An Attorney's Clear Explanation on the Key Points in Drafting a Basic Contract for Worker Dispatch in Japan

IT companies often have relatively frequent opportunities to receive dispatched workers. Although the template for the basic contract for worker dispatching is relatively standard, many of its clauses are based on the Japanese Worker Dispatching Contract Law. Therefore, a fundamental understanding of the Japanese Worker Dispatching Contract Law is essential when creating a basic contract for worker dispatching.

In this context, we will discuss typical clause examples in the basic contract for worker dispatching, along with an explanation of the related Japanese Worker Dispatching Contract Law.

What is a Worker Dispatch Contract?

A worker dispatch contract is a system where a worker enters into a labor contract with a dispatching company (the dispatching party), and is then dispatched to another company (the receiving party) where they actually work under direction and orders. For a detailed explanation of the differences between dispatching, secondment, quasi-delegation, contracting, disguised contracting, and labor supply, please refer to the article below.

https://monolith.law/corporate/difference-contract-dispatch-loan-labor-supply[ja]

In dispatched labor, a significant personalityistic is that the company with which the employment contract is concluded and the company where the worker actually works under direction and orders are different. Also, it is important to note that there is no contractual relationship between the dispatched worker and the receiving company.

Previously, there were two types of worker dispatching: the so-called “specific worker dispatching business” which was a registration type, and the “general worker dispatching business” which was a regular type. The former was a permit system, and the latter was a notification system. However, with the revision of the Worker Dispatch Law enacted in 2015, this distinction was abolished, and now all worker dispatching businesses are under the permit system.

As for day labor dispatching, which was once notably used by younger people, it has been basically prohibited due to legal revisions following its becoming a social issue.

For a detailed explanation of disguised contracting, which is similar to but different from dispatching and often becomes an issue in the IT industry, please refer to the article below.

https://monolith.law/corporate/criteria-for-disguised-contract[ja]

Key Points of the Basic Worker Dispatch Contract

When a dispatching party sends workers to a dispatched party, it is common to conclude a Basic Worker Dispatch Contract between the dispatching party and the dispatched party, and then conclude individual contracts for each specific dispatch task. In this article, we will explain the key points of the Basic Worker Dispatch Contract. Please note that in the following clause examples, “Party A” refers to the dispatched party and “Party B” refers to the dispatching party.

Provisions Regarding Individual Contracts

Party A and Party B shall, each time Party B dispatches workers to Party A, enter into a worker dispatch contract (hereinafter referred to as the “individual contract”) as stipulated in Article 26, Paragraph 1 of the Japanese Worker Dispatch Law (労働者派遣法), detailing the nature of the work to be performed by the dispatched workers, the place of employment, working hours, and other details necessary for worker dispatch.

A worker dispatch contract is a contract in which “one party to the contract promises to dispatch workers to the other party” (Article 26, Paragraph 1 of the Japanese Worker Dispatch Law). The worker dispatch contract is concluded between the dispatching company and the receiving company.

In many cases, a basic contract regarding worker dispatch is concluded between the dispatching and receiving parties, and individual employment conditions are stipulated in individual contracts each time workers are dispatched. It is important to note that the worker dispatch contract referred to in Article 26 of the Japanese Worker Dispatch Law refers to the individual contract, not the basic contract.

The matters to be stipulated in the individual contract are legally prescribed. The following are examples, but the matters to be stipulated in the individual contract are diverse.

• The nature of the work to be performed by the dispatched workers
• The name and location of the business office where the dispatched workers will work, and other places of employment related to the worker dispatch
• Matters concerning the person who will directly command and control the dispatched workers during their employment, for the benefit of the person receiving the worker dispatch services
• The period of worker dispatch and the days of dispatch employment
• The start and end times of dispatch employment, break times, and matters related to safety and hygiene

Clause on the Acceptance Period of Temporary Staffing

Both Party A and Party B shall not accept or dispatch temporary workers for a period exceeding three years (however, if extended by the opinion hearing procedure, that period) for each business location or other place of temporary employment (hereinafter referred to as “business locations, etc.”) excluding the dispatch of workers that are not subject to the period limit (those that fall under each item of Paragraph 1 of Article 40-2 of the Japanese Worker Dispatch Law).

In the revised Japanese Worker Dispatch Law enacted in 2015, a rule was established that the period for which a single temporary worker is dispatched to a client’s business location should be, in principle, within three years. This rule regarding the acceptance period of dispatch includes the following two specific contents:

• Cannot continuously accept the same dispatched worker in the same organizational unit for more than three years
• Cannot continuously accept worker dispatch at the same business location of the client for more than three years

However, it is possible for the client to extend the three-year dispatch period by hearing opinions from the majority labor union, etc. (majority labor union or majority representative) of the said business location one month before the end of the dispatch period.

This clause is established in response to the regulation of the Japanese Worker Dispatch Law regarding the acceptance period of dispatch.

Handling of Money and Use of Automobiles

If Party A needs to allow dispatched workers to handle cash, securities, other similar documents, and valuables, or to engage in tasks involving the use of automobiles or other special tasks, the necessary handling will be separately determined between Party A and Party B under the management and supervision responsibility of Party A.

It is generally agreed separately when it is necessary for the business of the dispatch destination company for dispatched employees to handle money or use automobiles.

If dispatched employees are allowed to handle money or valuables, the dispatching company may be liable for damages if the dispatched employee loses the money or valuables. Similarly, in the case of using automobiles, if a traffic accident occurs while driving, the dispatching company may also be liable for damages.

Therefore, as a dispatching company, the handling of money by dispatched employees and the use of automobiles are generally prohibited, but they are allowed under individual agreements when necessary.

Provisions for Ensuring Appropriate Employment

1. Party A shall ensure that dispatched workers comply with the employment conditions stipulated in the Labor Standards Act and other laws and regulations, as well as this contract and individual contracts. In addition, Party A shall take into consideration the prevention of sexual harassment and strive to provide facilities such as clinics and meal facilities that can be used by dispatched workers to ensure that their employment is carried out appropriately and smoothly.
2. Party A shall cooperate as much as possible in the education, training, and safety and hygiene education of dispatched workers conducted by Party B, as well as in the autonomous skill development of dispatched workers. In addition, Party A shall strive to include dispatched workers in the education and training provided to Party A’s workers engaged in the same type of work.

It may be stipulated in the basic contract for worker dispatching that the dispatching company should take measures to prevent sexual harassment, and strive to provide the same level of education and training as its own employees.

Under Article 40 of the Worker Dispatch Law (Japanese Worker Dispatch Law), the company receiving the dispatched workers is obliged to maintain an appropriate working environment. Specifically, if a complaint is received from a dispatched worker regarding employment, the company must notify the dispatching company and handle the complaint. In addition, the company must strive to maintain an appropriate training environment, including the prevention of sexual harassment. The first clause of the example is a confirmatory provision in the basic contract for worker dispatching that imposes this obligation on the company receiving the dispatched workers.

Also, under Article 40 of the Worker Dispatch Law (Japanese Worker Dispatch Law), the company receiving the dispatched workers should consider providing the same level of education, training, and welfare benefits as its own employees. The second clause of the example corresponds to this obligation of the company receiving the dispatched workers.

Clause on Overtime Work, etc.

Party A may order dispatched workers to work overtime and on holidays within the scope of the agreement (Article 36 Agreement) submitted by Party B based on Article 36 of the Japanese Labor Standards Act and in accordance with the provisions of the individual contract.

In labor dispatching, the working conditions of dispatched employees at the dispatch destination are stipulated in the labor dispatch contract concluded between the dispatching source and the dispatch destination. In many cases, only abstract matters are stipulated in the basic labor dispatch contract, and specific contents are stipulated in individual contracts.

The dispatch destination must comply with the employment conditions stipulated in the labor dispatch contract. In addition, the dispatch destination is responsible for obligations related to overtime work under the Labor Standards Act, breaks, and holidays.

Under the Labor Standards Act, if workers are made to work overtime exceeding 8 hours a day and 40 hours a week, it is necessary to submit the so-called Article 36 Agreement. In labor dispatching, the dispatching source bears the burden of submitting the Article 36 Agreement, but it is important to note that the dispatch destination is responsible for managing overtime work, etc.

Clause on Damages Compensation

In the event that a dispatched worker causes damage to Party A or a third party due to intentional or gross negligence in the performance of dispatch duties, Party B shall bear the liability for compensation. However, this does not apply if the damage is recognized to have been caused by the instructions or orders (including failure to provide necessary caution or instructions) given to the dispatched worker by the person in charge or other items used by Party A (hereinafter referred to as “the person in charge, etc.”).

When a dispatched worker causes damage to a third party such as the dispatch destination company or customers in relation to the dispatch work, the location of the liability for damages compensation may become an issue. In the clause example, while the dispatch source is primarily responsible for damages compensation, it is assumed that the dispatch destination will not bear the liability for damages compensation or will reduce the burden ratio if the cause is the instructions or orders from the dispatch destination.

Also, when dispatched employees handle money or use vehicles, the amount of damages compensation can easily become excessive, so it is effective to set a limit on the amount of damages compensation.

Summary

Many clauses in the Basic Contract for Worker Dispatch are regulated based on the Japanese Worker Dispatch Law. As this law is frequently revised, it is crucial to always check the latest version. Particularly in the IT industry where worker dispatch is commonly practiced, it is necessary to understand the basic aspects of the law concerning worker dispatch.

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