1990.06.05

1989 (O) 854

Minshu Vol. 44, No. 4

Judgment concerning the nature of a fixed period set under a contract for employment of a new worker in order to assess and determine the worker's competence

Case seeking a declaration of a position

Judgment of the Third Petty Bench, quashed and remanded

Osaka High Court, Judgment of March 1, 1989

1. If a fixed period is set under a contract for employment of a new worker in order to asses and determine the worker's competence, it is reasonable to consider such fixed period not as the period of duration of the contract but as the probation period, except when there are special circumstances such as that an explicit agreement has been reached between the parties to the effect that the contract shall automatically terminate upon the expiration of the period.

2. If a worker employed under an employment contract with a period of probation engages in the same duty at the same workplace as a worker who is not on probation, and when there is no particular difference in the treatment of both workers by the employer, and a procedure for preparing a contract concerning formal employment upon the expiration of the probation period has not been carried out, it is reasonable to consider the employment contract with a probation period as an employment contract with the reserved right to cancel, unless there are any other special circumstances.

Chapter II of the Labor Standards Act

The judgment in prior instance is quashed.

This case is remanded to the Osaka High Court.

Concerning Chapter III of the reasons for a final appeal stated by the counsels for final appeal, NODA Teigo, HASHIBA Osamu, FURUDONO Nobutaka, ITO Kaho, and TODANI Shigeki

I. The facts determined by the court of prior instance are as follows.

The appellee is an incorporated educational corporation which established and has operated D Gakuen High School (hereinafter referred to as the "School") since April 1983. The appellant was hired as a teacher (full-time instructor) in social studies at the School as of April 1, 1984 (hereinafter the contract between the appellant and the appellee is referred to as the "Employment Contract"). Upon being hired, the appellant had the first interview on January 26, 1984, and the second interview on March 1, 1984. In the second interview, the appellant received an explanation from the appellee's president that: the appellant would be hired as a full-time instructor; the period of the contract would tentatively be set as one year from April 1, 1984; and whether or not to re-employ the appellant would be determined depending on how the appellant engaged in work during the one-year period. On this occasion, the appellant received a verbal job offer from the president to hire him/her. The appellant declined the job offer from E Gakuen, another school at which the appellant had been informally appointed as a part-time instructor for a fixed year of one year. Subsequently, on March 5, 1984, the appellant visited the appellee, bringing a report that he/she wrote as requested by the appellee about matters such as his/her aspirations after obtaining employment, and on that occasion, the appellant received and agreed with the rough explanation given by the acting assistant principal and other school staff with regard to matters including the working hours, salary, and the assigned subject, and then accepted the abovementioned job offer. As of April 1, 1984, the appellant was hired as a full-time instructor in social studies at the School and started to engage in the duties assigned thereto. In mid-May 1984, the appellant signed and sealed, as requested by the appellee, a written contract for a fixed-term employee that the appellee had delivered to the appellant in advance on around April 7, 1984, which contained the following statements: "an agreement has been reached between the appellant and the appellee to the effect that the appellant shall be hired by the appellee as a full-time instructor for a fixed period of one year until March 31, 1985; the expiration of this period shall cause the appellant to automatically retire as of the date of expiration, without an advance notice of dismissal or any other notice."

II. Based on these facts, the court of prior instance determined that the Employment Contract was formed as of March 5, 1984, for the period of contract of one year starting from April 1, 1984, and that the Employment Contract terminated upon the expiration of this period.

III. However, the aforementioned determination of the court of prior instance cannot be upheld, for the following reasons.

In addition to the facts mentioned above, the court of prior instance also found that: the appellee set a fixed period of one year for the Employment Contract because the appellee needed to hire a large number of teachers at one time soon after the School opened, and in order to hire a person without teaching experience like the appellant as a teacher, it was necessary to carefully assess the person's competence, and therefore the appellee intended to secure a one-year period for such assessment; and the appellee set this period as one year because curriculums of school education including various school events are held on a yearly basis, and therefore the appellee intended to allow teachers to experience all programs in the annual schedule in order to assess their respective competence.

If an employer sets a fixed period for an employment contract upon hiring a new worker, and the purpose and objective of setting the fixed period are to assess and determine the worker's competence, it is reasonable to consider such fixed period not as the period of duration of the contract but as the probation period, except when there are special circumstances such as that an explicit agreement has been reached between the parties to the effect that the employment contract shall automatically terminate upon the expiration of the period. The legal nature of an employment contract with a probation period can only be determined in light of such matters as the circumstances in which the worker on probation is treated and the actual conditions of the procedure for formal employment to be carried out upon the expiration of the probation period. If the worker on probation engages in the same duty at the same workplace as a worker employed under an employment contract without a probation period, and when there is no particular difference in the treatment of both workers by the employer, and a procedure for preparing a contract concerning re-employment (formal employment) upon the expiration of the probation period has not been carried out, it is reasonable to consider the employment contract with a probation period as an employment contract with the reserved right to cancel, unless there are any other special circumstances. The exercise of the right to cancel under an employment contract with the reserved right to cancel is permitted if it is supported by objectively reasonable grounds and accepted as appropriate in terms of general social norms in light of the purpose and objective of the reserved right to cancel. An employer should be granted a broader freedom to dismiss a worker under such employment contract than when dismissing a worker under an ordinary employment contract. However, an employment contract with a probation period would not terminate upon the expiration of the probation period unless the refusal of formal employment, or in other words, the exercise of the reserved right to cancel, is permitted.

In this case, a question arises as to whether special circumstances can be found such as that an explicit agreement has been reached between the appellant and the appellee to the effect that the Employment Contract shall automatically terminate upon the expiration of the period of one year. In this respect, the court of prior instance found that: in the second interview held on March 1, 1984, the appellant received an explanation from the appellee's president that the appellant would be hired as a full-time instructor, the period of the contract would tentatively be set as one year from April 1, 1984, and whether or not to re-employ the appellant would be determined depending on how the appellant engaged in work during the one-year period; and on this occasion, the appellant also received a verbal job offer to hire him/her from the president, and then, on March 5, 1984, the appellant accepted this job offer. Thus, the court of prior instance determined that the appellee's president used the term "tentatively" when expressing the period of the contract. The court of prior instance also made findings of fact as follows: the appellant stated that in the second interview mentioned above, the appellee's president had said to the appellant, "Decline E's offer and work for us for 30 years, 40 years, or for as long as you want," "Do not take an employment examination for public schools. Come and work with us," or the like; from these remarks, it is found that the appellee's president expected the appellant to have competence as a teacher and hoped that the appellant would continue to teach at the School for many years to come by renewing the contract; and hence, the fact that the contract for a fixed period of one year was concluded and the abovementioned remarks of the appellee's president are not inconsistent. Although it is not necessarily clear whether the court of prior instance found that the appellee's president had made the remarks as stated by the appellant, if the appellee's president had actually made those remarks,---given that the appellee's president stated that the one-year period of the contract was set "tentatively," and that although the president is found to have used the term "re-employ," it cannot definitely be said that the president used that term in a strictly legal meaning, with the intention to express that the existing employment contract would terminate upon the expiration of the period unless a new employment contract was concluded---, it must be said that it is considerably questionable to find that an explicit agreement was reached between the appellant and the appellee to the effect that the Employment Contract shall automatically terminate upon the expiration of the period of one year.

According to the findings of fact made by the court of prior instance, the written contract for a fixed-term employee that the appellant signed and sealed contains statements such as that an agreement had been reached between the appellant and the appellee to the effect that the appellant shall be hired by the appellee as a full-time instructor for a fixed period of one year until March 30, 1985, and that the expiration of this period shall cause the appellant to automatically retire as of the date of expiration, without an advance notice of dismissal or any other notice. These statements may make it appear that an explicit agreement has been reached between the appellant and the appellee to the effect that the Employment Contract shall automatically terminate upon the expiration of the period of one year. However, the appellant received the abovementioned written contract for a fixed-term employee on around April 7, 1984, after the Employment Contract had been formed, and the appellant signed and sealed it in mid-May 1984. Furthermore, the records of the case suggest that Article 1 of the abovementioned written contract for a fixed-term employee, which the appellant submitted to the appellee, reads that the appellee needed to hire employees under this contract due to the conditions of the number of students and the number of teachers at the School. Since the School was opened in April 1983, it had only first-year and second-year students in academic year (AY) 1984, which was its second year, and in AY1985, it would have students in all of the first to third years for the first time since its opening. Therefore, the number of students was rather expected to increase in AY1984 to AY1985, and it does not seem that the School needed to hire fixed-term employees only for AY1984 due to the condition concerning the number of students. Similarly, it may have been necessary for the School to increase the number of teachers along with the increase in the number of students, but it does not seem to have been necessary to hire fixed-term employees only for AY1984 due to the condition concerning the number of teachers. Next, the records of the case suggest that Article 2 of the abovementioned written contract for a fixed-term employee reads that the appellant shall engage in work with sincerity and in compliance with the appellee's employment rules, but the records also suggest that these rules had not been prepared yet at the time in May 1984. Given these circumstances, there is room to doubt that the written contract for a fixed-term employee submitted by the appellant may not properly express the purpose and terms of the Employment Contract.

Moreover, the records of the case suggest that the appellant graduated from the Faculty of Economics at University F in March 1983, completed the correspondence course in the Faculty of Social Studies at University G in March 1984, and then was hired as a teacher at the School. It is a general tendency in Japanese society for a person such as the appellant to seek long-term, stable employment rather than short-term employment, and thus, the appellant may have had a good reason to expect the continued employment after one year.

For the reasons stated above, it must be said that it remains questionable to find any special circumstances such as that at the time of the conclusion of the Employment Contract, an explicit agreement was reached between the appellant and the appellee to the effect that the Employment Contract shall terminate upon the expiration of the period of one year. The court of prior instance, despite the question thus remaining, determined that the period of one year set for the Employment Contract was the period of duration of that contract and that the Employment Contract terminated upon the expiration of that one-year period. The judgment in prior instance should be held to be erroneous in the interpretation of the laws and regulations concerning the nature of the period of an employment contract and therefore illegal due to insufficient examination and defective reasons. Such illegality obviously affects the judgment.

Consequently, the counsels' arguments are well-grounded, and the judgment in prior instance should inevitably be quashed.

In this case, it is necessary to resolve the abovementioned question, and further examine whether or not there are special circumstances under which the Employment Contract should be regarded as a contract with the period of duration of one year, whether or not it is reasonable, if such special circumstances cannot be found, to consider that the Employment Contract is an employment contract with a probation period and that it has the legal nature of an employment contract with the reserved right to cancel, and whether or not the exercise of the reserved right to cancel is permissible in this case if it is reasonable to consider the Employment Contract as such. The Court remands this case to the court of prior instance to have it further examined on these points.

Accordingly, in accordance with Article 407, paragraph (1) of the Code of Civil Procedure, the Court unanimously decides as set forth in the main text of the judgment.

Justice TEIKA Katsumi

Justice YASUOKA Mitsuhiko

Justice SAKAUE Toshio

Justice SONOBE Itsuo