BANISHMENT ROOM: Top companies under investigation over unfair labor practices

January 29, 2013


Some of the biggest names in corporate Japan are under investigation by the labor ministry following revelations in The Asahi Shimbun of working conditions that are apparently designed to force employees to quit.

The Ministry of Health, Labor and Welfare has targeted Panasonic Corp., Sharp Corp., Sony Corp., NEC Corp. and Asahi Mutual Life Insurance Co. to assess whether they are flouting the spirit of labor and related laws.

The Asahi Shimbun established that the companies set up what came to be known as special banishment rooms to effectively drive out surplus employees.

In vowing earlier this month to mount an investigation, labor minister Norihisa Tamura said, "We will determine whether employees (at such sections) are being forced to perform a line of work they find unacceptable or against their will."

The ministry was expected to release partial results of its preliminary findings on Jan. 29, without identifying the companies.

The investigation is intended to sound a clear warning to businesses not to run afoul of the Civil Law and to show that the government is keeping a close eye on how they treat their employees.

So far, the ministry seems to have concluded the companies did not engage in unlawful behavior.

But any company that assigns an employee to the so-called banishment room for a prolonged period could find itself in violation of laws designed to ensure that employees are not deliberately left with little to do or let go without valid reason.


In the gloom that has overtaken Panasonic, a fallen icon of Japan's once-formidable electronics appliance sector, employees are naturally fearful for their jobs.

Although management vows to turn things around, many employees still wonder whether their futures are safe.

So it was with trepidation that a working mother at a Panasonic subsidiary met a summons from her boss five months ago to discuss her options. She was offered two choices: apply for an early retirement program or move to a section known by old hands as "oidashi-beya" (banishment room).

"There is no job for you here," the woman, who did clerical work, was told.

After mulling her options for several days, she decided she wanted to stay on--even if it meant transferring to the section.

At that point, her boss told her, "I want you to understand that there are no guarantees about what will happen to you a year from now."

Many big-name corporations in Japan operate sections where surplus employees are effectively banished. Once assigned to these sections, the employees are expected to perform menial tasks in the apparent hope that boredom and isolation will set in, prompting them to quit, although the companies assert that no such intimidation exists.

However, the number of people who eventually decide to seek work elsewhere would seem to belie those denials.

The woman at the Panasonic subsidiary spoke to The Asahi Shimbun on condition of anonymity. She is one of 113 regular employees with full pay and benefits who were transferred from departments throughout the company to the section. The subsidiary in Yokohama calls the section its "center for business and human resources empowerment." It was established last August.

Its main job is to "assist" busy departments.

Her first such task, along with her colleagues, was to stand beside a conveyor belt with newly assembled cellphones and box the devices. They also had other chores.

"My life has absolutely changed for the worse," she said glumly.

Panasonic spearheaded efforts to reverse the hollowing out of Japanese industry and bring the manufacturing process back to Japan from overseas. Yet, the company is in deep trouble financially.

It expects to log more than 765 billion yen ($8.639 billion) in group net losses for the current fiscal year ending March.

The projection comes after it posted consolidated net losses of 772 billion yen the previous year, the second largest on record by any Japanese manufacturer.

Regular employees at Panasonic and blue-chip makers such as Sharp and Sony used to enjoy rock-solid job security. But not anymore.

Internal documents obtained by The Asahi Shimbun show that another Panasonic subsidiary operates a similar setup. The documents list 449 employees who were transferred to the sections, or nearly 10 percent of the combined work force of both companies.

The management of the two companies has repeatedly told their employees that the banishment rooms were established to prepare them for new assignments after appropriate in-house training.

But few believe it.

"The real purpose is to bring surplus workers to one place and get them to quit," said a fiftysomething employee, echoing the views of many colleagues.

The parent company, Panasonic, which is based in Kadoma, Osaka Prefecture, defends the management tactics of its subsidiaries.

"(The very idea that the sections were established to kick out employees) reflects a difference in perceptions," said a public relations official at company headquarters. "The companies are not forcing their employees to leave."

A number of the employees undergoing "additional training" were eventually transferred to other sections within their companies or other entities in the Panasonic group.

But by the end of last September, 32 had quit. The figure exceeds those who transferred to other group companies.


At the Panasonic group, even employees in their 30s and 40s feel they are under threat. People in this age bracket landed regular employee positions after surviving fierce competition for jobs during the "employment ice age," which lasted about a decade and followed the collapse of Japan's asset-inflated economy in the early 1990s.

Even if they wanted to make a fresh start at other companies, few jobs paying comparable salaries are available.

As a result, countless employees are stuck in a situation in which they have little work to do despite remaining on the payroll.

Sharp, known for its liquid-crystal display TV sets, initiated a large-scale early retirement program last year for the first time in its 100-year history to shed 2,000 jobs.

The Osaka city-based company forecast consolidated net losses of 450 billion yen in fiscal 2012, after it logged 376 billion yen in group net losses in fiscal 2011.

Panasonic and Sharp, determined to maintain a domestic manufacturing presence, invested heavily in state-of-the art factories in Japanese cities.

But they quickly lost their competitive edge in the face of fierce competition from Apple Inc. of the United States and Samsung Electronics Co. of South Korea in the development of smartphones and other electronics wizardry. The strong yen also battered their business performance.

Businesses in emerging economies have grown into mighty players in the global market, threatening once-dominant Japanese manufacturers.

In the United States, the Obama administration is giving priority to job creation to combat a persistently high unemployment rate. It is encouraging American companies to bring their manufacturing base back home.

But Japanese businesses are struggling to keep afloat with surplus workers and get little in the way of government assistance. The government maintains a policy that businesses are ultimately responsible for employment-related matters.

In Japan, which used to revel in its lifetime employment structure, legal precedents show that businesses, even if they are in dire financial straits, are severely restricted in dismissing their workers--especially those who have spent years with the company.

A Sharp employee in his 40s recalled a meeting with his boss in October at the company's headquarters.

"Even if you stay on in the workplace, there will be no position for you," the man said he was told.

"Hold on a second. This smacks of dismissal. You might as well have singled out my name," the man protested.

The man joined Sharp more than 20 years ago, working on the front line of sales, catching the first train to the office and taking the last one home each day.

"It was tough, but I was always proud of working for Sharp because of its commitment to protecting jobs (despite ups and downs in the economy)," he said.

Several weeks later, the man told his boss he was leaving.


Companies often goad employees deemed to be redundant to quit--by offering them nothing to do. This allows the companies to meet their pledges to shareholders on job cuts and secure additional loans from banks.

Sections similar to Panasonic's banishment rooms have become the norm at many big-name companies in recent years.

Sony operates what it calls a "career station section," while a version at an NEC subsidiary is dubbed "project assistance center."

At the NEC subsidiary, located in the office district in Osaka, a male employee finally couldn't take it any longer.

Assigned to the center last April, he assisted other sections while performing routine chores day after day.

When he decided enough was enough, he was told to apply for an early retirement program that had recently become available.

An NEC-affiliated job placement agency was supposed to refer applicants to new employment opportunities and offer advice on job interviews for free.

When he visited the agency, he was told, "Only those who officially decided to quit are eligible for the service."

At Asahi Mutual Life Insurance, the main responsibility of employees posted to "the team to explore new business opportunities" is to look for a position outside the company where they can work as employees on loan. The team was formed last April.

One employee on the team arrives at the office each day at 9 a.m. to search for openings posted on online job placement sites.

He has applied to more than 150 companies in the past several months, to no avail.

"What the management wants is that I, out of despair, will finally write a letter of resignation," he said.

But both NEC and Asahi Mutual Life Insurance denied that the new sections are meant to spur employees to quit.

"To lend a hand to projects at other departments is important," an NEC representative said.

An Asahi Mutual Life Insurance official defended the practice, saying, "It is essential for us to loan employees to improve their skills and strengthen our ties with clients.”


For staffing agencies, however, the spell of joblessness that has afflicted Japan in recent years offers new business opportunities.

Some have taken a novel approach, offering a service whereby they find a company to which their clients can send employees on loan.

A man in his 40s in the real estate industry vividly recalls the six months he worked on loan for a sales agent company via a staffing agency.

The room in which he worked was packed--in almost sardine-like conditions--with between 100 and 200 people, including workers with a leading automaker.

Their job was to call people on a "customer list" to sell a set of English learning materials, which costs hundreds of thousands of yen, and other items.

"My colleagues who came with me decided to quit the company or moved to new jobs as they found it was too much for them," he said. "That is the final disposal site for redundant workers."

A person working in a senior position with a foreign-affiliated manpower company says the service related to corporate downsizing has potential for growth.

"Sales from businesses of referring to jobs and dispatching temporary workers will decline in times of economic slowdown," the individual said. "We need to provide staff-reduction services to help secure a new source of revenue. Demand for such services is rising in a slumping economy."

Seminars for executives, titled "employment adjustment" or "steps to bring the size of the work force to an appropriate level," are also thriving.

Human resources consultants and officials at job placement agencies in such seminars explain how to determine if workers are "necessary," "unnecessary" or "either way," as well as encourage "unnecessary" workers to leave.

According to Cabinet Office statistics as of last September, up to 4.65 million workers in Japan are effectively "out of a job" despite being on payrolls. The figure represents nearly 10 percent of Japan's working population.

In Europe, government-backed programs offer unemployed people an opportunity to improve their job skills. The initiatives are regarded as a key component of employment policy.

In Japan, however, the government subsidizes businesses to help retain redundant employees. Training programs for workers and resolving work-related matters was largely left to the discretion of businesses.

(This article was compiled from reports by Takuro Chiba, Yoshihiro Yokomakura, Hisashi Naito, Satoshi Seii and Yasuyuki Nishii.)

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Sign of the times: Many company employees are stuck in dead-end jobs. (Takaharu Yagi)

Sign of the times: Many company employees are stuck in dead-end jobs. (Takaharu Yagi)

  • Sign of the times: Many company employees are stuck in dead-end jobs. (Takaharu Yagi)
  • The Asahi Shimbun

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