On the occasion of the discussion of a draft Worker Cooperative Act at the Diet, Zenroren issued the following statement on Zenroren’s position on the draft. The bill was adopted unanimously by the Diet during the last session in early December.

Statement on a bill to give a specific legal form for worker cooperatives

Kurosawa Koichi
Secretary General
National Confederation of Trade Unions (Zenroren)

The House of Representatives Committee on Health, Labor and Welfare on November 20 approved a draft Worker Cooperatives Act, which had been introduced to the Diet as a Diet member-initiated bill. A worker cooperative operates with its members funding and participating by contributing their opinions. The legislation will set provisions regarding its founding and management and give it legal foundation. Its aim is to “encourage the creation of diverse job opportunities, promote businesses through developing worker cooperatives to meet a variety of needs of local communities, and contribute to making local communities sustainable and vibrant.

Workers will contribute funds to businesses, which they recognize as necessary or which attract them, and will take part in their operation with the right to say. This way of working enables workers’ proactive participation in running worker cooperatives and make them find it worthwhile. Also, its aim - to launch businesses that help make local communities better ? is agreeable.

There exist types of business that have for aims that are similar to the worker cooperative, in the form of cooperative business and non-profit organization, which are funded and run by members. But they have problems. Their members are workers engaging in the business but are regarded as working without being employed and deprived of their status as workers on the grounds that they take a stake and are involved in businesses. They are therefore out of employment law protection, and left without employment and social insurances. As workers without worker protection can be used as low-cost workers, there are instances of the abuse of this system, and lawsuits are being filed.
.
It may not necessarily be an abuse but it is a fact that members of a cooperative, who are investors with equal voting rights as well as the right to elect and be elected, are divided between people of management and those who work under the direction of management. Judging from the actual state, it is necessary to recognize members who are working there are to be treated as their employees who need worker protection. But judicial precedents show that courts tend to not determine that they are not working under the direction or supervision of management if members are investors and take part in making decisions on business operation by a majority vote.

The present bill has a provision to solve this problem: The cooperative shall conclude contracts on employment with members who work on its operation (Article 20, paragraph 1). It has been made clear in the Diet deliberation on the bill that the labor laws will be fully applied to people working and that, as a matter of course, they have the right to organize. The draft of the Act’s Article 1 (“the business is run by members of the cooperative”) has been amended to: “the business is run by reflecting opinions” so that members will avoid taking on entrepreneurial roles.

Regarding involvement with businesses, the bill provides that members have equal rights to vote and to elect or be elected regardless of the number of units of contribution, considering that there should not be disparity between members regarding influence. The bill also prohibits cooperatives from doing staffing business.

These provisions are commendable in that they are intended to help resolve the question whether the workers, who are also investors, can be regarded as employees.

But there are also matters of concern. If cooperatives are to make inroads into very competitive areas, or if they attempt to do business in local areas where there are no players in such business, the question will be how to reduce the costs. Under these circumstances, if members’ being workers is to be protected, isn’t it necessary to regulate management by forbidding the use of expressions of ideas denying cooperative members’ being workers? The bill has no provision on wages. It instead provides that dividends of surplus shall be paid to members depending on their participation in the business of the cooperative (Article 3, paragraph 2, No. 5). But the question remains whether dividends can ensure the appropriate levels of workers’ wage. Members, who execute the business of a cooperative and engage in business only as a member of the board of directors, are excluded from employment contracts. This might lead to their exclusion from worker protection if they are in managerial position in name. Worker cooperatives can join the federation. But the bill does not impose any upper limits to the amount of their membership fee, raising concern that this would place an extra burden on each individual business.

In order to wipe off these concerns, we think it necessary for the Diet as well as the Labor Policy Council to discuss fully the establishment of ministerial ordinances and guidelines to ensure administrative supervision.