2020.03.30

2018 (Ju) 908

Minshu Vol. 74, No. 3

Judgment concerning a case in which the Court ruled that the payment of overtime allowance, etc., which was made under the wage rules providing that percentage pay is calculated by deducting an amount equivalent to overtime allowance, etc. from an amount equivalent to a certain percentage of sales, etc., cannot be deemed to be payment of premium wages prescribed in Article 37 of the Labor Standards Act

Case seeking wages

Judgment of the First Petty Bench, quashed and remanded

Tokyo High Court, Judgment of February 15, 2018

The payment of overtime allowance, etc., which was made under the wage rules providing that percentage pay is calculated by deducting an amount equivalent to overtime allowance, etc. from an amount equivalent to a certain percentage of sales, etc., cannot be deemed to be payment of premium wages prescribed in Article 37 of the Labor Standards Act under the circumstances described in the judgment, including those in which the amount of overtime allowance, etc. arising from off-hour work, etc. directly causes a reduction in the amount of percentage pay, and percentage pay becomes 0 yen in some cases.

Article 37 of the Labor Standards Act



Labor Standards Act

(Premium Wages for Overtime Work, Work on Days Off and Night Work)

Article 37

(1) If an Employer extends the working hours or has a Worker work on a day off pursuant to the provisions of Article 33 or paragraph (1) of the preceding Article, the Employer shall pay Premium Wages for work during such hours or on such days at a rate no less than the rate stipulated by cabinet order within the range of no less than 25 percent and no more than 50 percent over the normal Wage per working hour or working day; provided, however, that in cases when extended working hours exceed 60 hours per month, the Employer shall pay Premium Wages for the excess working hours at a rate not less than 50 percent over the normal Wage per working hour.

(2) The cabinet order set forth in the preceding paragraph shall be set taking into consideration the welfare of Workers, the trends of overtime work and of work on days off, and any other relevant circumstances.

(3) If an Employer stipulates that they will grant Workers entitled to Premium Wages under the provisions of the proviso of paragraph (1) leave for which the normal Wage per working hour is paid instead of paying them Premium Wages (excluding annual paid leave under the provisions of Article 39) as provided for by Ordinance of the Ministry of Health, Labour and Welfare, pursuant to a written agreement either with a labor union organized by a majority of the Workers at the workplace concerned (in cases where such a labor union exists), or with a person representing a majority of the Workers (in cases where such a labor union does not exist), if any such Worker takes such leave, the Employer is not required to pay Premium Wages under the provisions of the proviso of said paragraph for work performed during the hours prescribed by Ordinance of the Ministry of Health, Labour and Welfare as hours corresponding to such leave taken for said work in excess of the hours stipulated in the proviso of said paragraph.

(4) In the event that an Employer has a Worker work between 10 p.m. and 5 a.m. (or between 11 p.m. and 6 a.m., in cases when the Minister of Health, Labour and Welfare recognizes the necessity of the application of those hours at a certain area or time of year), the Employer shall pay Premium Wages for work during such hours at a rate no less than 25 percent over the normal Wage per working hour.

(5) Family allowances, commutation allowances, and other elements of Wages as stipulated by Ordinance of the Ministry of Health, Labour and Welfare shall not be added to the base Wages underlying the Premium Wages set forth in paragraph (1) and the preceding paragraph.

The judgment in prior instance is quashed.

The case is remanded to the Tokyo High Court.

Concerning the reasons for a petition for acceptance of final appeal stated by the counsel for final appeal, IBUSUKI Shoichi and TANIDA Waichiro

1. In this case, the appellants of final appeal, who were employed by the appellee of final appeal and worked as taxi drivers, seek against the appellee payment of unpaid wages, etc., alleging that the relevant provisions in the appellee's wage rules are void as they stipulate that the amount of percentage pay is calculated by deducting an amount equivalent to an overtime work allowance, etc. from an amount equivalent to a certain percentage of sales (fare income), etc., and therefore the appellee has the obligation to pay wages in the amount equivalent to overtime work allowance, etc. thus deducted.

According to the abovementioned provisions, if the amount of fare income is the same, the amount of total wages would be the same in principle, irrespective of whether each driver has engaged in off-hour work, work on a day-off, and night work (hereinafter referred to as "off-hour work, etc.") or how many hours the driver has engaged in such work. The court of first instance ruled that these provisions are contrary to public policy and therefore void, and partially upheld the appellants' claims for unpaid wages. The court of second instance in the first trial affirmed this ruling and dismissed the appellee's appeal.

Contrary to this, the final appellate court in the first trial held that if it is provided in a labor contract that wages for ordinary working hours are calculated by deducting an amount equivalent to the premium wages prescribed in Article 37 of the Labor Standards Act from an amount equivalent to a certain percentage of sales, etc., whether the payment of premium wages under these provisions can be regarded as payment of premium wages prescribed in that Article can be an issue, but these provisions cannot necessarily be considered to be in violation of the purport of that Act and contrary to public policy, and therefore void. The final appellate court further stated that the court of second instance in the first trial partially upheld the appellants' claims, without examining and determining issues that include whether it is possible to distinguish the portion corresponding to the wages for ordinary working hours and the portion corresponding to the premium wages prescribed in that Article in the provisions on wages under the wage rules in question, and in this respect, the court of second instance in the first trial illegally failed to sufficiently examine these issues due to its errors in the interpretation and application of the laws and regulations concerning premium wages. In conclusion, the final appellate court in the first trial quashed the part of the judgment in second instance in the first trial which was against the appellee, and remanded the case to the court of prior instance (2015 (Ju) No. 1998, the judgment of the Third Petty Bench of the Supreme Court of February 28, 2017, Saibanshu Minji No. 255, at 1; hereinafter referred to as the "final appellate judgment in the first trial").

2. The outline of the facts determined by the court of prior instance as the court of second instance in the second trial is as follows.

(1) The appellee is a stock company engaged in the general passenger car transportation business, etc.

(2) The appellants concluded labor contracts with the appellee around the dates indicated in the "Date of employment" section of the list of dates of employment, etc. attached to the judgment in first instance, and worked as taxi drivers.

(3) The Taxi Driver Wage Rules, which form part of the appellee's rules of employment (hereinafter referred to as the "Wage Rules"), basically provided for the wages of taxi drivers under regular employment as follows.

A. As a basic salary, 12,500 yen is paid per unit of work of driving (driving for 15 hours and 30 minutes).

B. As a service allowance (a wage for work other than driving a taxi), 1,200 yen is paid per hour if an employee did not engage in work of driving a taxi due to causes not attributable thereto, and 1,000 yen is paid per hour if an employee is responsible for it.

C. (A) The subject amount to be applied to calculate premiums and percentage pay (hereinafter referred to as "Subject Amount A") is calculated as follows.

Subject Amount A = (before-tax fare income for prescribed working hours - basic personal exemption for prescribed working hours) × 0.53 + (before-tax fare income for work on days off - basic personal exemption for work on days off) × 0.62

(B) The amount of basic personal exemption for prescribed working hours is the amount calculated by multiplying the amount of exemption per unit of work of driving on prescribed working days (in principle, 29,000 yen for weekdays, 16,300 yen for Saturdays, and 13,200 yen for Sundays and holidays) by the number of days on work of driving on weekdays, Saturdays, and Sundays and holidays, respectively. The amount of basic personal exemption for work on days off is calculated in the same manner as the amount of basic personal exemption for prescribed working hours, using the amount of exemption per unit of work of driving on days off (work on days beyond the prescribed number of days on work of driving) (in principle, 24,100 yen for weekdays, 11,300 yen for Saturdays, and 8,200 yen for Sundays and holidays).

D. A night work allowance is the total of [i] and [ii] below.

[i] {(basic salary + service allowance) / (number of working days × 15.5 hours)} × 0.25 × number of hours of night work

[ii] (Subject Amount A / total working hours) × 0.25 × hours of night work

E. An overtime work allowance is the total of [i] and [ii] below.

[i] {(basic salary + service allowance) / (number of working days × 15.5 hours)} × 1.25 × hours of overtime work

[ii] (Subject Amount A / total working hours) × 0.25 × hours of overtime work

F. (A) With regard to an allowance for work on days off, the portion corresponding to work on non-statutory days off (days off prescribed under a labor contract other than days off that an employer is obligated to provide to a worker under the Labor Standards Act) is the total of [i] and [ii] below.

[i] {(basic salary + service allowance) / (number of working days × 15.5 hours)} × 0.25 × hours of work on days off

[ii] (Subject Amount A) / total working hours) × 0.25 × hours of work on days off

(B) With regard to an allowance for work on days off, the portion corresponding to work on statutory days off is the total of [i] and [ii] below.

[i] {(basic salary + service allowance) / (number of working days × 15.5 hours)} × 0.35 × hours of work on days off

[ii] (Subject Amount A) / total working hours) × 0.35 × hours of work on days off

(Hereinafter, with regard to a night work allowance, overtime work allowance, and allowance for work on days off, portion [i] in D. to F. above is referred to as the "portion corresponding to the basic salary" and portion [ii] in the same is referred to as the "portion corresponding to the percentage pay," respectively.)

G. Percentage pay (1) is as follows.

Subject Amount A - {premiums (the total of night work allowance, overtime work allowance, and allowance for work on days off) + transportation expenses}

H. Percentage pay (2) is as follows.

(before-tax fare income for prescribed working hours ? 341,000 yen) × 0.05

I. The Wage Rules were revised in April 2010. Under the Wage Rules prior to this revision, the amount of exemption per unit of work of driving, which served as the basis for the amount of basic personal exemption for prescribed working hours, was, in principle, 35,000 yen for weekdays, 22,200 yen for Saturdays, and 18,800 yen for Sundays and holidays, and the amount of exemption per unit of work of driving, which served as the basis for the amount of basic personal exemption for work on days off, was, in principle, 29,200 yen for weekdays, 16,400 yen for Saturdays, and 13,000 yen for Sundays and holidays). In addition, the portion prescribed as "basic salary + service allowance" in each of the calculating formulae in D. to F. above was prescribed as "basic salary + safety allowance + service allowance," and there was no provision equivalent to the provision concerning percentage pay (2) in H. above, while "percentage pay" was provided in the same manner as percentage pay (1) in G. above.

(4) A. From February 2010 to February 2012, the appellants engaged in work as taxi drivers under regular employment based on the Wage Rules, as indicated in the "Prescribed number of units of work" and "Number of units of work on days off" sections of the wage calculation sheet for each worker attached to the judgment in first instance.

B. The fare income (before tax) earned during the period mentioned in A. above was as indicated in the "Before-tax fare income for prescribed working hours" and "Before-tax fare income for work on days off" sections of the wage calculation sheet for each worker attached to the judgment in first instance. Based on this information and in accordance with the provisions of the Wage Rules (the provisions prior to the revision in April 2010 were applied to the payment for March 2010), the amounts of overtime work allowance, night work allowance, allowance for work on days off, transportation expenses, and percentage pay (1) (or "percentage pay" for the payment for March 2010; hereinafter both are referred to as "percentage pay (1)") were calculated as indicated in the "Overtime work allowance," "Night work allowance," "Allowance for work on days off," "Commutation and transportation allowance," and "Percentage pay" sections of the same calculation sheet. The appellee paid money to the appellants in the amounts indicated in these sections. Furthermore, for the period mentioned above, Subject Amount A for each month for each appellant was calculated as indicated in the "Subject Amount A" section of the same calculation sheet.

In calculating percentage pay (1), the appellee adopted the approach of treating the amount of payment of percentage pay (1) as 0 yen if the amount calculated by deducting the amounts equivalent to premiums and transportation expenses from Subject Amount A fell below zero. In fact, there were cases where, in the wages actually paid to the appellants, Subject Amount A was smaller than the abovementioned amount of deduction, and the amount of payment of percentage pay (1) was treated as 0 yen.

3. According to the facts mentioned above, the court of prior instance dismissed all of the claims filed by the appellants, holding as summarized below.

Among the wages to be paid to taxi drivers, the basic salary, service allowance, percentage pay (1), and percentage pay (2) correspond to wages for ordinary working hours, and the night allowance, overtime work allowance (except for the portion corresponding to off-hour work within the statutory limit), and allowance for work on days off (except for the portion corresponding to work on non-statutory days off), which constitute premiums, correspond to the premium wages prescribed in Article 37 of the Labor Standards Act. Thus, it can be said that the Wage Rules make a clear distinction between the portion corresponding to the wages for ordinary working hours and the portion corresponding to the premium wages prescribed in that Article. Since the amount paid as premium wages under the Wage Rules (the amount of premiums) does not fall below the amount of premium wages calculated by the method prescribed in Article 37 of the Labor Standards Act and in the relevant Cabinet Order and Order of Ministry of Health, Labour and Welfare (hereinafter these provisions are referred to as "Article 37 of the Labor Standards Act and other relevant provisions") on the basis of the amount of the portion equivalent to the wages for ordinary working hours, there are no unpaid wages that are found to be payable to the appellants.

4. However, the determination of the court of prior instance mentioned above cannot be upheld, for the following reasons.

(1) A. Article 37 of the Labor Standards Act obligates an employee to pay premium wages to workers for their off-hour work, etc., presumably for the purpose of controlling off-hour work, etc. by requiring employers to pay premium wages, thereby ensuring that employers comply with the provisions concerning working hours under the same Act and workers receive compensation (see 1969 (Gyo-Tsu) No. 26, the judgment of the First Petty Bench of the Supreme Court of April 6, 1972, Minshu Vol. 26, No. 3, at 397, 2016 (Ju) No. 222, the judgment of the Second Petty Bench of the Supreme Court of July 7, 2017, Saibanshu Minji No. 256, at 31, and 2017 (Ju) No. 842, the judgment of the First Petty Bench of the Supreme Court of July 19, 2018, Saibanshu Minji No. 259, at 77). Furthermore, although the calculation method for premium wages is specifically prescribed in Article 37 of the Labor Standards Act and other relevant provisions, Article 37 of the Labor Standards Act is interpreted as only obligating an employer to pay an amount of premium wages that does not fall below the amount calculated by the method prescribed in Article 37 of the Labor Standards Act and other relevant provisions, and even if an employer pays, under a labor contract, an allowance calculated by a method other than the method prescribed in Article 37 of the Labor Standards Act and other relevant provisions as compensation for off-hour work, etc., such payment method in itself does not immediately violate that Article (see the judgment in final instance in the first trial, the abovementioned judgment of the Second Petty Bench of the Supreme Court of July 7, 2017, and the abovementioned judgment of the First Petty Bench of the Supreme Court of July 19, 2018).

B. On the other hand, in the course of determining whether an employee can be deemed to have paid premium wages prescribed in Article 37 of the Labor Standards Act to a worker, it is necessary to examine whether the amount paid as premium wages does not fall below the amount of premium wages calculated by the method prescribed in Article 37 of the Labor Standards Act and other relevant provisions on the basis of the amount of the portion equivalent to the wages for ordinary working hours. As a prerequisite for examining this point, in the provisions on wages under a labor contract, it is necessary that the portion corresponding to the wages for ordinary working hours and the portion corresponding to the premium wages prescribed in that Article can be distinguished (see 1991 (O) No. 63, the judgment of the Second Petty Bench of the Supreme Court of June 13, 1994, Saibanshu Minji No. 172, at 673, 2009 (Ju) No. 1186, the judgment of the First Petty Bench of the Supreme Court of March 8, 2012, Saibanshu Minji No. 240, at 121, the judgment in final instance in the first trial, and the abovementioned judgment of the Second Petty Bench of the Supreme Court of July 7, 2017). Where an employer claims to have paid premium wages prescribed in Article 37 of the Labor Standards Act by paying allowances specified in a labor contract, the two portions of the wages under the labor contract mentioned above can be judged to be distinguishable only if those allowances are intended to be paid as compensation for off-hour work, etc. Whether those allowances are paid with such intention should be determined by taking into consideration various circumstances, including what is written in documents concerning the labor contract (see the abovementioned judgment of the First Petty Bench of the Supreme Court of July 19, 2018), and the determination on this issue must be made through examination while paying attention not only to the names and calculation method of those allowances but also to such factors as how those allowances are positioned in the entire wage system prescribed in the labor contract, in line with the purpose of said Article as explained in A. above.

(2) A. The appellee argues that it paid premiums under the Wage Rules (night work allowance, overtime work allowance, and allowance for work on days off) as compensation for the off-hour work, etc. performed by the appellants, and thereby paid premium wages prescribed in Article 37 of the Labor Standards Act. The Court examines whether this argument is acceptable on the premise of what has been explained in (1) above.

As explained in 2. (3) C. to G. above, while premiums are supposed to be paid according to the number of hours of night work, overtime work, and work on days off, the amount of premiums is also used as an amount to be deducted from Subject Amount A in the calculation of percentage pay (1), which is a wage for ordinary working hours. Subject Amount A is calculated according to fare income, and in the process of earning fare income, if a taxi driver has not at all engaged in off-hour work, etc., the total amount that remains after deducting an amount equivalent to transportation expenses from Subject Amount A is treated as the amount of percentage pay (1), whereas, if a taxi driver has engaged in off-hour work, etc., premiums arise according to the number of hours of off-hour work, etc., and at the same time, the same amount as the amount of premiums is deducted from Subject Amount A, resulting in a reduction of percentage pay (1). As the number of hours of off-hour work, etc. increases, the amount of premiums increases and a larger amount is deducted from Subject Amount A, and as a result, percentage pay (1) may come to 0 yen, in which case the total amount that remains after deducting an amount equivalent to transportation expenses from Subject Amount A is treated as the amount of premiums.

Among the wage items prescribed in the Wage Rules, the portions corresponding to percentage pay (1) and percentage pay (2) are considered to be wages under the fee-for-service system, or in other words, wages to be distributed to workers in an amount of fare income as multiplied by a certain percentage, which is calculated by deducting amounts equivalent to certain expenses and the employer's retained share from fare income. If premiums are paid as compensation for off-hour work, etc., the abovementioned system in which the amount of premiums directly causes a reduction in the amount of percentage pay (1) is tantamount to recognizing premium wages that arise in the process of earning fare income as expenses arising in that process, and imposing the total amount of such expenses on the taxi driver. In this respect, this system cannot be deemed to be in line with the purpose of Article 37 of the Labor Standards Act explained in (1) A. above. In addition, if the amount of premiums increases and percentage pay (1) becomes 0 yen, only premiums are paid with regard to the wages under the fee-for-service system. In such case, if premiums are regarded as compensation for off-hour work, etc., the wages under the fee-for-service system would not contain any portion corresponding to the wages for ordinary working hours and the entire portion would be premium wages. This consequence should inevitably be deemed to depart from the nature of premium wages prescribed in Article 37 of the Labor Standards Act, which are to be paid as an extra pay for work performed beyond the statutory working hours.

B. The abovementioned system prescribed in the Wage Rules, after all, should be deemed to be intended, in substance, to pay a part of the wage that is supposed to be paid as percentage pay (1) under the fee-for-service system, by treating it as premiums only in name if any off-hour work, etc. is performed (the same applies to the premiums in the portion corresponding to the percentage pay and also to the premiums in the portion corresponding to the basic salary to be deducted from Subject Amount A). In that case, there is no option but to consider that although the premiums under the Wage Rules contain a portion to be paid as compensation for off-hour work, etc., they also contain a considerable portion to be paid as percentage pay (1), which is a wage for ordinary working hours. Since it is uncertain which portion of the wages to be paid as premiums corresponds to compensation for off-hour work, etc., it is impossible to distinguish, in the provisions on wages under the Wage Rules, the portion corresponding to the wages for ordinary working hours and the portion corresponding to the premium wages prescribed in Article 37 of the Labor Standards Act.

Consequently, the appellee cannot be deemed to have paid premium wages prescribed in Article 37 of the Labor Standards Act by paying premiums to the appellants.

C. Therefore, in this case, the premiums deducted from Subject Amount A as mentioned above do not constitute premium wages but they constitute wages for ordinary working hours, and the amount of premium wages that is payable to the appellants should be calculated by the method prescribed in Article 37 of the Labor Standards Act and other relevant provisions.

5. The determination of the court of prior instance that is contrary to the above contains a violation of laws and regulations that obviously affects the judgment. The arguments stated by the counsel are well-grounded in that they argue this point, and the judgment in prior instance should inevitably be quashed. The Court remands the case to the court of prior instance to have it further examine issues including the amount of unpaid wages that are payable by the appellee to the appellants.

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

Justice MIYAMA Takuya

Justice IKEGAMI Masayuki

Justice KOIKE Hiroshi

Justice KIZAWA Katsuyuki

Justice YAMAGUCHI Atsushi