The Japanese Case Law on the Application of Employment Rules to Franchisees and on Vicarious...
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Transcript of The Japanese Case Law on the Application of Employment Rules to Franchisees and on Vicarious...
The Japanese Case Law on the The Japanese Case Law on the Application of Employment Rules to Application of Employment Rules to
Franchisees and on Vicarious LiabilityFranchisees and on Vicarious Liability
Prof. Souichirou Kozuka(Gakushuin University)
Two, unrelated developmentsTwo, unrelated developmentsIn 2009, some franchisees
established an association and requested the collective bargaining, alleging that it is the labour union
The Supreme Court held two decisions on the qualification of a worker under the Labour Union Act on 12 April 2011
Labour Union Act Art.3 The term "Workers" as used in this
Act shall mean those persons who live on their wages, salaries, or other equivalent income, regardless of the kind of occupation.
Labour Standards Act Art. 9 In this Act, worker means one
who is employed at an enterprise or office (hereinafter referred to as "enterprise") and receives wages therefrom, without regard to the kind of occupation.
SC 12 April 2011 (Case No.1)SC 12 April 2011 (Case No.1)New National Theatre Case
Some members of the opera chorus were on contracts with the theatre, while others were “registered” and called for from time to time
A singer who was on a contract sought for the collective bargaining when his contract was not renewed
The Court affirmed that he was a worker
SC 12 April 2011 (Case No.2)SC 12 April 2011 (Case No.2)INAX Case
Manufacturer of bathroom fixtures was on contracts with the engineers for repair works
The contract was titled as “Outsourcing contract”
The engineers claimed for the collective bargaining about guarantee of the minimum annual sales etc
The Court affirmed that the engineers were workers
SC 21 February 2012SC 21 February 2012Victor Case
Manufacturer of audio equipment contracted with individual repairers as “agents”
Some of the agents were incorporated The agents requested collective bargaining
over the improvement of their contract conditions
The Court affirmed that the individual agents were workers unless circumstances indicated that they were business owners
The Case Law Now FormedThe Case Law Now FormedElements to be considered
1. Integrated as necessary labour force2. Conditions of work were uniformly
determined3. Remuneration paid in exchange for the labour4. Little room for declining the allotted work 5. Subject to the directions over the work6. Time and place of work was regulated
If the test is applied to individual franchisee?
Challenges to the practiceChallenges to the practiceWhat does “integrated” mean? –
Employers’ lawyer views it equivalent to “outsourcing” (but distinguished from “directions”) Franchising is different from outsourcing Can this argument be maintained in
case of service franchising as well? The detailed manuals, uniform wears,
shop signs imply “uniform work conditions” or “directions”?
Possible responsesPossible responsesFocus on the “unless” part of Victor
decision - Suggestions by the Ministry’s Study Group Can the franchisee affect the earnings and
losses? Does the franchisee get the unexpected
profits (and bear the unexpected loss)? Does the franchisee have the power to
employ its own employees?Or requiring the franchisee to incorporate
solves the problem?
Worker under Labour Standards ActWorker under Labour Standards ActRecent cases deal only with the
applicability of the Labour Union ActThe Labour Standards Act may have
a narrower applicability (though the same term “worker” is used)
Implications: outsourcing is OK (to avoid regulation over dismissals), but the protection through collective bargaining must be given
Vicarious liabilityVicarious liabilityDilemma of the franchisor - lack of
control on franchisees could lead to vicarious liability (while too much control could turn franchise agreement into labour contract)
Source of liability Respondeat superior (Civil Code, art.715) Ostensible liability (Companies Act, art.9;
Commercial Code, art.14) Negligence by franchisor itself (Civil Code,
art.709)
Civil Code Article 715 (1) A person who employs
others for a certain business shall be liable for damages inflicted on a third party by his/her employees with respect to the execution of that business; provided, however, that this shall not apply if the employer exercised reasonable care in appointing the employee or in supervising the business, or if the damages could not have been avoided even if he/she had exercised reasonable care.
Article 709 A person who has intentionally or negligently infringed any right of others, or legally protected interest of others, shall be liable to compensate any damages resulting in consequence.
When is the franchisor liable?When is the franchisor liable?Osaka DC, 31 July 2001
Customer slipped on the floor of the convenience store on a rainy day and was injured
The floor was wet after cleaning by the employee
Floor materials were determined, and cleaning mop was provided, by the franchisor
Franchisor held liable for the failure to give proper directions
When is the franchisor liable?When is the franchisor liable?Kobe DC 19 October 2001
Grilled beaf restaurant caused bad smell The ventilation duct was not properly
designed Franchisor and franchisee were held jointly
liableImplications from two cases
The role of the franchisor: properly design the business format and implement the store policy
Failure to do so could make franchisor liable
When could the franchisor be liable?When could the franchisor be liable?SC 30 November 1995
Pet shop within the supermarket sold a bird having a disease and the purchaser’s family became ill
Legally speaking, pet shop was not part of the supermarket but an independent merchant
The Court applied “by analogy” the provision on liability for licensing the trademark and misleading the customer into a wrong understanding about the counterparty
Companies Act Article 9 Any Company who has
permitted others to carry out a business or engage in any enterprise by using the Company's own trade name shall be jointly and severally liable together with such others, vis-a-vis any person who has transacted with such others based on misunderstanding that such Company carries out such business, for the performance of any obligations which may arise from such transaction.
Practical responsePractical responseThe case is applicable to franchise
contextShop sign distinguishing independent
tenants from corners of the supermarkets – feasible in franchising?
Make clear the “division of labour” between the franchisor and the franchisee in operation of the outlet in responding to the customer’s claim
ConclusionConclusionControl should not be too much or too little
too much control turns franchisee into a worker
too little control could make the franchisor liable toward the customer / third party
They are not incompatible: the roles of franchisor and franchisee must be made clear Control over “franchise package” vs control
over daily operations Complication could arise with service sector