No. 45@2007/03

Address: Rodo-Soken
1-9-1,Hirakawacho Chiyoda-Ku,
Tokyo, 102-0093 Japan
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Position Paper

White-collar exemption system, if enacted, will allow

employers to seize 11.6 trillion yen (about $98 billion) by

foregoing paying workers for overtime pay

November 8, 2006



Japan Research Institute of Labor Movement (Rodo-soken)

Tension is increasing rapidly over the government Labor Policy Council discussion on labor law reform. The panel is still unable to iron out differences between labor and management. Nevertheless, the government has forcibly run the Council with a plan rush into an adverse revision of the labor laws using panel members who represent the public interest. There is a rumor that it is going to submit its proposal to the Ministry of Health, Labor and Welfare in mid November and propose a bill in November 2007. Although there are many points at issues that have been discussed in the Council, this statement focuses on the issue regarding the easing of regulation of working hours, namely the issue of the so-called "white-collar exemption system.

Business circles, notably the Japan Business Federation (Nippon Keidanren), are insisting that workers with annual income of 4,000,000 yen and more should be exempt from overtime payment currently mandated by the Labor Standards Law. The government, in particular the Ministry of Health, Labor and Welfare, shows willingness to accept this corporate demand. However, we believe that the proposal for exempting white-collar workers from overtime pay must not be enacted for the following three reasons:

We reject the plan because it will allow employers to legally usurp wages that should be paid to workers. The white-collar exemption, if enacted, will allow the government to assist the major corporations in seizing large amounts of working hours and wages through an adverse revision of the labor laws. It will lead to the destruction of modern labor compact. Our trial calculation shows that the introduction of the white-collar exemption system in Japan will seize about 11.6 trillion yen from 10.13 million people whose annual income is 4,000,000 yen or more that includes 7 trillion yen saved by not paying for overtime work, 4.6 trillion yen by usurping money that should be paid for legal overtime work. It will be 1,140,000 yen for each white-collar worker.

@ It is highly probable that the introduction of the white-collar exemption system will provide the legal basis for allowing employers to force workers into indefinitely long hours of work at substantially reduced wages. Such a deregulation is tantamount to giving employers freedom to destroy workers' rights and living. If the white-collar exemption system is introduced, what is today condemned as "unpaid overtime work" will no longer be a problem. Workers will no longer have the right to claim their overtime pay. What is more, no one can say for sure what would happen to the general wage system and wage levels under the new system. But we believe that it is highly possible that workers will even lose the present level of overtime compensation.

Secondly, this principle of law will only exacerbate workers' health problems and increase the number of death from overwork known as karoshi. As families whose loved-ones have died from karoshi are warning that legalizing the white-collar exemption system will increase risks of deaths and suicides from overwork, mental disorder and other illnesses. In the present-day labor, IT is essential for performing jobs, and demand for white-collar workers will necessarily increase. IT-based work requires working hours and sufficient breaks. If employers ignore this premise to force long hours of work on employers in the name of "self-regulating working-time system" in order to implement performance-based and cost-effective labor management, it will necessarily increase the number of workers who damage their health. It will also cause deaths and suicides from overwork or mental disorder due to excessively long and working hours and excessively heavy workloads.

Both Nippon Keidanren and the Labor Ministry use rhetoric flowery phrases such as "self-regulating work" or "enabling workers to make the most of their ability," to explain that workers will be allowed to have their discretionary work schedules and distribute work-time on their own. But as long as employers have the right to determine workloads as well as deadlines, advocating a "self-regulatory work" style is very deceptive. If the "white-collar exemption " system is introduced, workers exempt from overtime pay will work under "persons in positions of supervision or management." (Labor Standards Law, Article41-2) who are already exempt from work-time regulation. However, even these persons in supervisory positions, who should have more discretionary authority, cannot decide on work schedule on their discretion.

In Japan today, the average number of hours of overtime work is 33. This includes 13 hours of paid overtime and 20 hours without pay. This means that Japanese workers are forced to work 36 hours longer than the upper limit (360 hours year) set by the Labor Ministry.

In large corporations, workers in research and technological development, sales and service departments as well as in mid-managerial positions are forced to work more than 100 hours of overtime a month. More than 10,000 workers are presumably in danger of karoshi. The current situation is far from what the Japanese Constitution and Labor Standards Law provides, namely "the right to maintain the minimum standards of wholesome and cultured living" or "lives worthy of human beings". The danger is that the introduction of the "white-collar exemption" system would accelerate the destruction of workers' decent living conditions and their basic rights

The third reason we give for our opposition to the introduction of the "white-collar exemption" system is that it is a principle of law that undermines the labor law system. If it becomes part of the labor law system, the current law on working hour regulation under capitalism will be denied. The introduction of the "white-collar exemption" system will destroy the heart of the modern labor law system in which workers sell their labor force per hour. This means the extraordinarily heavy workloads and extraordinarily long hours of work will be left uncontrolled.

In 1986, Japanese government declared that it would make efforts to put a 1,800-hour cap on annual working hours (1,653 hours within the framework of 8-hour day and 40 hour workweek, and 147 hours of paid-overtime). This was in response to international criticism that "long working hours is a kind of social dumping and runs counter to a "fair trade." But when the Koizumi government carried out its "structural reform" policy, it effectively threw off this international commitment. Japanese corporations operating in Europe are doing business under working hour regulations set by the European Union (EU) and EU nations. If the Japanese government tries to use the "white-collar exemption" system simply to decrease the official number of hours worked and evade foreign criticism instead of taking any measures to regulate the excessively long working hours, it will come under criticism from the international community again, particularly at a time when corporations are strongly called upon to fulfill their corporative social responsibility.

This is why there is no other way than to stop the introduction of the "white-collar exemption" system.

Total amount lost when the exemption system will be applied to workers whose yearly income are over four million yean

Table 1@Number of workers with annual income 4,000,000 yen and more
Income Group
(10,000 yen)
Average annual
Number of
Yearly income (yen)
400`500 4,500,000 6,389,000 28,750,500,000,000
500`600 5,500,000 4,520,000 24,860,000,000,000
600`700 6,500,000 2,875,000 18,687,500,000,000
700`800 7,500,000 2,085,000 15,637,500,000,000
800`900 8,500,000 1,365,000 11,602,500,000,000
900`1,000 9,500,000 924,000 8,778,000,000,000
1,000`1,500 12,500,000 1,602,000 20,025,000,000,000
1,500`2,000 17,500,000 335,000 5,862,500,000,000
2,000` 25,000,000 210,000 5,250,000,000,000
Total 20,305,000 139,453,500,000,000
SourceF Statistical Survey of Actual Status for Salary in the Private Sector
(National Tax Agency Japan), 2005

Table 2 Workers under working hour regulation and workers exempted
Number of
Non-managerial 0.8485 11149850
Assistant manager 0.0550 722550 Average yearly Income (yen)
Assistant general manager 0.0675 887340 11,443,987,910,937 834.6
ACS class 0.0289 380220 5,934,242,395,715 1,010.0
1.0000 13139960 17,378,230,306,652
Source: The Ministry of Health, Labor and Welfar: 2007 Results of Survey of Practice of Discretionary
Labour System, and Basic Survey on Wage Structure 2006

Table 3 Numbers that do not include workers already exempted from current working hour regulations
Number of
Total Amount of Salaries paid
Total of TableP 20,305,000 139,453,500,000,000
Exempted workers
(Assistant general manager + ACS)
1,958,743 17,378,230,306,652
Non-managerial workers with annual income of 4
million yen and more
18,346,257 122,075,269,693,348

Table 4 Number of white-collar workers with annual Incomes 4,000,000 yen and more and
total amount of their earnings (not including seasonal bonuses (yen)
Total amount of wages on Table 3 18,346,257 87,196,621,209,534
Relative density of white-collar employees (0.552) 10,127,134 48,132,534,907,663
SourceF63rd Panel Meeting of the Labour Policy Council (Sep. 29, 2006)

Table 5 Estimated number of white-collar workers and amounts of payments denied to them with
annual incomes more than 4,000,000 yen under a white-collar exemption system
Total Number of white-collar employees
on Table S
10,127,134 48,132,534,907,663
Paid-overtime 10,127,134 4,563,822,612,879
Unpaid-overtime 10,127,134 7,021,265,558,275
Total Amount of lost 10,127,134 11,585,088,171,154

Amount of money a white-collar worker will lose (per worker/yen)
Amount 1,143,965
Paid-overtime 450,653
Unpaid-overtime 693,312