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Overtime Activists Take on Corporate Titans
Overtime Activists Take on Corporate Titans:
Toyota, McDonald’s, and Japan’s Work Hour Controversy
Co-written by Charles Weathers
cw@gol.com
JAPAN'S LONG work hours generate high human and economic costs. Even between 2002 and 2008, when Japan enjoyed a growing economy and low unemployment, the media regularly reported cases of workers felled by strokes and heart attacks or driven to depression or suicide by unrelenting job demands. Furthermore, work hours are a major impediment to equal opportunity; working mothers cannot devote the long hours to work expected of professional employees and so must opt for low-paying, low-status jobs. Family life is severely impacted because many younger persons postpone or give up entirely on marriage and children as they sacrifice personal lives to stay employed. Further, while long work hours and karō (overwork) are common in many countries, notably the US and Britain, in Japan karōshi (death caused by overwork) has been officially recognized as a medico-legal phenomenon for three decades, and has spawned a social movement to combat it. Workplace stress-related illness and deaths are at record high levels[1] and growing public awareness of problems has brought demands for improvement.
This paper examines two highly publicized court cases that have played important roles in defining the ongoing controversy. Both cases were launched against major global corporations, Toyota and McDonald's, by plaintiffs demanding just compensation for grievous injuries caused by overtime work that was compulsory yet neither compensated nor acknowledged. More important to the families and supporters than financial gain was recognition that the companies’ practices consistently endanger employees. The trials ended (in November 2007 for Toyota and January 2008 for McDonald's) in rulings so clear-cut that several major corporations felt compelled to revise their personnel practices. Yet, while these cases have strengthened the hands of reformers, they also demonstrate how deeply long work hours remain embedded in Japanese workplace culture, making meaningful change difficult to achieve.
1) Japan’s Long Work Hours
In contrast to the Ministry of Health, Labor and Welfare’s (MHLW) Monthly Labor Survey figure of 1980 hours, Morioka Koji, Japan’s leading work hour scholar, calculates the country’s 2006 average annual hours of work per worker at 2288 (nearly 700 hours more than the EU average of 1600), including 408 hours of overtime.[2] On average, only 161 hours of overtime are paid, leaving unpaid “service overtime” of 247 hours of per full-time worker. At the average overtime wage of 1970 yen per hour (including the 25 percent premium), service overtime amounts to a loss of 539,780 yen per worker per year (about US $5400). Only 19 percent of Japanese workers do no overtime; one study found that, excluding service overtime, overtime averages roughly 40 hours per month.[3] Furthermore, employment conditions are believed to have worsened during the early 2000s, as employers continued to hold down hiring of regular workers and supplement them with ever-greater numbers of non-regular workers with lower pay and lesser job responsibilities. According to survey information compiled by the Cabinet Office, over 80 percent of regular workers in 2006 experienced work-related fatigue and stress, while 67 percent of regular workers in 2007 believed that job burdens and responsibility were greater than five years earlier.[4]
The reasons for pervasive overtime derive from the logic of the employment system. Overtime is regarded as virtual condition of employment for seishain (regular employees), based on the assumption that a worker’s job and livelihood security are closely tied to that of his/her firm. Therefore, the employee accepts some degree of overtime (often on a routine, daily basis, but sometimes imposed without notice), enabling the company hold down costs by employing the minimum number of workers. Seishain enjoy job security because personnel adjustment is primarily achieved not by dismissing regular employees but by reducing overtime and dismissing non-regular workers. Japanese courts have supported the logic of strong security in exchange for strong commitment by sharply restricting employer’s right of dismissal, while also ruling that regular employees who refuse employer directives (notably for overtime or difficult transfers) may be liable for termination, sometimes even when the employer’s stance is unduly harsh.[5] In addition, many workers accept unpaid overtime as a necessary condition of “regular” (secure) employment, and rely on overtime pay to supplement their somewhat low base salary. Finally, most major labor unions accept the logic of commitment in exchange for security, and are unwilling to press strongly for work hour reduction.
Strong job and livelihood security are supposed to justify long work hours (as well as obligations such as sudden transfers, regardless of impact on family life) but the foundations for security have weakened drastically since the early 1990s. Jobs are only as secure as companies, yet a globalized economy renders vulnerable even the strongest firms–as demonstrated by Toyota’s late 2008 announcement of large losses, followed by subsequent reductions of jobs and pay. Stronger cost pressures and labor market deregulation have led employers to sharply increase the hiring of non-regular workers (including part-timers, fixed-term contract employees, and agency temporary workers). As a result, the number of non-regular workers increased by 3.97 million from 1997 through early 2004, while 4.32 million regular worker jobs were lost.[6] The increased use of non-regular workers holds down the creation of regular jobs, often creating heavier workloads for the remaining regular workers, who are expected to make up any shortfalls without concern for time. To a surprising degree, their extended hours are worked gratis.
1.2 How Firms Avoid Paying Overtime Wages
Building upon an analysis by lawyers specializing in unpaid overtime claims,[7] we have devised a representative list of the main means used by Japanese companies to extract overtime, both paid and unpaid, from workers.
1) Deny that overtime occurs, or deny responsibility.
2) Assign a large number of tasks on an informal basis so that they are not included in formal work hour calculations.
3) Manipulate employment categories to exempt workers from overtime rules.
4) Set quotas (noruma) unreasonably high and leave criteria for evaluations (satei) vague.
5) Claim that overtime premiums are included in base pay or that payment of a “management allowance” eliminates need to pay overtime allowances.
6) Purposefully hire too few regular workers (and/or hire a large proportion of non-regular workers).
7) Inculcate company norms regarding status and productivity.
These strategies are not, of course, used in isolation, but are, as seen in our cases, woven into the webs of values and constraints that create powerful internal and external pressures on employees to work long hours. Naturally, there is pressure to do overtime in other countries as well, but the particular means outlined here tend to rely heavily on managerial manipulation of Japanese social norms, aspirations, and fears.[8]
2) Case Studies: Toyota and McDonald's
Judges issued clear decisions in support of plaintiffs in cases regarding uncompensated excess work hours at Toyota and McDonald's, two of the world’s most prestigious corporations. The industries (manufacturing versus fast food) and the nature of the jobs (quality control specialist versus fast-food store manager) involved in these cases differed greatly, yet there were important similarities in the practices both companies used first to extract overtime, and then to resist pressure for reform.
2.1 Toyota[9]
Toyota’s prominence in the global auto industry rests on economies inherent in a system that raises productivity by reducing waste – including the time “wasted” by workers in moments between assembly tasks.[10] Between 1991 and 2005 the firm increased domestic production from 3.15 million vehicles produced by 75,266 workers (41.9 vehicles per worker) to 3.86 million vehicles produced by 65,798 workers (58.7 vehicles per worker), while 67 workers reportedly died of overwork, and 247 more suffered work-related depression or major injuries.[11] Corporate responsibility was clearly implicated in several cases recognized by the Labor Standards Office as eligible for workers’ compensation payments. Many other cases are suspected, but not reported or confirmed.[12]
Uchino Kenichi was a third-generation Toyota man and devoted employee. He held the rank of EX (expert), and was a group leader for quality control in the firm’s Tsutsumi autobody parts factory in Aichi Prefecture since 1989. In 2001, Uchino was assigned to analyze production defects while working long days in alternating shifts, 6:15 AM-5:15 PM one week, and 4:10 PM-1 AM the next. During late 2001, he was devoting nearly all his waking hours to efforts to resolving numerous quality problems of a new model. Toyota’s reputation is founded on exacting quality control, but prior to late 2008 the firm expanded worldwide production rapidly, seeking to establish itself as the world’s largest motor vehicle producer. The resulting strain on employees resulted in major quality lapses.[13]
On February 9, 2002, at 4:40 AM, Uchino collapsed at his desk while working overtime on the night shift. At Toyota, dialing 119, the Japanese emergency services number, does not bring the municipal ambulance. Instead, Toyota Corporation’s own ambulance is summoned. These personnel did not take Uchino’s pulse. He was taken by ambulance to Toyota’s Commerative Hospital, ten kilometers away, rather than to any of the several public hospitals in the city equipped to handle emergency cases. Uchino, 30 years old, was pronounced dead on arrival of heart failure.
In the month prior, Uchino had, by his wife’s careful estimate, worked just over 315 hours, including 144 hours of overtime. Although he collapsed at work in front of his boss, Toyota would later claim that virtually all the overtime hours were spent on either voluntary activities or “socializing” with co-workers. Quality control (QC) activities are conducted during off-work hours, and Toyota claimed that participation was voluntary. However, participation in QC circles was included in worker evaluations from the time of their introduction in the early 1960s. The company paid workers for the time (though the maximum two hours a month hardly covered the long hours devoted by many workers).[14] As a QC group leader, Uchino Kenichi was responsible for organizing after-hours QC sessions. He often worked at home drafting documents, including drawings and narrative explanations, detailing production problems and their proposed solutions. Toyota’s continuous improvement practices rely heavily on such unrecorded and unpaid overtime.
Uchino’s wife, Hiroko, noticed him looking fatigued in the last six months of his life. Convinced that his death was due to overwork, she filed a claim for benefits with the Labour Standards Office in Toyota City in March 2002. Toyota did not initially object to either the filing or her claim that he worked 144 hours of overtime in the last month of his life, but soon reversed its stance to deny the charges. The company’s union followed suit. In late November 2003, the Toyota City Labour Standards Office accepted the firm’s assertion and rejected Hiroko’s claim. Later, it was revealed that officers in the Toyota City Labour Standards Office who handled her application accepted golf outings and other favors from Toyota around the time they were reviewing the Uchino case.[15] Furthermore, the plaintiff side learned that Labour Standards Office officials leaked information from Toyota workers reporting illegal or dangerous practices back to Toyota’s personnel department.[16]
Immediately following the rejection of her claim, Hiroko contacted Toyota Union and Rengō, the leading national labor federation (to which Toyota Union and all other major autoworker unions are affiliated). Six weeks after Kenichi’s death, as it became clear that the unions would not act, Hiroko contacted Hatarakumono no inochi to kenko wo mamoru sentaa (Center to Protect the Lives and Health of Working Persons), a national network of labor activists, which provided her with extensive legal and personal assistance for the next several years.
Activists helped Hiroko to file a demand to reinvestigate the case with the Aichi Prefecture Labor Standards Bureau in January 2004. However, the Labour Standards Bureau’s decision, handed down in late March 2005, simply reiterated the Labour Standards Office’s conclusion that the death was not work-related, so compensation was denied. After her April 2005 appeal to the Central Worker’s Compensation Insurance Board in Tokyo was rejected, Hiroko hired a lawyer and filed an administrative suit in District Court in July 2005 seeking reversal of the decisions of MHLW and the Toyota City Labour Standards Office. It is nearly impossible to have severe penalties imposed on managers or firms, but the Uchinos, like many families who pursue karōshi claims, hoped to gain, not just compensation, but acknowledgement that a loved one’s death was caused by overwork.
Because of Toyota’s powerful influence in the Nagoya region, Hiroko came under intense pressure to retract her suit. Toyota City is dependent on automobile manufacturing for more than 95 percent of its industrial output, and the city’s mayors and many of its city assembly members have come from Toyota.[17] Virtually everyone Hiroko knew was associated with Toyota: her father-in-law, Kenichi’s grandfather, the neighbors. Prior to marrying, Kenichi and Hiroko worked in the same section at the plant. Kenichi’s father initially supported her claim, but later backed away. If surviving family members of victims of accidents and abuse refrain from filing compensation claims and lawsuits, Toyota helps them find work. In the few instances where survivors have pressed claims, they have done so privately and the cases have ended quietly in mediated settlements, diffusing negative publicity. Uchino, by pressing her suit openly, became a pariah in the community.
The Toyota Trial
The issues in the two-and-a-half-year long trial (July 2005–November 2007) were: How much overtime did Kenichi work? And, was there a cause and effect relationship between his work and his death – what level of stress did that amount of hours and the intensity of his work occasion?
Hiroko calculated Kenichi’s hours of work on the basis of her considerable knowledge of Toyota practices and her recollection of his activities, supplemented by receipts from convenience stores, which he visited on his trips to and from work. Co-workers testified that they and Kenichi stayed at the office until dawn each day they worked the night shift, but said their long hours were due to “shooting the breeze” with other co-workers. Although intended to support Toyota’s claim, this testimony backfired because the judges deemed it unreasonable for anyone whose shift ended at 1 AM to stay until dawn just for the sake of casual conversation. Hiroko testified that Kenichi’s long hours were forced on him by the demands of the Toyota Production System. She testified that he told her his dream was to drive home after the night shift with his headlights on, meaning before sunrise.
Hiroko and her legal team argued that Kenichi performed, in addition to his formally assigned tasks, five types of work that should have been counted in his working hours: soliciting and evaluating written suggestions (contributing additional suggestions himself to compensate for shortfalls by other workers); preparing for, leading, and keeping detailed records of twice-monthly Quality Control Circle meetings; preparing materials for and participating in group leader meetings (in 2001, he also produced these meetings’ bulletins); leading traffic safety for his section, which entailed collecting employees’ monthly reports of hazardous or inefficient traffic situations within the plant and drafting proposals for improvement, as well as twice-monthly traffic safety meetings and follow-up reports; and serving as worker representative to the Workplace Council. Hiroko and her supporters argued that, in cases like Toyota’s, where the union is a company union and discussions at the Workplace Council meetings revolve around “labor-management trust and mutual responsibility,” Council meetings should be considered work. Finally, a considerable portion of the work, especially preparation of reports and materials, was conducted at home. Toyota regarded these five tasks as non-compensable and did not count them toward overtime.
In the 41-page decision handed down on 30 November 2007,[18] the three-judge panel wrote that Kenichi’s death was the product of long hours, intense work, and related stress. The court criticized the Labour Standards Office for accepting Toyota’s claim that Kenichi stayed at work to engage in casual conversation, and found that his “work duty” included four of the five categories of workplace activity generally performed outside of regular working hours.
Despite omitting Kenichi’s participation in the Workplace Council and related activities, and some of the work done at home, the court nevertheless found that he worked 106 hours and 45 minutes of overtime in the month prior to his death. Because Toyota did not use a timecard reader in Kenichi’s workplace the court gave Hiroko’s estimate of her husband’s hours primacy, rejecting the company’s contention that it did not know whether he was working during times when he remained in the factory after his shift officially ended.
Though far less than the 144 hours of overtime that Hiroko claimed, 106 hours far exceeded the 80 hours per month standard that Ministry of Health, Labour and Welfare has established as the “karōshi line,” the level beyond which compensation is granted for claims of death due to overwork. In addition to recognizing his death as karoshi, the court established an important legal precedent by recognizing that rotating between day and night shifts compounded the effects of fatigue, increasing the danger to Kenichi.
Finally, the court recognized organizational pressure as the reason for Kenichi’s long hours. Although Toyota and other Japanese companies have long held that time spent drafting suggestions for improving production processes and participation in quality control circles are “not work” but “self-improvement,” the court found such activities should be compensated because they contribute value to the company. That they are company-supported and also part of the basis for employee evaluations supports characterizing them as what the labor scholar Kumazawa Makoto calls “coerced volunteerism.”[19]
Toyota dismissed the court decision, declaring that Uchino worked no more than 52 hours of overtime in his last 30 days at work. When Hiroko filed for survivor compensation following the trial, the LSO calculated the family’s payment using Toyota’s 52-hour figure instead of the court’s 106-hour figure.[20] Outraged by this refusal to recognize the court decision, Hiroko and her supporters appealed to Ministry of Health, Labour and Welfare, eventually gaining a meeting with the minister, Masazoe Yoichi on January 9, 2008. Expecting only aisatsu (ritual greetings), the minister was somewhat taken aback by Hiroko’s direct questions about how the LSO and Toyota could ignore the court’s decision, but promised to look into the situation. Subsequently, the Toyota City Labour Standards Office fixed the level of compensation based on a figure of 85 hours of overtime.
2.2 McDonald's[21]
McDonald's Japan was founded in 1971 by legendary entrepreneur Fujita Den, whose innovative strategies reaped massive profits. High profits in turn made possible high compensation that helped ease employee acceptance of rather harsh working conditions. As competition intensified after 2000, however, McDonald’s Japan’s performance weakened, and 2002 became the company’s first loss-making year. Fujita resigned and was replaced in 2004 by Harada Eiko, hired away from Apple Japan by the US headquarters. Unlike most of McDonald's overseas operations, McDonald's Japan under Den operated fairly independently of the US parent, but Harada promptly implemented the harsh cost-cutting measures and aggressive revenue-boosting strategies preferred by the parent firm. He reduced the number of regular employees by some 200 (about 70 percent of McDonald's Japan’s restaurants are directly managed by the corporation rather than franchisees) and increased revenues by reducing prices and steadily lengthening operating hours, including increasing the number of restaurants operating 24 hours. While increasing sales these measures also reduced profits since the additional customers could not offset the higher operating costs and reduced margins – however, they benefited the American parent firm, which derived higher royalties from the larger gross revenues. The new practices also worsened working conditions, leading to quits well beyond the “voluntary” quits demanded by Harada.[22]
On May 10, 2005, McDonald's employee Takano Hiroshi visited the offices of Tokyo Kanrishoku Union, claiming that he had never been paid for hundreds of hours of overtime work.[23] He was a model worker, but dangerous health problems and a series of chance events led him to contact a union. Like many of McDonald's regular employees, Takano first worked for the company as a crew member (a part-time or arubaito[24] employee). He became a regular employee in 1987, and in 2000 was promoted to tenchō (branch or outlet manager). In July 2004, Takano took charge of his fourth restaurant, located in Kumagaya City, in Tokyo’s northern hinterlands. As the sole regular employee, Takano was responsible for both opening and closing the restaurant. Consequently, he typically woke at 4:10 AM to make the long drive to his restaurant, arriving by 5:30 AM to prepare for a 7 AM opening. A “veteran arubaito” arrived at 10 AM, allowing Takano to nap in his car for an hour, resting for the peak 11 AM to 2 PM period. On days when the veteran arubaito failed to show up, Takano rested and ate lunch in the back of the restaurant, ready if necessary to interrupt his break to help the crew. After 6 PM, when business slacked off, he took his second break of the day and had dinner. The restaurant closed at 11 PM, and Takano did the books while an arubaito cleaned up. Sometime after midnight he headed home (or, on occasion, slept in his car).
This harsh schedule was dictated in large part by McDonald's strict performance monitoring system (gyōseki kanri seido), which mandates sales and profit performance objectives. Takano’s restaurant, which needs a crew of five, often operated short-handed, but the performance monitoring system constrains the ability of tencho to make adjustments such as offering higher pay to ensure adequate staffing. The workload was further increased by McDonald’s Japan’s strategy of adding items to the menu on a temporary basis every six to eight weeks (from 2000 to 2005, there were nearly 100 such short-term items), requiring constant adjustments in ordering, cooking, and staff training. Takano’s situation worsened when the mad-cow disease scare broke out, scaring away customers, and when competing fast-food chains opened restaurants nearby. Finally, tighter controls over tenchō instituted under President Harada reduced flexibility. Takano, for example, was forced to discontinue some successful promotional practices.
Takano logged over 1200 hrs of overtime in 2004, including 137 in his heaviest month, and once worked 63 consecutive days. He missed important family events, and the Takanos were once forced at the last minute to cancel a vacation planned months earlier when a part-time employee failed to show up for work. Worse, Takano was unable to devote time to a son with behavioral problems.
Inevitably, Takano’s body began to break down. In January 2005, he suffered a back injury, the result of constant lifting and long hours spent standing. (Back-related injuries account for about 40 percent of workers’ compensation claims in Japan.) However, management refused to allow him time off for hospitalization and recuperation because there was no other regular employee available to manage the restaurant. In April 2005, Takano, noting numbness in his hand, was diagnosed as having suffered a mild stroke.
A series of coincidental events then led Takano to consult Tokyo Kanrishoku Union, one of Japan’s most prominent community unions. Soon after the stroke, the local Labour Standards Office conducted unannounced inspections on several McDonald’s outlets, including Takano’s, and ordered improvements in personnel practices. Management promptly leveled a strong accusation against Takano, believing that either he or his wife had made the complaint triggering the inspection. It was, in fact, a logical assumption because surprise working condition inspections frequently result from complaints by employees or their spouses. However, Takano has steadfastly insisted that neither he nor his wife took this step; the timing of the inspections following closely upon the stroke was apparently coincidental. As noted by Abe Makoto, the union official who primarily handled Takano’s case, “He could have endured what was said about himself, but hearing his wife accused, whether she was the informer or not, was especially appalling, and maybe was the trigger [to contact the union].”[25] One other factor influenced Takano’s decision to consult the union: His younger brother was one of the union’s officials.
Ignoring the union’s demand for grievance negotiations was not a viable option under Japanese labor law, so McDonald's sought instead to suppress Takano. On four different occasions managers harangued Takano for three to four hours, either at his workplace or at corporate headquarters in Shinjuku, in central Tokyo, demanding that he quit the union and accusing him of slandering the firm. In part because of support from his brother, Takano stood firm.
Negotiations between Takano, represented by Tokyo Kanrishoku Union, and McDonald's commenced on June 30. The case eventually went to trial since the company refused the union’s main demand: that overtime allowances be paid to tenchō. Not too surprisingly, McDonald's has also never agreed to the second demand, an apology for “coercive policies.” However, the union enjoyed success with its third major demand – that wage regulations be enforced for part-time and regular non- tenchō staff. McDonald's had squeezed unpaid overtime from employees by having them work 20-25 minutes beyond their officially allotted hours, then calculating pay by rounding to the nearest hour. (Tokyo Kanrishoku Union officials were well aware of the practice because some had children who had worked as arubaito in McDonald’s.) The management side appeared genuinely surprised to learn that the practice was illegal, and readily agreed not only to revise time-keeping practices but to pay to crew members overtime allowances for the previous two years at a cost of 3.4 billion yen. The firm also agreed to begin paying late-night allowances to tencho.
During the second round of negotiations, according to Abe, McDonald’s executives initially conceded that tenchō were not high-ranking kanri kantokusha (managing supervisors), but were then ordered by the American headquarters to stand their ground. The Japanese managers thereupon asked for a month to convince US corporate headquarters, only to use up three months without gaining a change in stance. McDonald’s Japan thereupon assumed the hard-line position that it maintains to the present, insisting that tenchō are managing supervisors, exempt from overtime regulations as set forth in Clause 41 Number 2 of the Labor Standards Law. In addition, management rebuffed all attempts at compromise, including the labor side’s request for a change in labor management practice instead of back pay.
Meanwhile, McDonald’s claimed that Takano’s case was isolated and that his long work hours reflected inefficient work practices. Harada stated, “Next time, the headquarters needs to be better able to grasp the conditions in the workplace. But we have no intention of following up for people who are unable to produce results.” Charges of insecurity may have unsettled Takano, who said, prior to the start of the trial, “Among the tenchō, there were other people who did the work better [than me].”[26] Nevertheless, the corporation assigned a second regular employee to Takano’s restaurant, greatly reducing his work hours by the time the trial started.
Following the breakdown of negotiations, the trial started on 30November 2005 in Tokyo District Court. The plaintiffs were always confident of victory because plaintiffs had won 30 of 33 related cases beginning in 1956, including 3 involving tenchō. Tokyo Kanrishoku Union’s Abe stated just before the trial began that legal precedents virtually guaranteed a plaintiff victory.[27] The plaintiffs were assisted by Rengō Tokyo, which helped find employees willing to testify for Uchino.
The trial’s core issue was whether tenchō were managing supervisors. (In contrast to Uchino’s trial, the number of work hours was not an issue.) The law is written in general terms, but courts use three main criteria to determine whether classifications are valid. Managing supervisors should have (1) considerable autonomy in managing their own work time, (2) strong authority in supervising personnel and other firm operations, and (3) management-level status and compensation. True supervising managers should meet all three criteria, but the judge ruled that none applied, noting that Takano punched a time clock, had no authority over hiring of other regular workers, and did not decide opening hours, menu items, or prices.
Further, average yearly pay for McDonald's Japan’s tenchō was about 7.07 million yen (then roughly 50-60,000 dollars) by 2005. The court noted that McDonald's seika-shugi (performance-based) pay system actually put salaries of about ten percent of tenchō below that of “first assistant,” the regular worker rank just below tenchō, while another 40 percent of tenchō earned only 440,000 yen more than first assistants, insufficient to justify managing supervisor classification.[28] Furthermore, many tencho earn only slightly more than part-timers when their pay is calculated on an hourly basis. In one case, a court found that a McDonald's tenchō’s actual wage was just 670 yen per hour, below Tokyo’s minimum wage of 708 yen.[29] Finally, McDonald's Japan’s 2785 directly managed restaurants employed 2,555 regular workers, of whom 1715 were tenchō (some manage more than one outlet), while another 277 employees had ranks higher than tenchō. The court found that these distorted proportions indicated that tenchō did not have true managing supervisor status. McDonald's was ordered to pay Takano 7.5 million yen for unpaid overtime work.
2.3 Aftermath
Both the Toyota settlement (announced November 30, 2007) and the McDonald's decision (January 28, 2008) generated headline news and celebratory editorials. Several major companies that rely heavily on tenchō labor, notably 7-11 Japan, the nation’s largest convenience store chain operator, immediately announced plans to change personnel practices as a result of the McDonald's verdict. Similarly, many of the nation’s largest manufacturing firms began to revise or reconsider QC compensation practices.[30] As we shall see, however, actual impact may be considerably diluted.
While the media trumpeted the results, neither Toyota nor McDonald's accepted the rulings, though they made some efforts to protect their images. Toyota disputed the court’s finding on Uchino’s work hours, but in May, announced that it would pay overtime for QC activity as required.[31] At the same time, it declared that time spent on QC would be reduced. Employees required to participate would be delimited to reduce impact on wage costs. In spite of this positive development, critics argue that much time spent in preparation for QC meetings will likely continue go unpaid because it is often done at home. Toyota still refuses to say that QC activity is “work,” only that it will “treat it as work.”
McDonald's immediately filed an appeal. However, its belligerent stance and refusal to compromise, despite the weight of legal precedents, unintentionally strengthened anti-work hour campaigns by leading to a decisive court decision. The impact was strengthened because just weeks before the announcement of the Takano decision, a group of store managers forced the retail clothing chain Konaka to make concessions on overtime pay.[32] The core issue, misclassification of tenchō as managing supervisors, was the same as in Takano’s case, reinforcing the publicity impact of the McDonald's verdict. The resulting media coverage helped to make nabakari kanrishoku (manager in name only) a national buzzword, and to encourage people to contact community unions and labor rights groups about rights of employees, especially kanrishoku. Employees started new unions in Kentucky Fried Chicken Japan (where they quickly won a back overtime pay settlement) and other restaurant chains, while four former McDonald’s tenchō filed a lawsuit in Tokyo District Court on March 21 demanding back overtime pay.
Still, the number of assertive workers remained small, and by May a counter-trend had already emerged. Some companies announced plans to introduce overtime allowances, but designed them so that little or no additional payment occurred. Harada, for example, announced that McDonald's would pay overtime allowances but substantially reduce job pay, leaving actual pay the same. Similarly, Konaka began paying overtime but reduced other allowances. As newsweekly AERA sarcastically put it, the situation had merely shifted “from ‘managers in name only’ to ‘overtime allowances in name only’.”[33]
3) Outcomes and Analysis
Despite the great differences in the two companies involved and in their financial conditions, the two cases demonstrate great similarity in the means used by managers to pressure or compel employees to work excess hours. Six of the seven means previously outlined were used by both firms, as discussed in this section.
No. 1: Deny that overtime occurs. Both companies denied that their practices caused overtime. In addition, both presented dubious records or testimony, as the court ruled in Toyota’s case, and as indicated by records held by Rengō Tokyo. The latter show that McDonald's reports hours well below those reported to it by tenchō, even though many tenchō report fewer hours than they actually work, since doing so would not raise pay, and might get them labeled as inefficient. In addition, many Japanese companies put a ceiling on overtime allowances and pay no more than that regardless of hours actually worked.
No. 2: Assign tasks informally. QC activities are one way that this is performed, especially by manufacturing firms. Although officially voluntary, participation at Toyota and many other firms is considered in performance evaluations, though a 2004 survey by the Japan Union of Scientists and Engineers found that companies often pay only nominal allowances and that 30 percent of respondents pay nothing at all.[34]
No. 3: Manipulate employment categories. This was the main issue in the McDonald's case, which showed that McDonald's tenchō, though formally ranked as kanrishoku, routinely perform a wide range of mundane duties unpaid. Takano was forced to perform virtually all duties in the restaurant, showing that the distinction between No. 2 and No. 3 is not necessarily clear-cut. Uchino, as an EX, was expected to strive for virtual perfection without regard for time. Both men routinely covered shortfalls for absent or under-contributing employees by doing additional work. Another common practice is to misclassify employees as independent contractors, then force them to meet harsh quota systems (see No. 4) in order to maintain their “contracts.”[35]
No. 4: Set high quotas and use vague evaluation criteria. Both the Toyota Production System and the McDonald's performance monitoring system (a variation of performance-based pay systems that emerged on a large scale in Japan in the late 1990s) set exacting standards that frequently force employees to devote their own time to solving problems and meeting targets. Similarly, many service sector companies use bonuses to pressure workers to pursue difficult-to-achieve performance targets.[36] Furthermore, Japanese employers increasingly assign quotas to raise the productivity of low-paid non-regular workers, though penalties for under-performance are far more common than rewards.[37]
No. 5: Claim that overtime premiums are included in base pay or management allowances. This practice does not apply to our cases, but 7-11 Japan and Takefuji are among the prominent firms known to use this approach.[38]
No. 6: Deliberately understaff, employ non-regular workers. Toyota has been a pioneer in squeezing higher productivity out of ever fewer employees. In the case of non-production personnel like Uchino, Toyota compensated for lack of staff by expecting workers to voluntarily (or unofficially) contribute long hours, thus achieving three shifts of work from two shifts’ staff levels.
Since non-regular workers are generally not expected to work overtime, their employment often increases the amount of overtime that regular workers are likely to work. Problems caused by high proportions of non-regular workers are especially acute in the service sector. At McDonald's, 95 percent of employees were non-regulars in 2007.[39] Low-paid, poorly motivated non-regular workers in service sector positions frequently go absent or quit suddenly, forcing the remaining regular workers to cover their work;[40] as seen above, this situation was a constant problem for Takano.[41]
Toyota employed approximately 10,000 non-regular workers for several years (until reducing their numbers drastically from late 2008) compared with around 68,000 regular workers. Not only is the proportion of non-regulars low compared with many service industries, but discipline is better, partly because wages are often somewhat higher than for other non-regular positions.
No. 7: Inculcate corporate values. Uchino Hiroko observed that Toyota employees commonly internalize the company’s philosophical stance that quality control activities are voluntary and are not work time.[42] Further, Toyota is a national icon, and its global success is often seen as a justification of its particular vision of Japanese values, in which loyalty–to superiors and the organization–is the highest virtue. Rengō Tokyo’s Denta observed that many of McDonald's tenchō regard themselves as managers because the company encourages this belief during training, and because they perform tasks such as keeping books and supervising employees – and simply because they want to believe themselves managers.[43]
Competition consciousness is powerful as well. Toyota and other Japanese manufacturers have long excelled in instilling such belief (regarding both domestic and international competitors), while McDonald's encourages strong competition consciousness among employees by posting evaluation results and other personnel-related information. Further, leading corporations use their elevated status and high wages to heighten motivation. At Toyota even union leaders challenge complaining workers to, “Find me a company that will hire you for the wages you’re being paid now.”[44] Several years of falling wages notwithstanding, the average pay of McDonald's tenchō remains the highest in the industry. Many tenchō have lower pay but better conditions, while those in the lowest-cost chains earn little more than \4 million, and routinely handle decidedly un-managerial tasks such as garbage disposal.[45]
In addition to the seven corporate practices used to extract overtime, these and other cases indicate that bullying and intimidation are often used to suppress complaints about work hours.[46] Community pressure was used on Uchino Hiroko to pressure her to drop her court case. McDonald's managers criticized Takano publicly, claiming that his long hours reflected his inefficiency, and then tried to browbeat him into quitting the union. Thus, bullying of the plaintiff took a very public form in both cases, though only McDonald's conducted direct bullying. The information presented here suggests that managerial behavior diverged largely because Toyota maintains much stronger control over employees and corporate culture, and even its social environment, making overt bullying unnecessary.
4) What Do These Cases Imply?
The two cases demonstrate several major features of Japan’s work-hour controversy. First, since neither politicians nor major unions have made serious efforts to reduce work hours, plaintiffs must seek support from activists and lawyers committed to protecting workers’ rights. Aggrieved employees sometimes commence the process by contacting community unions or labor rights groups, as both Uchino Hiroko and Takano Hiroshi did. Others start by contacting lawyers directly through labor-issue hotlines. Both Tokyo Kanrishoku Union and Center to Protect the Lives and Health of Working Persons naturally passed main responsibility to lawyers as the cases went to trial, but remained involved in the larger struggles against excess work hours by conducting demonstrations and other activities to raise public awareness. They also provided crucial personal support to the plaintiffs, in part by putting them in contact with other aggrieved workers and with groups such as the Association of Families Concerned with Karōshi. This psychological support helped in enduring pressure from community, in Hiroko’s case, and from fellow workers, in Takano’s, to drop their lawsuits.
A major problem for activists is that cases often turn on technical issues. The Toyota case hinged on understanding the minutia of the Toyota Production System, and defining what should be considered work. Uchino Hiroko had to sue to bring the Toyota definition into question before an impartial judge, and then had to force the government to recognize the court’s ruling. She never sued Toyota itself (and Toyota did not even acknowledge messages from the plaintiff until after the verdict), though the plaintiff team implicitly sought to impugn some of the company’s core personnel practices, and later demanded payment for the unpaid work time. A settlement specifying an apology and payment of some portion of the service overtime was reached through quiet negotiations in late 2008 (personal communication with the plaintiff). Similarly, the McDonald's case hinged on the definition of “supervising manager” rather than the fact that Takano nearly suffered disabling injury or death. This led to errors in media reports over whether the McDonald's trial concerned work hours or manager status – it was really about both, of course, but technically it only covered the latter. Hence, a major limitation of these and many other lawsuits is that they attack the overwork problem only indirectly and in piecemeal fashion.
Major unions and government agencies have often been passive or even obstructive, as demonstrated in these cases. Both Toyota Union and Rengō failed to take action in support of Uchino, while Nagoya’s Labour Standards Office clearly supported the position of management and accepted favors from it. Furthermore, the Labour Standards Office Chief who refused Uchino’s application and was later found to have accepted favors was reinstated following a temporary demotion.[47] Labour Standards Office guidance was merely ineffective in the McDonald's case–ironically, union officials believe it would never have gone to trial had the agency forced McDonald's to amend practices rather than simply issuing an easily ignored recommendation (kankoku). Bowing to pressure to strengthen rules on work hours, Ministry of Health, Labour and Welfare in October 2008 issued new guidelines on defining managing supervisors, but the standards were so weak that infuriated unions and lawyers demanded their retraction.[48] An exception to the pattern of major union disinterest was Rengō Tokyo, which emphasizes cooperative resolutions of disputes, but operates more independently of managers than most Rengō-affiliated unions.
Despite the limited results, it is important to understand why these two cases generated tremendous publicity even though the vast majority of the hundreds of deaths ruled karōshi or karōjisatsu (suicide due to overwork) every year generally garner much less press coverage. The global stature of both corporations was important, of course, and so was timing, because long work hours are now widely recognized as a major socioeconomic problem. Recognized cases of karōshi have risen steadily since the term was coined in 1978, reflecting rising awareness and litigation-forced changes to the standards for granting compensation, rather than actual changes in work conditions. Accordingly, the government has become somewhat more assertive about conducting unannounced inspections, levying fines, and making recommendations for improvement. Nevertheless, the emphasis is still on guidance, and penalties remain symbolic. Similarly, major unions are also steadily implementing programs to combat excess work hours, but proceed cautiously and non-confrontationally.
Probably more important, the mainstream media rather suddenly began launching regular exposes of deteriorating workplace conditions around the latter half of 2005. Uchino Hiroko, taking advantage of this favorable public climate, proved an effective campaigner. Her meeting with Minister Kawazoe kept media attention on Toyota’s dangerous work practices and its refusal to acknowledge them. In McDonald's case, the fact that the plaintiff was alive and the case fresh probably helped stimulate media interest. The Toyota court case began four years after Uchino Kenichi’s death, while the McDonald's trial started within eight months of Takano’s near-death experience. Furthermore, media attention was drawn by the large financial stakes since McDonald's paid a large settlement to its part-time workers, and could still find itself liable to pay around 10 billion yen (ninety million dollars) for unpaid overtime to tenchō. The mass media continued to focus considerable attention on both cases and their implications for months, thanks in part to allegations of continued mistreatment of workers at Toyota[49] and a steady stream of reports of overwork deaths and community union-backed resistance among tenchō.
Awareness of the work hour issue was also heightened in late 2007 and early 2008, when the business community and government attempted to pass the so-called “white-collar exemption,” legislation that would have eliminated mandatory overtime allowances for most white-collar workers. Backers claimed that white-collar exemption would actually reduce work hours by making work more flexible and by eliminating the incentive to seek overtime allowances. Initially, the public was barely aware of the issue, but activists and the media moved quickly to raise awareness,[50] and then had little difficulty winning over the mass of white-collar workers, 70 percent of whom would have lost their overtime benefits under the plan. The proposal was further weakened when Okutani Reiko, a business representative in the Ministry of Health, Labour and Welfare’s labor policy deliberative council, uttered a series of inflammatory opinions, most notoriously, “Managers don’t tell anyone to work to death, do they? To some degree, karōshi included, I think this is a matter of self-control [jiko-kanri].”[51]
The clear public opposition to white-collar exemption led the government to abandon the proposal in January 2007, while conservative politicians and even many business leaders began to criticize labor deregulation policies.[52] However, Japanese business and conservative leaders’ change in stance was probably intended to appease the public rather than encourage the strengthening of safety standards. In December 2008, the ruling Liberal Democratic Party agreed to raise the current overtime premium from the current 25% to 50% in April 2010 – but only for overtime in excess of 60 hours per month (less would continue to draw only 25 percent). The original proposal set out an 80-hour overtime threshold, but opposition parties, pointing out that this was the “karōshi line” at which health is regarded as seriously endangered, insisted on a lower figure.
5) Conclusion
The attention accorded to the Toyota and McDonald's cases are indicative of growing public discontent with excess work hours. However, the two cases also demonstrate the major obstacles facing plaintiffs, even when clearly dangerous violations of work standards occur. Both plaintiffs covered here, for example, endured abuse from community and company, and both companies committed violations, including falsification of records, that went un-penalized. Facing little risk, firms have little legal or financial incentive to monitor work time properly.
It is true that Takano’s lawsuit could yet bring significant change to the restaurant-bar and other sectors employing large numbers of tenchō should McDonald's appeal of the January 2008 verdict fail. So far, however, companies have merely diffused the impact of legal rulings through nominal adjustments of pay and other personnel practices. Moreover, McDonald's Japan, after several years of shaky performance, announced record profits for 2008, enabling management to claim vindication for its aggressive cost-cutting strategy. Toyota, meanwhile, has suffered its first loss-making year in decades, but reacted by reducing jobs and pay – in short, its ability to adjust labor costs means that payment of QC allowances will have little if any effect on earnings.
Finally, the analysis reveals the limits of activist pressure. Strongly motivated plaintiffs and supporters defeated two of the world’s largest corporations in court, forcing both to admit to some degree of malfeasance. Nevertheless, the unwillingness (or inability) of major unions or the government to follow up the rulings means that neither Toyota or McDonald's has suffered significant penalty or lasting damage to corporate image, or to bottom line. Campaigners for reform of work hours will need stronger allies to turn their court victories into meaningful reform of the nation’s workplaces.
[1] Kenji Iwasaki, Masaya Takahashi and Akinori Nakata, “Health Problems Due to Long Working Hours in Japan,” Industrial Health, vol. 44 (2006), pp. 537-540.
[2] Morioka Koji ‘Rōdō konpuraiansu no jittai to saabisu zangyō’ (Labor Compliance and Unpaid Overtime). Report presented for Hataraki Net Osaka, Osaka (10 April 2008).
[3] Ogura Kazuya, “Contemporary Working Time in Japan: Legal System and Reality,” Japan Labor Review, vol. 3, no. 3 (2006), p. 12.
[4] Kokumin seikatsu hakusho (Japanese Lifestyle White Paper). Naikakufu (Cabinet Office) (Tokyo: Shadan hōjin jiji kakuho sha), pp. 170-72.
[5] Hisamoto Norio, Seishain no runesansu (Regular Worker Renaissance) (Tokyo: Chuko Shinsho, 2003), pp. 52-53.
[6] Ministry of Health, Labour and Welfare, Rōdō keizai hakusho (Labor Economics White Paper) (Tokyo: Government of Japan, 2005), p. 278.
[7] Kawamura Manabu, “Rōdō jikan seido to kigyō no kisei nogare ni tai suru hōritsu-hanrei
no kangaekata” (Laws and Court Decisions Regarding Overtime Regulations and Corporate
Attempts to Evade Them). Report presented for Hatarakinet Osaka, Osaka (10 April 2008).
[8] Our analysis is informed by prior research demonstrating how companies have instilled corporate values in employees, notably Thomas Rohlen, For Harmony and Strength: Japanese White-Collar Organization in Anthropological Perspective (Berkeley: University of California Press, 1974) and Andrew Gordon, Wages of Affluence (Cambridge, MA: Harvard University Press, 1998).
[9] This account draws from the published court ruling, personal communications and public presentations by Uchino Hiroko and community union official Sakurai Zenko (both on 21 June 2008, and transcribed in “Toyota jidōsha no kōjō de” (At Toyota Automobile’s Factory), Shokuba no jinken, no. 43, (September 2008), pp. 17-37).
[10] Jeffery K. Liker, The Toyota Way (New York: McGraw-Hill, 2003).
[11] Ekonomisuto, “Karōshi taikoku” (Land of Karōshi), 25 July 2006, p. 20.
[12] Companies often avoid taking responsibility for work-related accidents and illnesses in order to hold down costs (such as insurance premiums) and protect image.
[13] Asahi shinbun, 22 May 2008, p. 11. Micheline Maynard and Martin Fackler, “A Dent in Toyota Quality?” International Herald Tribune, 4 August 2006; accessed at
[14] Asahi shinbun, 22 May 2008, p. 1.
[15] Asahi shinbun, 27 April 2007, p. 9.
[16] Shokuba no jinken 2008, p. 18-19.
[17] Kamata Satoshi, “Toyota: Suicide and Worker Depression at the World’s Most Profitable Manufacturer,” Japan Focus. http://japanfocus.org/, 2004 (accessed 10 October 2008).
[18] Nagoya District Court, 30 November 2007.
[19] Kumazawa Makoto, Nihon-teki keiei no meian (The Light and Dark of Japanese-style
Management) (Tokyo: Chikuma shobo, 1989).
[20] Compensation payments are calculated as a percentage of the average salary and bonus paid during the last three months of life. The number of hours of overtime recognized thus has a significant impact on compensation.
[21] Main sources include presentations by Makoto Abe on 19 August 2006 (transcribed in “Tenchō datte rōdōsha da!,” Shokuba no jinken, no. 43 (November 2006), pp. 21-40) and on 8 May 2008; Tokyo Kanrishoku Union, Gisō kanrishoku (False mid-level managers) (Tokyo: Popura sha, 2008); NHK nabakari kanrishoku shuzaihan, Nabakari kanrishoku (Name-only managers) (Tokyo: NHK shuppan seikatsujin shinsho, 2008); and interviews with involved persons, including Takano Hiroshi (Tokyo, 24 July 2008).
[22] Nikkei, 17 June 2008, p. 13. Author interview, Denta Yuji, new member organizing director for Rengō Tokyo, in Tokyo, 27 June 2008. Rengō Tokyo, a branch of Rengō, established McDonald's Union in May 2006.
[23] Kanrishoku is roughly equivalent to mid-level manager. Tokyo Kanrishoku Union is a community union representing around 700 primarily white-collar employees, about half of them kanrishoku.
[24] An arubaito is a part-time worker, usually young and typically a student. Paato are also part-timers, but usually housewives or older women.
[25] “Tenchō datte rōdōsha da!,” Shokuba no jinken, 2006, p. 22.
[26] Both citations from page 35 of Nikkei bijinesu, “Shain ga kowareru” (Employees Break Down), 24 October 2005, pp. 30-43.
[27] Abe Makoto, taped interview by author, Tokyo, 8 November 2005.
[28] Natsume Ichirō, “‘Nabakari kanrishoku’ ranzō he no keishō” (Sounding the alarm on ‘name-only managers’), Hiroba no yunion (September 2008), p. 29.
[29] Nikkei, 1 February 2008 (evening edition), p. 1.
[30] Asahi shinbun, 19 July 2008, p. 13.
[31] Asahi shinbun, 22 May 2008, p. 1.
[32] Tokyo Kanrishoku Union, ed. (2008) Gisō kanrishoku (False mid-level managers) (Tokyo: Popura sha, 2008), pp. 70-85.
[33] Katagiri Keiko, “Makku Harada-shachō no hyōban” (Mac President Harada’s reputation), AERA, 2 May 2008, p. 27.
[34] Asahi shinbun, 22 May 2008, p. 1.
[35] Kazama Naoki, Koyō yukai (Employment Meltdown) (Tokyo: Toyo Keizai Shinposha, 2007), pp. 175-97.
[36] Kobayashi Miki, Rupo:‘seishain’ no wakamono-tachi (Report: ‘Regular worker’ youth) (Tokyo: Iwanami Shoten, 2008).
[37] Nikkei, 7 November 2008 (evening), p. 17.
[38] Kawamura Manabu, “Chingin fubarai zangyō nezetsu no tame ni–Takefuji zangyō fubarai jiken ni furete” (Getting Rid of Unpaid Overtime: Clues from the Takefuji Case), (Geppō shihō shoshi, no. 401, July 2005), pp. 16-21.
[39] Nikkei, 23 September 2007, p. 1.
[40] Kobayashi, Rupo: Seishain no wakamono-tachi, 2008.
[41] Low pay notwithstanding, growing numbers of non-regular workers are becoming subject to over-work. Some are simply in a weak labor market position, while others work furiously in efforts to convince firms to hire them as regular workers. See Asahi shinbun, 14 June 2008, p. 34; and Kobayashi Miki, Rupo: Seishain ni naritai (Report: I want to become a regular employee) (Tokyo: Ei shobo, 2007).
[42] Liker, The Toyota Way, 2003.
[43] Interview, Denta.
[44] Kamata, “Toyota,” 2004.
[45] Nikkei, 17 June 2008, p. 13.
[46] For examples, see Tokyo Kanrishoku Union, Gisō kanrishoku, 2008.
[47] Asahi shinbun, 12 April 2008, p. 9.
[48] Asahi shinbun, 25 October 2008, p. 19.
[49] The Japan Times, 13 September 2008. Available at .
[50] Kazama, Koyō yukai, pp. 206-209.
[51] Kazama, Koyō yukai, p. 224.
[52] Igarashi Jin, Rōdō sai-kisei (Labor Re-regulation) (Tokyo: Chikuma shinsho, 2008).
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