement is reached with the executive committee, there is always the risk that this agreement may be rejected by the vote of the members at a later general assembly. Therefore, it is wise for corporate negotiators to inquire about the union’s internal approval process during negotiations and to develop their negotiation strategy considering this ratification risk.

The Legal Structure and Practice of Union Shop Agreements Under Japanese Employment Practices

Union shop agreements are widely adopted in Japanese labor relations to strengthen the organizational power of unions. These agreements effectively require employees of a company to join a specific labor union, and understanding their legal force and limitations is extremely important for corporate human resource and labor management.

Article 7, Item 1 of the Japanese Labor Union Law prohibits, as an “unfair labor practice,” the disadvantageous treatment of workers, such as dismissal, on the grounds of not joining or withdrawing from a labor union. However, a proviso to this item provides an important exception to the principle. It states that “it does not prevent the conclusion of a labor agreement that makes being a member of a labor union a condition of employment for workers employed at a specific factory or workplace, if the labor union represents the majority of the workers there.” This is the legal basis for union shop agreements.

The most crucial requirement for the validity of these agreements is the “majority representation requirement.” Only labor unions that are organized by a majority of the workers at the workplace (majority unions) can enter into a union shop agreement. If the union represents a majority at the time of the agreement but later falls below the majority due to members leaving, the union shop agreement automatically loses its effect. In this case, the company’s obligation to dismiss employees for not joining the union ceases.

Even if a company is approached by a labor union to enter into a union shop agreement, it is not necessarily required to agree to the most stringent terms. Depending on the negotiations, it is possible to conclude a more flexible form of agreement that retains the company’s discretion. Two common types seen in practice are:

One is known as the “escape clause union.” In this arrangement, while the agreement stipulates that employees who leave or are expelled from the union are “in principle” to be dismissed, the final decision on dismissal is left to consultation between the company and the union, thus preserving the company’s discretion.

The other is the “declaration union.” This is the weakest form of agreement, where the agreement merely declares that “employees must be union members,” without specifying any obligation to dismiss employees for not being union members.

To clarify the differences between union shop agreements and other related systems, the following table organizes them. While these concepts are used internationally, their validity under Japanese law varies.

As can be seen from this comparison, the strong closed shop, which requires union membership at the hiring stage, is generally not permitted in Japan. On the other hand, the union shop is a system whose validity is recognized only under strict conditions such as majority representation. Companies must fully understand these legal requirements and practical options when considering entering into a union shop agreement, and make a careful decision that fits the actual situation of their labor relations.

Key Court Cases on Union Shop Agreements Under Japanese Law

Union shop agreements provide a strong organizational foundation for labor unions, while also wielding significant power over the employment of individual workers. As a result, their implementation has led to numerous legal disputes. The Supreme Court of Japan has clarified through a series of rulings that there are legal limits to the effectiveness of union shop agreements. These precedents are essential for companies to understand the legal risks involved when fulfilling dismissal obligations based on such agreements.

Firstly, there is a precedent regarding the validity of dismissals when a union’s expulsion of a member is invalid. In the Japan Salt Manufacturing case (Supreme Court decision on April 25, 1975 (1975)), the Supreme Court ruled that if a labor union unjustly expels a member, the employer’s dismissal of the worker based on this invalid expulsion constitutes an abuse of the right to dismiss and is therefore invalid. This judgment serves as an important warning to companies. Even if a union requests the dismissal of a member based on a union shop agreement, a company should not act merely as an ‘enforcement body’ complying with the union’s demands. Before executing a dismissal, a company has a legal duty of care to investigate and confirm whether the union’s expulsion procedures were properly conducted in accordance with the union’s rules and whether the reasons for expulsion are rational. Failure to do so, resulting in a dismissal based on an unjust expulsion, will render the dismissal invalid, and the company will be held legally responsible to the affected employee.

Secondly, there is a significant precedent regarding the validity of dismissals when a worker joins another labor union. The Mitsui Warehouse Port Transport case (Supreme Court decision on December 14, 1989 (1989)) established that an employer is not obligated to dismiss a worker who leaves a majority union that has entered into a union shop agreement and immediately joins another minority union or forms a new union. The Supreme Court stated that while the purpose of a union shop agreement is to maintain and strengthen the unity of the union, it should not be recognized to the extent that it infringes upon the more fundamental right of workers to choose their union freely. Therefore, dismissal requests against workers who maintain their solidarity as workers by joining another union, despite leaving the majority union, are contrary to public order and morals as defined by Article 90 of the Japanese Civil Code and are invalid.

This case is extremely important in clarifying the limits of the power of union shop agreements. While the agreement can encourage workers who are not members of any union to join the majority union, it does not have the power to hinder the freedom to transfer from one union to another. Especially in companies where multiple labor unions coexist, this ruling plays a role in legally protecting the existence of minority unions.

Common to these two Supreme Court decisions is the careful balancing by the courts between the contractual power of union shop agreements and the fundamental rights of individual workers (the right to due process, the right to solidarity, and the freedom to choose a union). This judicial stance suggests to corporate managers that a union shop agreement is not an automatic dismissal mechanism. Dismissals based on such agreements are always subject to post hoc review by the courts and are actions with high legal risk. Therefore, when considering such dismissals, it is essential to seek the advice of a legal professional in advance.

Summary

The organization and operation of labor unions under Japanese labor law are disciplined by a detailed legal framework that respects the autonomy of the unions while ensuring that their activities are conducted democratically and fairly. From a business management perspective, understanding the qualification requirements for labor unions to receive legal protection, the principles of democratic operation that should be stipulated in the union bylaws, and the powerful effects and legal limitations of systems like union-shop agreements, is fundamental to building stable and constructive labor-management relations. This legal knowledge serves as a compass for avoiding legal risks and making appropriate management decisions when dealing with collective bargaining, concluding labor agreements, and making decisions related to human resources and labor.

Monolith Law Office has a proven track record of providing legal services to a multitude of domestic and international client companies on complex issues related to Japanese labor law. Our firm is staffed with attorneys who, in addition to being qualified in Japan, hold foreign legal qualifications and are English speakers, enabling us to address a diverse range of labor issues that arise in an international business environment. We offer comprehensive legal support related to the organization and operation of labor unions, including consultations, responses to collective bargaining, and reviews of labor agreements.