How a Company Should Respond to a Request for Collective Bargaining: Community Unions, the Duty to Bargain in Good Faith and Collective Agreements

Hello, I'm Noriaki Asato, Representative Attorney at LegalAgent.

Even a company with no in-house labor union can receive a request for collective bargaining. This is because, if an employee individually joins a community union (a general union open to workers of any company) outside the company, that union can request bargaining with the company as the employer. A labor union can be formed whenever two or more workers come together, and it requires neither notification to a government office nor the company's approval (Tokyo Labor Relations Commission glossary (Japanese)).

Consider, for example, a case in which a community union joined by a former employee whom the company dismissed three months ago sends a request letter demanding withdrawal of the dismissal and payment of unpaid overtime, with a response deadline one week later. What the company has to decide in that week is not whether to agree to bargain. This is because Article 7, Item 2 of the Labor Union Act prohibits refusing collective bargaining without justifiable reasons, and that item also applies to a request from a union joined by a former employee who disputes the validity of their dismissal. What the company should decide is who will sit at the bargaining table, the date, time and place, and what it will explain on each of the demands.

The central issues in the company's response are the duty to respond to collective bargaining under Article 7, Item 2 and the substance of the duty to bargain in good faith that the Supreme Court derived from that item. As for the actions the company takes in parallel with the bargaining, the question is whether they constitute disadvantageous treatment under Item 1 or control of or interference with the union under Item 3 of the same Article. If an agreement is reached, the collective agreement under Article 14 of the Labor Union Act becomes the next issue; if bargaining reaches an impasse, the procedures of the Labor Relations Commission do.

The Duty to Respond to Collective Bargaining and the Duty to Bargain in Good Faith (Article 7, Item 2 of the Labor Union Act)

Article 28 of the Constitution of Japan (Japanese) provides: "The right of workers to organize and to bargain and act collectively is guaranteed." Article 7, Item 2 of the Labor Union Act (Japanese) prohibits, as an unfair labor practice, an employer "refusing without justifiable reasons to bargain collectively with the representatives of the workers it employs." Under Article 6 of the same Act, not only the representative of a labor union but also a person entrusted by the labor union has the authority to negotiate on behalf of the union and its members.

"The representatives of the workers it employs" include community unions outside the company. The Labor Union Act does not require that all or a majority of a union's members be employees of a particular company. Even a request from a community union that only one of the company's employees has joined falls under Article 7, Item 2. Even if there is a majority union within the company and the company has already reached agreement with it on the same matter, the company must still respond to bargaining with the community union (Fukushima Labor Relations Commission Q&A (Japanese)). A union joined by a dismissed former employee may also request bargaining to seek, for example, withdrawal of the dismissal. If the request is made within a period after the dismissal that can be regarded as reasonable under socially accepted norms, the company is obliged to respond to the bargaining (same Q&A (Japanese)).

The matters on which the company must bargain (mandatory bargaining subjects) are those matters concerning the working conditions and other treatment of union members, or the conduct of the relationship between the company and the union, that the company is in a position to decide. In addition to wages and working hours, they include personnel matters such as dismissal, discipline and transfers, as well as the rules of collective bargaining. Even for a management decision such as closing a factory, the employment and working conditions affected by it are subject to bargaining (same Q&A (Japanese)).

Whether there are "justifiable reasons" for refusing to bargain is judged strictly. The Mie Labor Relations Commission (Japanese) explains that the company being busy or the union's demands being excessive do not constitute justifiable reasons. In the examples presented by the Shiga Labor Relations Commission (Japanese) as well, refusals to bargain on the grounds that officers of the union's umbrella organization would take part, or that the matter to be negotiated was being disputed in court, were found to be unfair labor practices.

Merely taking a seat at the bargaining table does not fulfill the duty under Article 7, Item 2. In a case concerning collective bargaining between National University Corporation Yamagata University and a labor union made up of its faculty, staff and others, the Supreme Court set out the content of the duty to bargain in good faith. It held that an employer bears "a duty to respond to collective bargaining in good faith by such means as explaining, as necessary, the grounds for its assertions and presenting materials that support them," and that a breach of this duty constitutes an unfair labor practice under Article 7, Item 2 (Supreme Court, Second Petty Bench, judgment of March 18, 2022 (Yamagata University case), Minshu Vol. 76, No. 3, p. 283 (Japanese)). The same judgment held that even where there is no prospect of an agreement being reached on the matters under negotiation, the Labor Relations Commission may issue a remedial order directing the employer to bargain in good faith. Even for demands the company has decided it cannot accept, it is still required to bargain by explaining its reasons and the basis for them.

The Shiga Labor Relations Commission presents examples of bargaining found to be in bad faith. One is a response that merely answered the union's demands with "already resolved" without explaining the reasons or grounds. Also listed are a case in which only officers with no authority to decide wages attended even though a wage increase was on the agenda, and a case in which the company kept putting off the meeting date on the grounds that it was busy. On the other hand, the company has no obligation to go so far as to accept the union's demands (Tokyo Labor Relations Commission glossary). Once both sides have exhausted their assertions and explanations and the bargaining has reached a stage at which no progress can be expected even with further sessions, the company's breaking off the bargaining is considered not to breach the duty to bargain in good faith. If a later change in circumstances makes it meaningful to resume bargaining, the company is obliged to agree to resume it (Fukushima Labor Relations Commission Q&A (Japanese)).

Disadvantageous Treatment and Control of or Interference with the Union at Issue During Bargaining (Article 7, Items 1 and 3)

Any personnel measures the company takes against union members after receiving the request will be examined for whether they violate Article 7, Item 1. That item prohibits dismissing or otherwise treating a worker disadvantageously "by reason of" the worker being a union member, having joined a union, or having engaged in justifiable union activities. Besides dismissal, demotion and discrimination in pay raises, there are examples in which treatment such as excluding only union members from company events was found to be disadvantageous treatment (Shiga Labor Relations Commission). Even if the company ostensibly cites a different reason, the measure may be found to be disadvantageous treatment if the company's words and conduct make its hostility toward the union clear.

Item 3 of the same Article prohibits "controlling or interfering with" the formation or management of a labor union by workers. Control of or interference with the union is established if there is conduct that objectively has the significance of interference, regardless of whether the union's management was actually affected (Fukushima Labor Relations Commission Q&A (Japanese)). Urging employees to withdraw from the union, investigating union membership, and distributing documents criticizing the union leadership to all employees are given as examples of control of or interference with the union (Hiroshima Labor Relations Commission explanatory guide (Japanese)). A remark by the president at the bargaining table asking the union not to affiliate with an umbrella organization in exchange for accepting its demands is also considered to constitute control of or interference with the union (Fukushima Labor Relations Commission Q&A).

Control of or interference with the union is not limited to acts by the president. The words and conduct of department managers or section managers who hold substantive authority over personnel matters may also be found to be control of or interference with the union by the company. Even the acts of someone in a lower position, such as a subsection chief, may be regarded as conduct in line with the company's intentions if the company knew of them and did not stop them (Shiga Labor Relations Commission).

Responding from Receipt of the Request Letter to the First Bargaining Session

Once you receive the request letter, consolidate the company's point of contact in the staff in charge of HR and legal affairs. Tell the managers who supervise union members not to hold meetings in which union membership is raised and not to ask who has joined. You also need to instruct managers to consult the point of contact in advance before changing a union member's assignment or evaluation. This is because, if a disadvantageous measure is taken against a union member right after the request, whether the measure was taken because the person is a union member will be disputed.

What to Check in the Request Letter

The staff serving as the point of contact should check the following four points by the response deadline.

• The union's name, address and representative, and whether it is an in-house union or a community union
• The employees named as union members, and their employment status
• What each demand asks for, and whether it is a matter the company can decide
• The response deadline, and the date, time and place requested for bargaining

It is not for the company to vet the union's constitution or how the union was formed. For a union to obtain relief from the Labor Relations Commission, it must prove before the commission that it meets the requirements of Article 2 and Article 5, Paragraph 2 (Article 5, Paragraph 1), and that determination is made by the Labor Relations Commission. Even where managers are among the union members, whether they are "persons who represent the interests of the employer" under Article 2, Item 1 is determined by their actual authority and duties, not by their job titles (Tokyo Labor Relations Commission glossary). Avoid refusing to bargain on the grounds that managers have joined. The first steps to take when a labor union serving as a resignation agency requests negotiations on resignation terms are covered in First Steps for a Company Contacted by a Resignation Agency.

You check the scope of union membership to confirm whether the union includes "workers it employs" within the meaning of Article 7, Item 2. If it is clear that the company's employees have joined, the union's failure to submit a membership list is not a reason to refuse bargaining (Fukushima Labor Relations Commission Q&A (Japanese); Mie Labor Relations Commission). Going around asking other employees whether they have joined the union amounts to an investigation of union membership, which is understood to constitute control of or interference with the union.

Examine each demand to see whether it is a mandatory bargaining subject, and then gather within the company the materials that substantiate the facts. For withdrawal of a dismissal, the core materials will be the records supporting the grounds for dismissal; for unpaid overtime, the attendance records and the wage ledger. For matters such as unpaid overtime, where the question is whether the Labor Standards Act has been violated, the worker may also report the fact of the violation to the administrative agency or a labor standards inspector (Article 104, Paragraph 1 of the Labor Standards Act (Japanese)). In that case, the investigation proceeds as a procedure separate from collective bargaining. Responding to such investigations is covered in Responding to Labour Standards Inspection Office Investigations: Inspections, Correction Recommendations and Reports in Practice.

The response deadline is one the union has set, and passing that date does not in itself give rise to any legal effect. Even so, letting the deadline pass without responding can lead to a petition for relief on the grounds that the company refused to bargain. Even if preparation will take time, inform the union in writing by the deadline that the company will bargain, of candidate dates, and of when the company will be able to give its answers to the demands.

Discussing the Date and Time, Venue, Attendees and Session Length

The law does not prescribe the date and time or the venue of collective bargaining, the number of attendees, or the length of each session; the company and the union decide these through discussion. According to the Mie Labor Relations Commission, the venue must be decided through discussion between the parties. If the company does not agree to discuss these matters, or insists on conditions that are neither necessary nor reasonable so that bargaining never takes place, this may amount to a refusal to bargain collectively without justifiable reasons. The company should propose specific candidate dates, times and venues, and continue discussing, in the first session, any points on which it cannot reconcile its position with the union's wishes. Because the rules of bargaining themselves are also mandatory bargaining subjects, respond with reasons to the union's proposals on those rules as well.

There is no legal obligation to include the company's representative director among the company's attendees. The company may give officers or the head of the HR department authority to negotiate and appoint them as its negotiators, and it need not go so far as to give them authority to settle (Fukushima Labor Relations Commission Q&A (Japanese)). However, a response that consists only of reading out prepared answers and repeating "We will take this back and consider it" in reply to questions may constitute an unfair labor practice as bad-faith bargaining (same Q&A). Decide internally in advance, for each demand, how far the negotiators can answer on the spot and the procedure for answering, by the next session, the matters taken back. Even if officers of an umbrella organization attend on the union's side, the company cannot refuse to bargain for that reason, and the company, for its part, may include an attorney among its attendees.

Also agree with the union in advance on the start time and scheduled end time, whether sessions will be held during working hours, and how the wages of attending union members will be treated. Under the proviso to Article 7, Item 3, holding bargaining sessions during working hours without deducting the wages of the union members who attend does not constitute prohibited financial assistance. As for recording, confirm at the outset whether each side will record the session. Recordings of collective bargaining are sometimes submitted as documentary evidence, with transcripts attached, in the Labor Relations Commission's examination of a case (Tokyo Labor Relations Commission glossary).

Preparing the Written Response and the Minutes

In the written response, take each numbered demand in the request letter and divide the items into those the company will accept, those it cannot accept and those under consideration. For items it cannot accept, state the reasons, and either attach the supporting materials to the written response or present them at the bargaining table. If you state the reason for matters the company cannot decide, and when the company will be able to answer matters under consideration, the union will also know what the company will explain at the next session. If the duty to bargain in good faith is disputed before the Labor Relations Commission, it is the written responses and the records of the bargaining that prove the company explained its grounds and presented materials. Do not include in the written response any statements criticizing the union or its umbrella organization, or any proposal to talk directly with the employee without going through the union, because these may be assessed as control of or interference with the union.

For each session, prepare minutes on the company's side as well. Record the date and time, place and attendees, what each side said on each demand, the materials the company presented, the matters taken back and the plan for the next session. In parallel with collective bargaining, the union member may also personally file a petition for labor tribunal proceedings concerning the dismissal or unpaid wages. If the company's explanations in bargaining and its arguments in the labor tribunal proceedings diverge, the credibility of the company's position suffers. Before filing the minutes, have the staff who attended the session and the HR and legal staff check their content against each other. Responding to labor tribunal proceedings is covered in How a Company Should Respond to a Labor Tribunal Petition: Preparing the Written Answer and the First Hearing.

If the union asks the company to sign minutes or a confirmation document it has prepared, do not sign on the spot; check the content within the company. If both parties sign a document setting out matters they have agreed on, it may have effect as a collective agreement even if it is titled "minutes."

Putting the Agreement in Writing and Collective Agreements (Article 14 of the Labor Union Act)

Article 14 of the Labor Union Act provides: "A collective agreement between a labor union and an employer or an employers' organization concerning working conditions and other matters takes effect when it is put in writing and both parties sign it or affix their names and seals to it." The title does not matter. Even a document called an agreement, memorandum or confirmation is a collective agreement if the union and the company put what they agreed in writing and both sign it or affix their names and seals (Fukushima Labor Relations Commission Q&A (Japanese)).

Any part of an employment contract that violates the standards concerning working conditions and other treatment set out in a collective agreement is void, and the void part is governed by the standards in the agreement (Article 16). Work rules likewise must not conflict with a collective agreement applicable to the workplace (Article 92, Paragraph 1 of the Labor Standards Act). The term of a collective agreement cannot be set at more than three years, and an agreement without a fixed term can be terminated by giving notice at least 90 days in advance in a document bearing a signature or a name and seal (Article 15). When concluding an agreement with an in-house union, also keep in mind the extension (general binding effect) under Article 17. When three-quarters or more of the workers of the same kind regularly employed at a single factory or workplace come to be covered by one collective agreement, that agreement also applies to the other workers of the same kind.

Before signing an agreement, check how its terms relate to the work rules and to the working conditions of other employees, and obtain internal approval. In the agreement, state the union members it covers, the matters agreed and the date it takes effect, and, if it sets ongoing working conditions, its term as well. An agreement under which a settlement payment is made and the termination of the employment contract is confirmed directly concerns the rights of the individual union member. For such an agreement, I believe it is appropriate to ask the employee personally to sign as a party in addition to the union and the company. Also include a clause confirming that, apart from what is set out in the agreement, no claims or obligations exist between the employee and the company.

Petitions for Relief to the Labor Relations Commission and Conciliation

The Labor Relations Commission is a tripartite body made up of public interest members, worker members and employer members that examines unfair labor practice cases and carries out the adjustment of labor disputes. Supervision and guidance based on the Labor Standards Act and similar laws is carried out by the Labor Standards Inspection Office, and the Labor Relations Commission is not in charge of it (Central Labor Relations Commission FAQ (Japanese)).

If the union considers that the company's conduct constitutes an unfair labor practice under Article 7, it can file a petition for relief with the Labor Relations Commission. A petition may be filed only within one year from the date of the act (or, for a continuing act, the date on which it ended) (Article 27, Paragraph 2). The procedure proceeds in the order of petition for relief, investigation, hearing, deliberation and order. The Central Labor Relations Commission states that at least half of the cases filed are resolved through settlement or other means. The company submits a written answer, as a rule, within 30 days from the date a copy of the petition is sent to it (Article 41-2, Paragraph 2 of the Labor Relations Commission Rules (Japanese)). In cases alleging a refusal to bargain collectively, the chairperson of the commission may also designate a date promptly after the investigation begins and ask the company for an oral answer (Paragraph 5 of the same Article).

A remedial order takes effect on the date it is delivered (Article 27-12, Paragraph 4). A company dissatisfied with an order of a prefectural Labor Relations Commission may apply to the Central Labor Relations Commission for review within 15 days of delivery (Article 27-15). If it does not apply for review, it may file an action with a court to revoke the order within 30 days of delivery (Article 27-19). Whichever procedure the company takes, the effect of the order is not suspended (Central Labor Relations Commission FAQ). A violation of a remedial order that has become final can result in a non-penal fine of up to JPY 500,000 (Article 32). For an order requiring a specific act, if the number of days of non-compliance exceeds five, the maximum fine increases at the rate of JPY 100,000 for each day in excess. If a remedial order that has been upheld by a final and binding judgment is violated, the person who violated it is subject to imprisonment for up to one year, a fine of up to JPY 1 million, or both (Article 28).

Article 7, Item 4 prohibits treating a worker disadvantageously on the grounds that the worker filed a petition for relief, or submitted evidence or made statements in Labor Relations Commission proceedings. Nor is the fact that an examination is still pending before the Labor Relations Commission considered a justifiable reason for refusing a new request for bargaining (Fukushima Labor Relations Commission Q&A (Japanese)). Submit the written responses, the minutes and the materials presented in bargaining as evidence together with the written answer, and continue bargaining after that as well.

If the bargaining stays deadlocked, or the parties cannot agree on rules such as the date, time and venue, the company can also apply for conciliation. Article 12, Paragraph 1 of the Labor Relations Adjustment Act (Japanese) provides that the chairperson of the Labor Relations Commission designates a conciliator upon the application of both or either of the parties concerned, or ex officio. The designated conciliator ascertains the key points of both parties' positions and endeavors to bring about a resolution of the dispute (Article 13). Where only one party applies, it is up to the other party whether to take part in the conciliation, and whether to accept the conciliation proposal is also for the parties to decide (Fukushima Labor Relations Commission Q&A (Japanese)). The Mie Labor Relations Commission states that it conducts conciliation free of charge and in private, and the Central Labor Relations Commission gives the average time to resolution through conciliation as around 60 days.