SNA (Tokyo) — The Tokyo District Court has ruled that Seven-Eleven store owners have no collective bargaining rights.

Store owners for work long hours, under strict time constraints, and have heavy responsibilities. Some years ago the Japan Association of Convenience Store Franchisee’s Union (Konbini Kameiten Yunion), made up of such store owners, requested collective bargaining with Seven-Eleven Japan headquarters, but the firm refused, asserting that they were not employees as defined by the Trade Union Act of 1945.

The union then petitioned the Okayama Prefectural Labor Relations Commission in hopes that it would order the company to negotiate.

The board indeed ruled in favor of the union and ordered Seven-Eleven to agree to collective bargaining.

In response, headquarters appealed to the Central Labor Relations Commission (CLRC) and managed to overturn the prefectural-level ruling. The CLRC asserted that franchisees are not employees protected by the trade union law.

Taking the next step, the union sued the labor relations board itself in the Tokyo District Court in an effort to overturn the decision. However, the court, on June 6, backed the CLRC.

The Trade Union Act protects the three fundamental labor rights (rodo sanken) in Japan: the right to solidarity, the right to collective bargaining, and the right to strikes and other collective action.

The definition of who falls into the category of rodosha (protected worker, employee) depends on which labor law is under discussion. The definition in the Trade Union Act is much broader than it is in the Labor Standards Act of 1947, which covers wages, work hours, days off, safety, and other standards. It is not uncommon that someone not covered by the Labor Standards Act still enjoys protection for the three labor rights of the Trade Union Act. Once collective bargaining rights are recognized, management cannot refuse to negotiate with a union.

Courts generally look at whether the relationship between two contractual parties is such that one group plays a dominant role over the other, including the effective ability to give orders to the other party. Baseball players are considered individual proprietors not protected by the Labor Standards Act, but they are organized into a labor union, the Japan Professional Baseball Players Association (JPBPA). Their collective bargaining rights are recognized due to the gap in the negotiating power between the two sides.

In this case, the plaintiff, the Japan Association of Convenience Store Franchisee’s Union, claimed that due to the stark power differential between Seven-Eleven Japan headquarters and the store owners, they had a right to organize and engage in collective bargaining.

However, the June 6 verdict rejected the rodosha status of the franchise owners, determining that the franchise owners themselves have the final say on deciding shelf prices, and there is no obvious indication that they are forced to use suggested retail prices.

The following are some other snippets from the verdict:

–The contracts stipulate no obligation to heed the advice and guidance given by headquarters consultants to franchisees, who face no contractual or actual disadvantage for noncompliance.

–It is appropriate to recognize the independent discretion of franchisees regarding the selling of products and provision of services.

–It cannot be recognized that those who conclude franchise contracts are generally forced to work long hours to run the stores.

–Even though the franchisees are controlled in terms of business hours and open days, it cannot be said that the franchisees themselves are constrained in terms of hours in which they personally provide labor.

Even a cursory look at the realities of convenience store operation in Japan makes it obvious that there is a yawning gap between the district court’s portrayal and the practical situation–the convenience store business model in Japan is highly centralized and the franchisees are required to conform to precise, unified formats.

Even the Ministry of Economy, Trade and Industry (METI) pointed out in a 2020 document that “it goes without saying that maintaining unified integrity under the brand is a crucial factor for increasing the competitiveness of the franchise model. For example, nearly every single convenience store chain has put into practice the idea that 24-hour operation leads to an increase in daytime customers due to the sense of reassurance provided (because it always open).”

METI also noted that franchisees are strictly bound by headquarters policies and must take on the “color” of the brand. Franchisees have almost no discretion to depart from the policies laid down by headquarters and are required to stay open at all hours, 365 days a year.

So on the one hand the government itself explicitly recognizes–and celebrates as a key part of the business model–the power of regimentation emanating from the headquarters of the major convenience store chains, while on the other hand the Tokyo District Court rules that it doesn’t exist and that store owners are free to run their businesses at their own discretion.

The verdict leaves the franchisees in the extraordinary dilemma of having to take orders from headquarters for all practical purposes, but not being properly recognized as rodosha.

Unsurprisingly, Japan Association of Convenience Store Franchisee’s Union has filed an appeal.

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