2018.06.01

2017 (Ju) 442

Minshu Vol. 72, No. 2

Judgment concerning being a fixed-term worker who has been re-employed after mandatory retirement and concerning “other circumstances” as referred to in Article 20 of the Labor Contracts Act

Case seeking confirmation of position, etc.

Judgment of the Second Petty bench, partially quashed and decided by the Supreme Court, partially quashed and remanded, and partially dismissed with prejudice on the merits

Tokyo High Court, Judgment of November 2, 2016

1. Being a fixed-term worker re-employed after mandatory retirement constitutes a circumstance to be taken into account as one of the “other circumstances” as referred to in Article 20 of the Labor Contracts Act in determining whether or not differences in labor conditions between such fixed-term worker and indefinite-term workers are found unreasonable.

2. In determining whether or not differences in labor conditions related to individual wage items between fixed-term workers and indefinite-term workers are “found unreasonable” as referred to in Article 20 of the Labor Contracts Act, the purposes of such wage items should be individually taken into account instead of merely comparing the total amount of wages between fixed-term workers and indefinite-term workers.

3. The difference in labor conditions where drivers who are indefinite-term workers receive incentive wages and job wages while those who are fixed-term workers and have been re-employed after mandatory retirement receive percentage pay instead of incentive wages and job wages, does not constitute a difference that is “found unreasonable” as referred to in Article 20 of the Labor Contracts Act even if the content of the duties of the two types of workers as well as the extent of changes in the content of such duties and in work locations are the same, under certain circumstances described in the judgment, including those listed in (1) through (6) below:

(1) The amount of base wages paid to a fixed-term worker exceeds the amount of base salary of such fixed-term worker at the time of their mandatory retirement.

(2) The amount of percentage pay paid to a fixed-term worker and the amount of incentive wages paid to an indefinite-term worker are both calculated by multiplying the amount of the worker’s monthly operation by the prescribed factor corresponding to the type of bulk cement tanker driven by the worker. The factor for percentage pay has been set at approximately two or three times higher than the factor for incentive wages.

(3) Through collective bargaining, the base wages for fixed-term workers have been increased and some of the factors for percentage pay have been changed in favor of fixed-term workers.

(4) The wage system for fixed-term workers gives consideration to the stabilization of their income through the measure described in (1) above and is designed to easily reflect the performance of their work on their wages through the measures described in (2) above, instead of paying job wages whose amount is determined according to the type of bulk cement tanker driven by each worker.

(5) Calculation of (i) the total amount of base wages and percentage pay actually paid to a fixed-term worker and (ii) the total amount of base salary, incentive wages and job wages that would be paid if the labor conditions related to wages for the fixed-term worker were the same as those for an indefinite-term worker, reveals that the former amount is lower than the latter amount, but the difference between them is only approximately 2% to approximately 12%.

(6) Fixed-term workers are entitled to receive old-age employees’ pension subject to the satisfaction of certain requirements and are also entitled to receive adjustments until commencement of payment of the portion of the old-age employees’ pension proportional to the amount of premiums paid by employees according to their salaries.

Article 20 of the Labor Contracts Act



Labor Contracts Act

(Prohibition of Unreasonable Labor Conditions by Providing a Fixed Term)

Article 20 If a labor condition of a fixed-term labor contract for a Worker is different from the counterpart labor condition of another labor contract without a fixed term for another Worker with the same Employer due to the existence of a fixed term, it is not to be found unreasonable, considering the content of the duties of the Workers and the extent of responsibility accompanying the said duties (hereinafter referred to as the "content of duties" in this Article), the extent of changes in the content of duties and work locations, and other circumstances.

1. Of the judgment in prior instance, the portion related to the appellants’ claim for damages for their lost regular attendance allowance is quashed.

2. The appellee shall pay to appellant X1 an amount of 90,000 yen as well as the amounts of interest at the rate of 5% per annum on the amounts listed in the “regular attendance allowance” section of Exhibit 2 to the judgment in first instance for the respective periods commencing on the respective corresponding dates listed in the “payment date” section of the same exhibit and ending on the respective dates of payment.

3. The appellee shall pay to appellant X2 an amount of 50,000 yen as well as the amounts of interest at the rate of 5% per annum on the amounts listed in the “regular attendance allowance” section of Exhibit 3 to the judgment in first instance for the respective periods commencing on the respective corresponding dates listed in the “payment date” section of the same exhibit and ending on the respective dates of payment.

4. The appellee shall pay to appellant X3 an amount of 60,000 yen as well as the amounts of interest at the rate of 5% per annum on the amounts listed in the “regular attendance allowance” section of Exhibit 4 to the judgment in first instance for the respective periods commencing on the respective corresponding dates listed in the “payment date” section of the same exhibit and ending on the respective dates of payment.

5. Of the judgment in prior instance, the portion related to the appellants’ claim for damages for their lost overtime allowance is quashed, and for this portion this case is remanded to the Tokyo High Court.

6. The remaining portions of the appellants’ final appeal are dismissed.

7. The total court costs incurred in relation to paragraphs 1 through 4 above shall be borne by the appellee. The costs of final appeal incurred in relation to the preceding paragraph shall be borne by the appellants.

Reasons for the petition for acceptance of final appeal (excluding those that have been excluded) filed by the counsels for the appeal, MIYAZATO Kunio, TADANO Yasushi and HANAGAKI Arihiko

1. In this case, the appellants, who work at the appellee under a labor contract with a fixed term (hereinafter referred to as a “fixed-term labor contract”) after mandatory retirement from the appellee, allege that there are differences in labor conditions violating Article 20 of the Labor Contracts Act between the appellants and employees who have executed with the appellee a labor contract without a fixed term (hereinafter referred to as an “indefinite-term labor contract”), and seek from the appellee: (i) as primary claims, (a) a confirmation that the appellants are in a position under their respective labor contracts in which the rules of employment, etc. for the said employees apply to the appellants; and (b) payment under the labor contract of the difference between the wages payable to the appellants under the said rules of employment, etc. and the wages actually paid to the appellants, plus delay damages thereon; and (ii) as an alternative claim, payment of damages for tort in an amount equivalent to the aforementioned difference, plus delay damages thereon.

2. An outline of facts, etc. related to the case duly confirmed by the court of prior instance is as described below:

(1) a. The appellee is a stock company engaged in the business of transporting cement, liquid gas, food products, etc., with a workforce of 66 employees as of September 1, 2015.

b. The appellants had all worked as bulk cement tanker (hereinafter referred to as “BCT”) drivers under an indefinite-term labor contract with the appellee. After mandatory retirement from the appellee, the appellants each executed a fixed-term labor contract with the appellee and have continued to work as BCT drivers since then.

(2) a. In the wage regulations, etc. established under its rules of employment (Appellants’ Exhibit No.1 and Appellee’s Exhibit No. 1; hereinafter referred to as the “Rules for Employees”), the appellee provides as follows in respect of wages of drivers of BCTs, etc. who have executed an indefinite-term labor contract with the appellee (hereinafter referred to as “regular employees”):

(a) The base salary shall in principle be paid on a monthly basis and shall consist of seniority-based wages and age-based wages:

Seniority-based wages: 89,100 yen for the first year of employment, with an increment of 800 yen per year of employment (up to 121,100 yen at the 41st year of employment).

Age-based wages: 0 yen at 20 years of age, with an annual increment of 200 yen per year of age (up to 6,000 yen at 50 years of age).

(b) A driver shall receive incentive wages in an amount calculated by multiplying the amount of his/her monthly operation by one of the following factors corresponding to his/her job type (meaning the type of BCT driven by him/her; the same applies hereinafter):

10-ton BCT: 4.60%

12-ton BCT: 3.70%

15-ton BCT: 3.10%

BCT trailer: 3.15%

(c) Job wages shall be paid according to job types in the following monthly amounts:

10-ton BCT: 76,952 yen

12-ton BCT: 80,552 yen

15-ton BCT: 82,952 yen

BCT trailer: 82,900 yen

(d) An employee who has worked on all days for a month except the holidays prescribed in the Rules for Employees shall receive a regular attendance allowance of 5,000 yen per month.

(e) A driver who has worked without an accident for a month shall receive a no accident allowance of 5,000 yen per month.

(f) An employee shall receive a housing allowance of 10,000 yen per month.

(g) An employee shall receive family allowances of 5,000 yen per month for spouse and 5,000 yen per child (up to two children) per month.

(h) An employee with a senior position title (meaning a team leader or group leader; the same applies hereinafter) shall receive a position allowance of 3,000 yen per month for a team leader or 1,500 yen per month for a group leader.

(i) If an employee has been ordered to work overtime, he/she shall receive an overtime allowance.

(j) An employee shall receive a commuting allowance in a monthly amount equivalent to the price of a monthly pass for the relevant public transportation up to 40,000 yen.

(k) Employees’ bonuses shall be subject to rules described elsewhere.

(l) A driver who leaves the company after working for three years or longer shall receive a severance allowance.

b. The Rules for Employees provide that the mandatory retirement age for employees shall be 60 years. The Rules for Employees also provide that some of the rules’ provisions may not apply to “contract workers (shokutaku sha).”

c. On September 17, 2004, the appellee executed with the Japan Construction and Transport Industry Workers Solidarity Union Kanto Branch Office (hereinafter referred to as the “Union”) a labor-management agreement whereby the total annual bonus payable by the appellee was set at five months’ base salary of each employee. The Union includes the Nagasawa Transport Branch Union consisting of the appellee’s employees.

(3) The appellee has established the Rules of Employment for Contract Employees as the rules of employment applicable to its employees who work at the appellee under a fixed-term labor contract after mandatory retirement from the appellee (hereinafter referred to as “contract employees”) (hereinafter referred to as the “Rules for Contract Employees”). The Rules for Contract Employees provide, among other things, that salary for contract employees shall in principle be subject to their respective labor contracts for contract employees, and that contract employees shall receive no bonuses or other extra pay and no severance allowance.

(4) In April 2010, the appellee established conditions of re-employment of mandatory retirees regarding criteria for hiring, wages, etc. of persons who continue to work as drivers of BCTs, etc. beyond mandatory retirement (hereinafter referred to as “contract drivers”). The contents of the conditions of re-employment of mandatory retirees as amended on April 1, 2014 (hereinafter referred to as the “Retiree Re-employment Conditions”) are as listed below in a. through d. According to these conditions, it was expected that the wages (i.e., annual income) of contract drivers, including the appellants, would be approximately 79% of their wages before mandatory retirement (in this regard, calculation of the appellants’ wages based on a fictitious assumption that they had been contract drivers for the one year prior to their mandatory retirement reveals that the amounts of their wages would have been between approximately 76% and approximately 80% of those that were actually paid to them).

a. Eligible persons

Regular employees who have reached 60 years of age and wish to be re-employed

b. Term

The term of re-employment shall be a fixed term of up to one year.

c. Wages

(i) Base wages: 125,000 yen per month

(ii) Percentage pay: 12-ton BCT: Amount of monthly operation × 12%

15-ton BCT: Amount of monthly operation × 10%

BCT trailer: Amount of monthly operation × 7%

(iii) No accident allowance: 5,000 yen per month

(iv) Adjustment: A monthly amount of 20,000 yen shall be paid until commencement of payment of the portion of the old-age employees’ pension proportional to the amount of premiums paid by employees according to their salaries.

(v) Commuting allowance: A monthly amount equivalent to a monthly pass for the relevant public transportation (up to 40,000 yen).

(vi) Overtime allowance: Overtime allowance at the rate prescribed by the Labor Standards Act shall be paid for overtime work, etc.

(vii) Bonuses and severance allowance: No bonuses and no severance allowance shall be paid.

d. Renewal of contract

The last due date for renewal shall be the earlier of the last day of September or the last day of March following the day employee reaches 65 years of age.

(5) The details of the collective bargaining negotiations on labor conditions for contract drivers are as described below:

a. In response to the measures for securing employment of elderly persons up to 65 years of age required by the Act on Stabilization of Employment of Elderly Persons (hereinafter referred to as the “ASEEP”), the appellee negotiated with the Union and, in January 2005, executed a labor-management agreement whereby the appellee would introduce a continuous employment system under which the appellee would re-employ its mandatory retirees.

b. According to the original conditions of re-employment of mandatory retirees established by the appellee, contract drivers were to receive base wages of 100,000 yen per month, percentage pay calculated by “multiplying the amount of operation of (13- or 15-ton) BCT by 10%,” and a no accident allowance of 10,000 yen per month, with no provisions mentioning payment of adjustments. In and after March 2012, the appellee was engaged in collective bargaining negotiations with the Union and serially made the following amendments to the conditions of re-employment of mandatory retirees: (i) the base wages would be 120,000 yen per month; (ii) the no accident allowance and the base wages would be 5,000 yen per month and 125,000 yen per month, respectively; (iii) an adjustment of 10,000 yen per month would be paid until commencement of payment of the portion of the old-age employees’ pension proportional to the amount of premiums paid by employees according to their salaries, in response to the increase of the age at which (former) employees are entitled to receive old-age employees’ pension pursuant to the provisions of Article 8 of the Supplementary Provisions of the Employees’ Pension Insurance Act; and (iv) the adjustment described in (iii) above would be increased to 20,000 yen per month. After these amendments, the Retiree Re-employment Conditions became the conditions of re-employment of mandatory retirees.

During the aforementioned collective bargaining negotiations, the Union requested, among others, that the appellee re-employ mandatory retirees at the same wages as before their mandatory retirement, but the appellee did not comply with this request.

(6) a. Appellant X1 executed an indefinite-term labor contract with the appellee in June 1980 and retired on March 31, 2014. Appellants X2 and X3 each executed an indefinite-term labor contract with the appellee in October 1986 and January 1993, respectively, and both retired on September 30, 2014. The amounts of appellants’ base salary at the time of mandatory retirement were 121,500 yen, 117,500 yen and 112,700 yen for appellants X1, X2 and X3, respectively. All of the appellants received a severance allowance upon mandatory retirement.

b. Each of the appellants executed a fixed-term labor contract with the appellee on the date of mandatory retirement. After expiration of their respective initial terms of employment (i.e., one year for appellant X1 and six months each for appellants X2 and X3), all of the appellants have renewed their respective fixed-term labor contracts for successive employment terms of one year each (hereinafter the fixed-term labor contracts between the appellants and the appellee are referred to as the “Fixed-term Labor Contracts,” whether before or after any of the renewals). All of the Fixed-term Labor Contracts contain the same terms and conditions as the Retiree Re-employment Conditions, and all of the appellants received arrangements until commencement of payment of the portion of the old-age employees’ pension proportional to the amount of premiums paid by employees according to their salaries.

(7) a. The duties of the appellants, who are contract drivers, consist of delivering bulk cement to designated destinations by driving a BCT. There are no differences between the appellants and regular employees in the content of their duties or in the extent of responsibility accompanying such duties. The Fixed-term Labor Contracts provide that the appellee may change the appellants’ work locations and assigned duties for the appellee’s business reasons, as is the case with regular employees.

b. During the period from execution of the Fixed-term Labor Contract to October 2015, the appellants received wages from the appellee as described in Exhibit 5 to the judgment in first instance (hereinafter the wages described in the said exhibit are referred to as the “Wages”). At the appellee, wages for the period commencing on the first day of each month and ending on the last day of the same month are to be paid on the 10th day of the following month. During the period for which the Wages are payable, appellants X1 and X3 missed no work days throughout the period and appellant X2 missed no work days except in December 2014 and January 2015.

(8) In this litigation, the appellants allege that the following facts constitute unreasonable differences in labor conditions between contract drivers and regular employees: (i) contract drivers receive percentage pay instead of incentive wages and job wages; (ii) contract drivers receive no regular attendance allowance, housing allowance, family allowance or position allowance; (iii) contract drivers’ overtime allowance is calculated to be lower than regular employees’ equivalent; and (iv) contract drivers receive no bonuses (hereinafter the wage items in terms of which comparisons are made in (i) through (iv) above are collectively referred to as the “Wage Items”). The appellants allege that if the labor conditions related to contract employees’ wages had been the same as those for regular employees during the period for which the Wages were paid, the wages listed in Exhibit 6 of the judgment in first instance (hereinafter referred to as the “Estimated Wages”) should have been paid.

3. Based on the facts related to the case described above, the court of prior instance ruled as follows in summary and dismissed all of the claims of the appellants.

The ASEEP requires employers to take certain measures to secure employment of elderly persons over 60 years of age. Considering, among other things, that employers need to avoid unrestricted increase in wage and salary costs associated with continued employment of retired elderly persons, one cannot say it is unreasonable, per se, to reduce wages of persons whose employment continues after mandatory retirement. In addition, it is a common practice to substantially reduce wages of persons whose employment continues after mandatory retirement, without changes in the content of their duties or in the extent of changes in such content. Furthermore, the appellee has made efforts to reduce the differences in wages between contract drivers and regular employees. In light of these circumstances, among others, one cannot immediately say that it is unreasonable that the appellants’ wages were reduced by approximately 20% as compared to their wages before mandatory retirement, and that the differences in labor conditions related to wages between contract drivers and regular employees violate Article 20 of the Labor Contracts Act.

4. The Court can, in conclusion, uphold the court of prior instance’s ruling that the differences in labor conditions related to the Wage Items, except regular attendance allowance and overtime allowance, do not violate Article 20 of the Labor Contracts Act, out of the court of prior instance’s rulings described above. However, the Court cannot uphold the court of prior instance’s ruling that the differences in labor conditions related to the Wage Items, except regular attendance allowance and overtime allowance, do not violate the said article, for the following reasons:

(1) Article 20 of the Labor Contracts Act provides that if a labor condition for a worker who has executed a fixed-term labor contract (hereinafter referred to as a “fixed-term worker”) is different from the corresponding labor condition for another worker who has executed an indefinite-term labor contract with the same employer (hereinafter referred to as an “indefinite-term worker”) due to the existence of a fixed term, the difference in the labor condition is not to be found unreasonable, considering the content of the duties and the extent of responsibility accompanying the said duties (hereinafter referred to as the “content of duties”), the extent of changes in the content of duties and in work locations, and other circumstances. Based on an assumption that there may be differences in labor conditions between fixed-term workers and indefinite-term workers, the said article prohibits any such differences that are found unreasonable, considering the content of duties, the extent of changes in the content of duties and in work locations, and other circumstances (hereinafter referred to as the “content of duties, etc.”). We thus consider that the said article requires balanced treatment of fixed-term workers and indefinite-term workers according to differences in the content of duties, etc. between them (see Supreme Court, 2016 (Ju) Nos. 2099 and 2100, Judgment of the Second Petty bench of June 1, 2018).

(2) It is reasonable to consider that the phrase “due to the existence of a fixed term” in Article 20 of the Labor Contracts Act means that the differences in labor conditions between fixed-term workers and indefinite-term workers have arisen in connection with the existence or non-existence of a fixed term (see the aforementioned Judgment of the Second Petty bench, Supreme Court). Since the differences in labor conditions related to the Wage Items between the appellee’s contract drivers and regular employees have arisen from the fact that the labor conditions related to contract drivers’ wages have been established by their respective labor contracts for contract employees under the Rules for Contract Employees instead of the wage regulations, etc. applicable to regular employees, one can say that such differences have arisen from the existence or non-existence of a fixed term. Therefore, we can say that in this case, the differences in labor conditions related to the Wage Items between contract drivers and regular employees have arisen from the “existence of a fixed term” as referred to in the said article.

(3) a. It is reasonable to understand that the phrase “found unreasonable” in Article 20 of the Labor Contracts Act means that differences in labor conditions between fixed-term workers and indefinite-term workers are considered unreasonable (see the aforementioned Judgment of the Second Petty bench, Supreme Court).

b. There are no differences between the appellee’s contract drivers and regular employees in the content of their duties or in the extent of responsibility accompanying such duties. These drivers and employees are not different from each other either in that they are both subject to the appellee’s orders to change their work locations, etc. for the appellee’s business reasons. Therefore, one can say that there are no differences between the two types of workers in the content of duties or in the extent of changes in the content of such duties and in work locations (hereinafter collectively referred to as the “content of (one’s) duties and extent of its changes”).

We can say, however, that labor conditions related to workers’ wages are not unambiguously determined by the content of their duties and extent of its changes, and that the employer considers labor conditions related to workers’ wages by taking into consideration not only the content of the workers’ duties and extent of its changes but also various other circumstances, based on the employer’s business judgment as to employment and personal affairs. We can also say that labor conditions related to workers’ wages should be basically left substantially to labor-management autonomy through collective bargaining, etc. In the meantime, Article 20 of the Labor Contracts Act lists “other circumstances” as factors to be taken into account in determining whether or not differences in labor conditions between fixed-term workers and indefinite-term workers are found unreasonable. Under these circumstances, there is no reason to limit such circumstances to those related to the content of workers’ duties and the extent of its changes.

Therefore, we should say that circumstances to be taken into account in determining whether or not differences in labor conditions between fixed-term workers and indefinite-term workers are found unreasonable are not limited to the content of the workers’ duties and extent of its changes and other circumstances related thereto.

c. The appellee’s contract drivers have been re-employed under a fixed-term labor contract after mandatory retirement from the appellee.

One can say that a mandatory retirement system is intended to allow the employer to ensure the appropriate operation of the organization through personnel reforms, etc. and to hold wage and salary costs to a certain level, while respecting long-term employment and seniority-based treatment of workers employed by the employer. Under these circumstances, we consider that the wage system for indefinite-term workers based on a mandatory retirement system is often established on the assumption that these workers will be employed for a long time until mandatory retirement. In contrast, when the employer re-employs retirees under a fixed-term labor contract, the employer does not usually plan intend to employ them for a long time. In addition, fixed-term workers re-employed after mandatory retirement had received wages as indefinite-term workers until mandatory retirement, and will also receive old-age employees’ pension subject to the satisfaction of certain requirements. One can say that these circumstances constitute bases on which an appropriate wage system for fixed-term employees re-employed after mandatory retirement should be considered.

It is then appropriate to consider that being a fixed-term worker re-employed after mandatory retirement constitutes a circumstance to be taken into account as one of the “other circumstances” as referred to in Article 20 of the Labor Contracts Act in determining whether or not differences in labor conditions between such fixed-term worker and indefinite-term workers are found unreasonable.

(4) In this case, the differences in labor conditions related to the Wage Items between the appellee’s contract drivers and regular employees are at issue. If workers’ wages consist of two or more wage items, one can say that wages payable under different wage items usually have different purposes according to the respective wage items under which they are paid. We should then say that in determining whether or not differences in labor conditions related to wage items between fixed-term workers and indefinite-term workers are found unreasonable, circumstances to be taken into consideration and how they should be considered may differ depending on the purposes of such wage items.

It is then appropriate to consider that in determining whether or not differences in labor conditions related to individual wage items between fixed-term workers and indefinite-term workers are found unreasonable, the purposes of such wage items should be individually taken into account instead of merely comparing the total amount of wages between fixed-term workers and indefinite-term workers.

In this regard, the existence or non-existence and the content of a certain wage item may be determined based on the existence or non-existence and the content of (an)other wage item(s). We consider that such a circumstance should also be taken into account in determining whether or not differences in labor conditions related to individual wage items between fixed-term workers and indefinite-term workers are found unreasonable.

(5) Based on the discussion described in (1) through (4) above, let us discuss whether or not the differences in labor conditions related to the Wage Items between the appellee’s contract drivers and regular employees are “found unreasonable” as referred to in Article 20 of the Labor Contracts Act.

a. The fact, among others, that incentive wages and job wages are not paid to contract drivers

While the appellee pays to its regular employees base salary, incentive wages and job wages, the appellee pays to its contract drivers base wages and percentage pay and not incentive wages or job wages. Base salary and base wages are wages paid to employees in a fixed amount regardless of the amount of each worker’s operation as the performance of his/her work. The amounts of the appellants’ base wages are all above the respective amounts of their base salary at the time of their mandatory retirement. Incentive wages and percentage pay are wages for the performance of work. The amount of incentive wages and that of percentage pay are both supposed to be calculated by multiplying the amount of each driver’s operation by the factor corresponding to his/her job type. The factors for contract drivers’ percentage pay have been set at approximately two to three times the factors for regular employees’ incentive wages. In addition, the appellee has, through collective bargaining negotiations with the Union, increased the base wages for contract drivers and changed some of the factors for percentage pay in favor of contract drivers. In light of these details of the wage system, one can say that in adopting the wage system for contract drivers that is different from that for regular employees, the appellee, in compensation for not paying job wages whose amount is fixed according to each employee’s job type, not only has given consideration to the stabilization of contract drivers’ income by setting the amount of their base wages at a level higher than their base salary at the time of mandatory retirement, but also has designed the system so that the performance of their work will be easily reflected on their wages by setting the factors for percentage pay at levels higher than those for incentive wages. Therefore, in determining whether or not the difference in labor conditions where contract drivers do not receive incentive wages or job wages is found unreasonable, we must take into account that the base wages and percentage pay for contract drivers correspond to the base salary, incentive wages and job wages for regular employees. In this regard, calculation for each of the appellants of the total amount of the base wages and percentage pay out of the Wages and the total amount of the base salary, incentive wages and job wages out of the Estimated Wages, based respectively on Exhibits 5 and 6 to the judgment in first instance, reveals that, while the former amount is lower than the latter in each case, the difference between them is only approximately 10%, approximately 12% and approximately 2% for appellant X1, X2 and X3, respectively.

Furthermore, contract drivers have been re-employed after mandatory retirement and are, as such, eligible to receive old-age employees’ pension subject to the satisfaction of certain requirements. In addition, the appellee has decided, after collective bargaining negotiations with the Union, to pay an adjustment of 20,000 yen per month to contract drivers until commencement of payment of the portion of the old-age employees’ pension proportional to the amount of premiums paid by employees according to their salaries.

Taking these circumstances comprehensively into account, the difference in labor conditions where regular employees receive incentive wages and job wages while contract drivers receive percentage pay instead of incentive wages and job wages, is not considered unreasonable even if the fact that the content of these drivers’ and employees’ duties and extent of its changes are the same is taken into account. It is therefore reasonable to consider that this difference is not “found unreasonable” as referred to in Article 20 of the Labor Contracts Act.

b. The fact that regular attendance allowance is not paid to contract drivers

In light of its content and the requirements for its payment, one can say that the appellee’s regular attendance allowance is paid with the intention of encouraging employees to work without missing a single day other than holidays. We should then say that, as long as the content of duties is the same between the appellee’s contract drivers and regular employees, there is no difference between the two types of workers in the necessity of encouraging their perfect attendance. In this regard, the fact that the factors for contract drivers’ percentage pay have been set more favorably than those for regular-employees could be seen to indicate the appellee’s intention to encourage contract drivers to increase the amount of their operation as the performance of their work. Since regular attendance allowance is paid based on the fact of employee’s perfect attendance, we cannot say that not paying regular attendance allowance to contract drivers is not unreasonable on the grounds that the factors for percentage pay and those for incentive wages are different from each other.

Therefore, the difference in labor conditions where regular attendance allowance is paid to regular employees but not to contract drivers is considered unreasonable. It is therefore reasonable to consider that this difference is “found unreasonable” as referred to in Article 20 of the Labor Contracts Act.

c. The fact that housing allowance and family allowance are not paid to contract drivers

In light of their content and the requirements for their payment, one can say that the appellee’s housing allowance and family allowance are paid to help employees with their housing expenses and their living expenses incurred in supporting their family, respectively. These allowances are paid not by evaluating services provided by workers in terms of money but for the purpose of employees’ welfare and life security. Therefore, it is considered that when the employer considers the necessity and content of these wage items, the employer would, in light of the above purpose, take into account circumstances surrounding workers’ life. The appellee’s regular employees may, unlike its contract drivers, include workers of a wide variety of generations, and one can say that it is with good reason to help such regular employees with their housing expenses and their living expenses incurred in supporting their family. On the other hand, contract drivers have retired after working as regular employees, are expected to receive old-age employees’ pension, and are to receive adjustments from the appellee until commencement of payment of the portion of the said pension proportional to the amount of premiums paid by employees according to their salaries.

Taking these circumstances comprehensively into account, the difference in labor conditions where housing allowance and family allowance are paid to regular employees but not to contract drivers is not considered unreasonable even if the fact that the content of these drivers’ and employees’ duties and extent of its changes are the same is taken into account. It is therefore reasonable to consider that this difference is not “found unreasonable” as referred to in Article 20 of the Labor Contracts Act.

d. The fact that position allowance is not paid to contract drivers

The appellants allege that it is unreasonable not to pay position allowance to contract drivers, because position allowance has a nature of seniority-based wages or seniority-linked pay. However, in light of its content and the requirements for its payment, it is fair to say that the appellee’s position allowance is intended to be paid to employees with a senior position title appointed from among regular employees, and we cannot say that it has such a nature as alleged by the appellants. Therefore, we cannot say that the difference in labor conditions where position allowance is paid to regular employees but not to contract drivers is “found unreasonable” as referred to in Article 20 of the Labor Contracts Act.

e. The difference in overtime allowance between contract drivers and regular employees

One can say that overtime allowance for regular employees and that for contract drivers are both paid with the intention of paying for employees’ overtime work at the applicable premium rate prescribed by the Labor Standards Act. While the appellee has established separate wage systems for regular employees and contract drivers, the appellee does not seem to have separate premium rates or other calculation methods for calculating overtime premium wages for regular employees and those for contract drivers. However, as described in b. above, the appellee’s failure to pay regular attendance allowance to contract drivers is found unreasonable. The difference in labor conditions where regular attendance allowance is included in the basis for calculation of overtime allowance for regular employees but not in that for contract drivers is, therefore, considered unreasonable. Therefore, it is reasonable to consider that this difference is “found unreasonable” as referred to in Article 20 of the Labor Contracts Act.

f. The fact that bonuses are not paid to contract drivers

A bonus is a one-off payment that may be paid separately from monthly wages. Bonuses may be paid for a variety of purposes, such as deferred payment of compensation for services, incentives for achievements, assisting living expenses, or improving workers’ motivation. Contract drivers have been re-employed after mandatory retirement, received severance allowance upon mandatory retirement, are expected to receive old-age employees’ pension, and are also expected to receive adjustments from the appellee until commencement of payment of the portion of the old-age employees’ pension proportional to the amount of premiums paid by employees according to their salaries. In addition, according to the Retiree Re-employment Conditions, it is expected that the wages (i.e., annual income) of contract drivers will be approximately 79% of their wages before mandatory retirement. As described in a. above, the wage system for contract drivers is designed to easily reflect the performance of their work on their wages while giving consideration to the stabilization of their income.

Taking these circumstances comprehensively into account, the difference in labor conditions where bonuses are paid to regular employees but not to contract drivers, is not considered unreasonable even if the fact that the content of these drivers’ and employees’ duties and extent of its changes are the same, and that the total annual bonus paid to regular employees is equivalent to their five months’ base salary is taken into account. It is therefore reasonable to consider that this difference is not “found unreasonable” as referred to in Article 20 of the Labor Contracts Act.

(6) a. As described above, we cannot say that the differences between contract drivers and regular employees in labor conditions related to the Wage Items, other than regular attendance allowance and overtime allowance, are “found unreasonable” as referred to in Article 20 of the Labor Contracts Act. Therefore, the appellants’ primary and alternative claims related to the Wage Items other than these allowances are all groundless.

b. On the other hand, the differences between contract drivers and regular employees in labor conditions related to regular attendance allowance and overtime allowance are found “found unreasonable” as referred to in Article 20 of the Labor Contracts Act. However, it is reasonable to consider that even if differences in labor conditions between fixed-term workers and indefinite-term workers violate the said article, the relevant labor conditions for fixed-term workers are not adjusted by the force of the said article to be identical to the corresponding labor conditions for indefinite-term workers (see the aforementioned Judgment of the Second Petty bench, Supreme Court). In addition, the appellee has established, separately from the Rules for Employees, the Rules for Contract Employees to which contract drivers are subject and which provide that labor conditions related to wages of contract drivers shall be specified in their respective labor contracts for contract employees executed under the Rules for Contract Employees, instead of in the wage regulations, etc. established under the Rules for Employees. Furthermore, the Retiree Re-employment Conditions, which are to be contained in such labor contracts for contract employees, contain no provisions on regular attendance allowance and do not contemplate payment of regular attendance allowance to contract drivers. In light also of these provisions of the rules of employment, etc., it is difficult to interpret, as a reasonable interpretation of these rules of employment, that the appellants, who are contract drivers, are in a position under their respective labor contracts to receive regular attendance allowance. Furthermore, we cannot consider that, in calculating overtime allowance for contract drivers, the wages based on which overtime premium wages are calculated should include regular attendance allowance which is not to be paid to contract drivers.

Therefore, the appellants’ primary claims related to regular attendance allowance and overtime allowance are groundless.

c. (a) Let us then discuss the appellants’ alternative claim related to regular attendance allowance. As described in (5)b. above, not paying regular attendance allowance to the appellants violates Article 20 of the Labor Contracts Act. In addition, the appellee had been requested to improve the labor conditions for contract drivers through collective bargaining with the Union. Considering these circumstances, we should say that the appellee committed negligence by treating contract drivers in an illegal manner by not paying regular attendance allowance to them. We can say that the appellants suffered damage corresponding to their respective amounts of regular attendance allowance which should have been received by them if they had been regular employees, as listed in the respective “regular attendance allowance” sections of Exhibits 2 through 4 to the judgment in first instance (i.e., a total of 90,000 yen, 50,000 yen and 60,000 yen for appellants X1, X2 and X3, respectively). The appellants’ alternative claim related to regular attendance allowance is then well-grounded, and the appellee is obligated to pay, in damages for a tort, damages in the aforementioned amounts plus delay damages thereon at the rate of 5% per annum as prescribed by the Civil Code for the respective periods commencing on the respective due dates for regular attendance allowance and ending on the respective dates of payment.

(b) Let us now discuss the appellants’ alternative claim related to overtime allowance. As described in (5)e. above, the appellee’s failure to pay to the appellants overtime allowance calculated by including regular attendance allowance in the basis for calculation violates Article 20 of the Labor Contracts Act, and we should say that the appellee committed negligence by treating the appellants in such an illegal manner. Therefore, the appellee has liability in tort to compensate the appellants for damage suffered by them as a result of the treatment described above.

5. For the reasons described above, the Court can, in conclusion, uphold the court of prior instance’s ruling which dismissed the appellants’ primary claims as well as their alternative claim related to the Wage Items, except regular attendance allowance and overtime allowance, and the appellants’ arguments regarding this point are not acceptable. On the other hand, of the court of prior instance’s ruling which dismissed the appellants’ alternative claim, the portion related to the aforementioned allowances have illegality which obviously affects the judgment and should inevitably be quashed, and the appellants’ arguments regarding this point are well-grounded. Therefore, of the judgment in prior instance: the portion related to the appellants’ alternative claim related to the aforementioned allowances is quashed; the portion of the appellants’ alternative claim related to regular attendance allowance is accepted; the portion of the appellants’ alternative claim related to overtime allowance is remanded to the court of prior instance to further and fully hear the case as to the existence or non-existence and amount of damage suffered as a result of regular attendance allowance not having been included in the basis for calculation of the appellants’ overtime allowance; and the remaining portions of the final appeal are dismissed as they are groundless.

Accordingly, the Court unanimously decides as set forth in the main text.

Justice YAMAMOTO Tsuneyuki

Justice ONIMARU Kaoru

Justice KANNO Hiroyuki

Justice MIURA Mamoru