Collective Bargaining in Japanese Labor Law: An Explanation of Legal Obligations and Practical Responses

In the Japanese business environment, corporate executives may face collective bargaining with labor unions. This collective bargaining is not merely a dialogue between labor and management but is based on legally protected rights and obligations. Article 28 of the Japanese Constitution guarantees workers the right to organize, to bargain collectively, and to act collectively (the right to strike). The Japanese Labor Union Law concretizes these constitutional rights by imposing a duty on employers to engage in good faith in collective bargaining with representatives of the workers. Therefore, responding to collective bargaining is not a matter of corporate discretion but a critical issue at the heart of legal compliance. If an employer refuses to negotiate without just cause, it may be considered an “unfair labor practice” and could be subject to legal sanctions. This article comprehensively explains the legal framework of collective bargaining in Japan, covering its principals, subject matters, specific procedures, and legal remedies available in case of refusal to negotiate. It aims to assist companies in appropriately managing legal risks and building constructive labor-management relationships.

The Legal Foundations of Collective Bargaining in Japan

The obligations of employers in collective bargaining are deeply rooted in two legal norms in Japan: the Constitution of Japan and the Labor Union Law. Firstly, Article 28 of the Japanese Constitution guarantees “the right of workers to organize and to bargain and act collectively,” positioning the right to collective bargaining as a fundamental human right. This provision is based on the recognition that there is a structural imbalance in negotiating power between individual workers and employers. The law aims to create a situation where workers, by uniting and negotiating as a group, can discuss labor conditions on an equal footing with employers.

The Labor Union Law of Japan concretizes these constitutional principles into specific obligations for employers. Particularly significant is the system of “unfair labor practices” defined in Article 7 of the law. Unfair labor practices refer to specific acts by employers that interfere with the activities of labor unions and are prohibited by law. In terms of collective bargaining, Article 7, Paragraph 2 of the Labor Union Law explicitly prohibits employers from “refusing to engage in collective bargaining with the representatives of the employed workers without a legitimate reason.” This clause crystallizes the workers’ right to collective bargaining into an obligation for employers to engage in such negotiations. The existence of this legal obligation transforms collective bargaining from a mere voluntary discussion into a process with legal enforceability.

Negotiating Parties Under Japanese Law

For collective bargaining to be legally established, it is essential to accurately identify who the negotiating parties are.

On the worker’s side, the party is usually a labor union that meets the requirements under the Japanese Labor Union Act. Article 6 of the Act stipulates that representatives of the labor union or those authorized by them have the authority to negotiate with the employer on behalf of the union members. Although Article 28 of the Constitution does not limit the negotiating entity to labor unions, allowing groups of workers, such as ad hoc dispute committees, to engage in collective bargaining, protection under the unfair labor practice relief system of the Labor Union Act requires the entity to be a labor union as defined by the Act.

The employer’s side, namely the party obligated to negotiate, is not limited to the contractual employer. The term “employer” in the Japanese Labor Union Act is interpreted more broadly, and responsibility can extend beyond the corporate organizational structure. A leading case on this point is the Asahi Broadcasting Corporation decision by the Supreme Court of Japan on February 28, 1995 (Heisei 7). In this case, a television station was requested to engage in collective bargaining by the labor union of employees from a subcontracting company that the station did not directly employ. The Supreme Court established the criterion that “even a business owner who is not an employer, if they are in a position to realistically and concretely control and decide on the basic labor conditions of those workers to an extent that can be regarded as equivalent to an employer, then to that extent, the business owner falls under the ‘employer’ as referred to in the said article.”

This case established the concept of “partial employer status,” which means, for example, that if a parent company has substantial decision-making power over the wage system and working hours of a subsidiary’s employees, that parent company may be considered the “employer” with an obligation to engage in collective bargaining with the subsidiary’s labor union. This legal principle does not allow corporate groups to evade negotiation obligations based on complex capital relationships or business outsourcing arrangements as formal reasons, but instead imposes responsibility on entities that have substantial influence over labor conditions. Therefore, companies need to carefully assess not only their own organizational structure but also the extent to which they are involved in the labor conditions of employees of related companies and business partners.

Scope of Negotiable Issues Under Japanese Labor Relations

When an employer is approached by a labor union for collective bargaining in Japan, they are not obligated to negotiate on all matters. Negotiable issues are broadly categorized into “mandatory bargaining items,” which legally require negotiation, and “permissive bargaining items,” which the employer may choose to negotiate at their discretion. This distinction is crucial in determining whether a refusal to negotiate constitutes an unfair labor practice.

Mandatory bargaining items are generally defined as matters related to the working conditions and other treatments of union members, as well as the management of the collective labor relations, which are within the employer’s authority to decide. Specifically, this includes matters related to labor conditions such as wages, bonuses, retirement pay, working hours, holidays, safety and health, and disaster compensation. Additionally, standards and procedures related to individual union members’ dismissals, disciplinary actions, and reassignments are mandatory bargaining items because they directly affect the treatment of workers. Rules regarding the operation of the relationship between the labor union and the employer, such as union shop agreements and the provision of facilities for union activities, also fall under this category.

On the other hand, permissive bargaining items primarily revolve around pure management and production matters, known as “management prerogatives.” For example, the introduction of new technologies, relocation of factories, appointment of directors, and corporate reorganization are generally not included as mandatory bargaining items. Similarly, matters that the employer cannot decide or dispose of within their authority, such as demands for legislative changes or political issues, are also considered permissive.

However, the boundary between these two categories is not always clear. Even if a decision falls under management prerogatives, it can directly impact employees’ employment and working conditions. For instance, the decision to close a factory is a permissive bargaining item, but the resulting dismissals or reassignments of employees, which are changes to labor conditions, become mandatory bargaining items. Therefore, employers have an obligation to negotiate with the labor union regarding the impact of management decisions on workers. Recognizing this obligation to negotiate the “impact” is an essential part of legal risk management when undertaking significant business reorganizations.

The Collective Bargaining Process: Procedural Guidelines in Japan

When an employer in Japan receives a request for collective bargaining from a labor union, it is essential to respond systematically and strategically while keeping legal obligations in mind. The entire process is subject to evaluation based on the “duty of good faith bargaining” that will be discussed later, necessitating careful handling at each stage.

Typically, a labor union initiates negotiations by sending a written request, such as a “Collective Bargaining Request Form,” to the employer. Ignoring this request is absolutely unacceptable. The immediate steps to take include analyzing the nature of the labor union (whether it is an in-house union or an external joint labor union), the status of the employees who are union members (whether they are current employees or retirees), and the content of the negotiation items being requested.

Prior to the formal negotiations, “preliminary negotiations” are conducted to establish administrative rules. During this phase, both parties agree on the date, location, number of attendees, and duration of the negotiations. Strategically, it may be wise to set an external meeting room as the location to avoid impacting other employees and to set a time limit of about two hours in advance to prevent negotiations from becoming protracted and impairing calm judgment.

In parallel with the preliminary negotiations, the most crucial aspect is internal preparation. Conduct a thorough investigation of the objective facts related to the union’s demands and organize evidence (for example, time cards or pay slips in the case of unpaid overtime claims). Then, analyze the company’s legal position, determine the final settlement point and the range of possible concessions, and unify the approach among the negotiation representatives. It is important that an official with decision-making authority attends the negotiations. The presence of only non-authorized representatives who avoid giving concrete answers can be seen as a risk of insincere bargaining.

On the day of the negotiations, it is vital to approach the discussions with a calm and rational demeanor. Avoid emotional rebuttals and false explanations, and persistently explain the company’s position based on facts and legal grounds. To accurately record the course and content of the negotiations, create detailed minutes and, if possible, record the audio with the consent of both parties.

If the negotiations result in an agreement (settlement), the details are clearly documented in a “labor agreement” or “agreement document.” At this point, it is extremely important to include a “settlement clause” confirming that no other claims or obligations exist between the parties, in order to prevent future disputes. If negotiations break down without an agreement, the labor union may move on to dispute actions such as strikes, filing complaints with the Labor Relations Commission, or initiating litigation, so the employer must also be prepared for these eventualities.

Refusal of Collective Bargaining and Its Consequences Under Japanese Law

Employers in Japan who refuse a request for collective bargaining or approach negotiations with insincerity face serious legal risks. These risks can materialize through two distinct pathways: administrative procedures and civil litigation.

Firstly, an employer’s duty is not merely to sit at the negotiating table. Japanese law imposes an obligation of ‘good faith bargaining,’ which aims at reaching an agreement through sincere discussions. Specifically, this involves listening to the union’s claims, explaining the company’s position with reasons and evidence, and presenting alternatives when necessary. A mere repetition of the company’s stance without genuine engagement can be deemed a violation of the good faith bargaining obligation, potentially qualifying as an unfair labor practice. On this matter, the Supreme Court of Japan ruled on March 18, 2022 (Reiwa 4), in the Yamagata University case, that even if there seems to be no prospect of reaching an agreement on the negotiation items, the employer’s obligation to negotiate in good faith persists, and the Labor Commission can order the employer to engage in sincere negotiations.

The ‘legitimate reasons’ for an employer to refuse negotiations are interpreted very narrowly under the law. For instance, if the union side resorts to violence or threats, creating a situation where normal discussion is impossible, or after prolonged negotiations, both parties’ claims have been fully exhausted, leading to a complete deadlock, these may be considered legitimate reasons. However, reasons such as ‘the union is an external organization,’ ‘the demands are excessive,’ or ‘the same issue is currently being litigated’ are not generally recognized as legitimate reasons.

If a labor union deems that an employer has refused to negotiate without just cause or has engaged in insincere negotiations, the union can pursue two main remedies.

One is an administrative relief petition to the prefectural Labor Commission. Upon receiving a petition, the Labor Commission conducts an investigation and hearing (questioning of parties and witnesses), and if it finds that an unfair labor practice has occurred, it issues a ‘relief order’ to the employer. This order may command specific actions, such as ‘engage in collective bargaining,’ representing direct administrative intervention in corporate activities. If the employer disagrees with this order, they can file for a review with the Central Labor Commission or initiate a lawsuit to cancel the order in court.

The other is initiating a civil lawsuit in court. Infringement of the right to collective bargaining is considered a tort under Japanese civil law, and the labor union can claim damages from the employer. In fact, the Nagoya District Court ordered a company to pay 2 million yen in damages on January 25, 2012, for refusing collective bargaining, among other reasons. Similarly, the Kyoto District Court ordered a municipality to pay 300,000 yen on December 8, 2023 (Reiwa 5), for the same reasons.

It is important to note that these two procedures are independent of each other. Labor unions can seek a relief order from the Labor Commission while simultaneously filing a lawsuit for damages in court. This dual risk underscores the significant legal and economic impact that improper handling of collective bargaining can have on a company.

Summary

Collective bargaining under Japanese labor law is an unavoidable legal obligation for employers, rooted in constitutional rights. In responding to negotiation requests from labor unions, it is essential to accurately understand the entity and subject matter involved, and to respond sincerely in accordance with legal procedures to manage legal risks effectively. Refusal to negotiate or insincere responses can lead to serious consequences, such as relief orders from the Labor Relations Commission or court-ordered compensation for damages.

Monolith Law Office boasts a wealth of experience representing numerous domestic clients in Japan, particularly in handling collective bargaining under Japanese labor law. Our firm employs several attorneys who are native English speakers with foreign legal qualifications, enabling us to provide precise and strategic legal support for complex labor issues faced by international companies.