How to protect worker’s rights of cloud workers facing globalization and the current situation in Japan

It is said that in Japan, basic elements of employment form, in principle, are (1) indefinite term contract, (2) direct employment contract between employer and employee, and (3) full-time worker (8 hours per day, 40 hours per week). Also, it is normal that the country where the employer is and the county where the employee is are the same country.

However, with the development of ITC (information and communication technology) and the globalization of the economy and labor market, such basic principles of employment practice and common sense about how people work are changing radically. One of these changes is a way of working so-called, “Cloud work” or “Cloud Worker”. It is sometimes referred to as the sharing economy, the gig economy, or work-on-demand via apps. It’s a system in which client companies or/and client individuals order “specific work” or “ specific project” directly from online sites to individual contract workers called cloud workers through an app, such as ridesharing apps like Uber, Lyft, Grab, etc. Uber, for example, is a convenient service that allows users to download an app once and receive services around the world, with lower and more constant rates than taxis, and easy to use by entering their destination and current location. For the workers who provide the service, they can earn money when and where they want, while making effective use of their own resources. There is also an advantage for society in terms with creating job opportunities.

Although ride-sharing is not licensed in Japan, crowdsourced work is already prevalent in areas such as data entry, writing, shopping, food or grocery delivery, etc. Under this type of work, the relationship between a worker and user is considered “temporary contracting based on specific work and project ” and not “employment. The legal relationship between the agency or app operator and the worker is also unclear. Workers are treated as sole proprietors or independent contractors and are responsible for all social insurance premiums, as well as necessary expenses such as gasoline, and the reality is that there are many low-wage workers with unstable incomes.

In some countries, this is a major social problem. For example, in the U.S., Uber has been sued by registered drivers in several countries and state territories for tens of billions of dollars in class action lawsuits by registered drivers claiming “employment in nature” to pay for necessary expenses and other costs which should be bored by an alleged employer, Uber. Also in the United Kingdom, Transport for London has refused to renew Uber’s operating license in urban areas since September 30, citing safety concerns, and furthermore, on November 10, 2017, the Labour High Court ruled on behalf of two drivers representing 19 drivers, seeking a guarantee of minimum wage and paid leave from the workers.
In the lawsuit, the court ruled in favor of the drivers’ claims and ordered Uber to guarantee minimum wage and paid leave. There is also a lawsuit against the company’s founder, former CEO Travis Kalanick, and other executives for personal liability. Uber had repeatedly argued that the drivers were sole proprietors and denied their worker status, but in April 2016, the company offered to pay a total of $100 million in settlements to 385,000 drivers in California and Massachusetts (but, the district court said the settlement was unfair and did not admit that amount as the settlement). In 2015, the California Department of Labor affirmed the driver’s work status and ordered Uber to pay necessary expenses. In addition, the California Unemployment Insurance Appeals Board also ruled that the driver was eligible to receive unemployment insurance because of his worker status. Kalanick, once an enviable darling of his time, has now resigned as CEO.

Japanese Prime Minister, Shinzo Abe’s administration has approved the Cabinet’s Future Investment Strategy 2017, which states that the sharing economy is a mechanism to boost value maximization and that “examples of local governments using the sharing economy will be created in at least 30 regions by the end of fiscal 2017”. However, the current state of court cases and social condemnation of Uber in the U.S. does not constitute healthy “job creation” and risks significant losses and instability for both businesses and workers. The Ministry of Economy, Trade, and Industry’s March 2017 report on the Study Group on the “Way of Working free from Employment-style” released by the Ministry of Economy, Trade, and Industry shows that 6.9% of workers have an annual income of fewer than 1 million yen, 11.5% have an annual income of between 1 million and 1.99 million yen, 15.1% have an annual income of between 2 million and 2.99 million yen, and 33.5% have an annual income of fewer than 3 million yen. Sixty percent of those who have used the sharing economy as their primary means of acquiring customers report earning less than $2 million a year.

The International Labor Organization (ILO) has been warning about the increasing number of informalized workers worldwide, which is causing significant harm in terms of low wages, precarious employment, and being not covered by social security. Especially, regarding the “gig economy,” I am concerned about the tendency to ignore workers’ rights while emphasizing convenience and job creation benefits. As for the issues regarding “cloud working “ in the international cross-border labor market and economic/service transactions, there are not only issues of “de facto employment in nature”, but also international jurisdiction and which country’s laws should be the applicable law in the event of a dispute.

Recently, the globalization of remote work and telecommuting, especially for IT professionals, has led to international companies employing telecommuting workers scattered across multiple countries. Workers upload their deliverables to the cloud, and meetings with colleagues scattered around the world are conducted via Skype, Zoom, and other teleconference tools. It’s not uncommon to receive a notice of dismissal via email out of blue. Increasingly, I am also consulting on which country’s courts and labor laws apply to unfair dismissal disputes. The development of information and communication technology and the globalization of the economy has had the positive effect of diversifying services and increasing convenience, as well as creating more flexible ways of working and employment opportunities. However, the lack of a perspective on the protection of workers’ rights and the development of necessary legislation addressing such cross-border labor cases including cloud workers facing the uncertainty of no-boundary internet-based labor contract, will ultimately cause significant damage to companies, workers, and society as a whole in all countries.

Copyright © さくら国際法律事務所 All Rights Reserved.