Research
ArticleLabor Law Policy on Freelance WorkHAMAGUCHI Keiichiro
The year 2021 saw continued developments inlabor law with respect to freelance work: a number of
new policies made an appearance, and progress inthe EU culminated in the proposal of a Directive on
platform work by the end of the year. Thesedevelopments inspired the booklet Labor Law Policy
on Freelance Work,1 which builds on the issues I
addressed in a special lecture for the JILPT Tokyo
Labour College in March 2021. This article focusses
on summarizing that lecture and the subsequentdevelopments, and therefore seeks to convey, as far
as possible, a clear overview of current trends, rather
attempting an earnest debate on the related labor law.
It introduces a few of the key aspects of the labor
policy developments, addressing trends both in Japanand several other countries.

1. Historical background to the issues offreelance work
There has been a long history of issues
surrounding the kinds of work that do not quite fallunder employment contracts. Craftspeople in the
premodern era were more akin to subcontractors thanemployees, as they pursued their work according totheir own individual methods, without detailed
supervision or directions. Employed labor typicallytook the form of roles as domestic workers, such as
butlers or maids. However, the Industrial Revolution
prompted dependent labor—labor under the directionof an employer—to become the norm. Workers cameto be regarded as the vulnerable, and therefore
provided with social protection in the form of laborlaws and social security. The self-employed, on theother hand, were not seen as such, and were

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consequently excluded from thesocial protection of labor laws
and social security.
In fact, already then, there
were persons who, while in legal
terms self-employed, were sociallyand financially more struggling
than employed workers. Namely, the persons engaged
in “industrial homework” (naishoku), where factories
outsourced portions of their manufacturing andassembly processes to be carried out by individuals
in their homes for low piece rate wages. These“homeworkers” (kanai rōdōsha) thereby formed thelowest level of the economic structure. Albeit
following a number of road bumps along the way, theIndustrial Homework Act, enacted in 1970, set out
provisions on minimum piece rate wages by work
type. However, the said Act applies only to the
manufacturing and processing of goods. The numberof homeworkers has dropped dramatically, from 1.81
million persons at the time of the Act’s enactment to110,000 persons in 2017.
In contrast, an ever-increasing number of persons
are working from home via the internet. In 2000, theJapanese Ministry of Labour (currently the Ministryof Health, Labour and Welfare, MHLW) sought toaddress such workers by formulating the Guidelines
for the Proper Implementation of Work from Home,obliging employers to stipulate the contract
conditions in writing and preserve them in document,
and to pay remuneration within 30 days of receiving
the products of work, among other provisions. In
2018, MHLW’s revised guideline, the Guidelines for
the Proper Implementation of Self-employed TypeTeleworking, was formulated in response to the 2017
Action Plan for the Realization of Work Style
Reform. This guideline also covers cases in whichintermediaries that have already done business withthe worker place reorders (including crowdsourcing).
The guideline also prescribe the protection of
intellectual property rights in the event of competitive
bids and the provision of notice when annulling acontract. However, the guidelines are merely
government notifications with no legal grounds andare therefore not legally binding. Violations of theIndustrial Homework Act are investigated by a labor
standards inspector, but these guidelines lack legal
force.

2. Criteria for determining worker status:
Analysis of labor standards inspection
cases
Once the protection of workers was establishedthrough labor and employment law and social
security, persons in the borderline category began toseek to claim their status as a worker (rōdōsha).
Benchmarks for such cases were compiled in the“Criteria for determining ‘worker’ under the Labor
Standards Act,” which were set out as part of the1985 report of the Ministry of Labour’s Study Groupon the Labor Standards Act (Rōdō kijyun hō kenkyu
kai hōkoku-sho; Ministry of Labour, 1985).
According to the report, worker status is determinedon the basis of whether the person in question issubordinate to and dependent on an employer (shiyōjūzoku sei)—that is, whether an employer provides
direction and supervision, and pays wages. In doing
so, a combination of all the relevant elements—suchas whether the person in question is a business
operator, and whether the person is working
exclusively for a certain organization—is taken into
consideration.
I analyzed the content of documents on individuallabor standards inspection cases, over a two-and-ahalf-year period from April 1, 2017, to October 2,
2019, focusing on any labor standards inspection
reports (kantoku fukumeisho) or declaration
processing records (shinkoku shori daichō)
containing the terms “worker status” and/or “soleproprietors” (kojin jigyōnushi)2. This encompassed a
total of 122 documents: 80 inspection reports and 42
declaration processing records.
The different industry types covered in these
documents included 54 cases (44.3%) in theconstruction industry, 16 cases (13.1%) in the field offood and drink services, serving customers andproviding amusement services, 11 cases (9.0%) in
the transport industry, and 10 cases (8.2%) incommerce. In terms of occupation types, 56 persons(45.9%) were working on construction sites as
independent contractors (hitori oyakata), 13 persons(10.7%) were drivers, 13 persons (10.7%) wereserving staff, 9 persons (7.4%) were barbers or
hairdressers, 7 persons (5.7%) were marketing andsales staff, 4 persons (3.3%) were information andcommunications technologists, and 3 persons (2.5%)
were chefs. The issues addressed in the cases wereunpaid wages, which accounted for 54 cases (44.3%),
and issues related to occupational health and safety,
which accounted for 40 cases (32.8%). Finally, a
breakdown of the cases according to whether worker
status was recognized shows that worker status wasrecognized in 27 cases (22.1%) and not recognized in
37 cases (30.3%), while in 58 cases (47.5%) nodecision was made either way.
Looking at the distinctive characteristics of each
occupation, among independent contractors (56persons)—who make up the lowest extreme of theseveral layers of contracting that takes place in theconstruction industry—the common approach is tocombine the forms of work, such that it may not for
instance be clear even for the person themselves
whether they are working under an employment
contract or a subcontracting agreement, or such thata person may sometimes work as a contracted
business operator and sometimes as an employedworker, rendering the differences between the two
unclear. This may pose considerable difficulty inreaching an unequivocal judgment according to theaforementioned criteria set forth by the Study Groupon the Labor Standards Act in their report. In manycases, independent contractors also come about theirwork through highly informal personal relationships
such as those with relatives, friends or acquaintances,

Japan Labor Issues, vol.6, no.38, July, 20227

which in turn renders it difficult to clearly identify
whether the work is being conducted under an
employment contract or a subcontracting agreement.
Drivers (13 persons) include not only ownerdrivers (yōsha untenshu; drivers who own theirvehicle and use it to transport goods on commission
from a freight company) but also a number of casesof drivers who transport goods using a truck or othersuch vehicle loaned to them by the company
commissioning the work (in a total of 13 cases, 10
involved trucks belonging to the client company).
This prompts the question of whether it is appropriate
to presume such drivers to be business operators, asis the case for owner-drivers, who, according to thereport of the Study Group on the Labor Standards
Act, “are tentatively presumed to be business
operators given the high expenses of owning theirown truck, etc.”
In the case of serving staff (13 persons), giventhat the nature of the work at hostess bars, pubs, andother such entertainment establishments serving foodand drink requires such staff to serve customers fromevening to late night, remuneration is determinedaccording to an hourly rate (a factor that indicatesworker status). On the other hand, such staff do notreceive detailed direction and supervision from theirplace of work regarding the specific means by which
service is provided to customers. Likewise, while thework of barbers and hairdressers (9 persons) does tosome extent involve constraints on the place andtimes of work—in the form of the salon or similarplace of work and its opening times (factors thatindicate worker status)—as, due to some extent to
the fact that it requires specialist skills (often
nationally certified), providing such services entails
high levels of individuality and involves very little
detailed directions or orders, such roles seem to fit
well in the category of sole proprietor.
For marketing and sales staff (7 persons), in theevent that such staff engage in marketing and sales
outside of the default workplace—in other words,
not at a shop or sales office—the lack of restriction
on time or place of work lends itself to classification
as a sole proprietor. As employed workers who
engage in marketing work outside of the default

8Japan Labor Issues, vol.6, no.38, July, 2022

workplace also work under a system by which they
are deemed to have worked their prescribed hours,
there has in fact been little necessity for persons insuch roles to be classified as sole proprietors in legal
terms. Likewise, in the case of information andcommunications technologists (4 persons), who are
eligible for the application of the discretionary
working system for specialist work (by which they
are deemed to have worked their prescribed hours),
there has been relatively little need to adopt thecategory of sole proprietor in legal terms.

3. The 2021 Guideline on freelance work, ajoint guideline by Cabinet Secretariat, Fair
Trade Commission, Small and Medium
Business Administration, and MHLWIn recent years, new forms of employment
utilizing
information
andcommunications
technology—such as platform work, gig work, andcrowd work—are becoming increasingly common
across the world. Likewise in Japan, the Uber Eatsfood delivery service developed particularprominence due to the COVID-19 pandemic. Amongits mid- to long-term goals established in the 2017
Action Plan for the Realization of Work Style
Reform, the Japanese government intended to
explore the necessity of legal protection for nonemployment type teleworking and other such typesof employment-like working styles. The MHLW
responded by convening the Meeting on EmploymentLike Working Styles that year. The subsequent
Meeting on Points of Controversy with regard to
Employment-Like Working Styles published apreliminary review of its findings, the Interim Report,
in June 2019, establishing that rather than (i)expanding the scope of protected worker status or (ii)creating an intermediate category between employees
and the independent self-employed, the appropriate
direction to pursue would be to (iii) separately
provide the self-employed persons who require acertain level of protection with the special protection
they require as suited to the type of protection.
The JILPT survey results reported to these expert
meetings recorded the estimated number of persons
in employment-like working styles (namely, persons

who receive a request to carry out work from anordering party, provide their services primarily as anindividual, and receive remuneration in return for
those services) as 2.28 million persons (of which,1.69 million persons pursue such work as theirprimary employment and around 590,000 persons
pursue it as secondary employment). Of this number,
1.7 million persons (1.3 million persons pursuing thework as primary employment, 400,000 persons
pursuing it as secondary employment) work directlywith businesses.
Meanwhile, the Guidelines for Secure Working
Conditions for Freelancers, formulated in March
2021, clarified approaches to the application of theJapan Fair Trade Commission’s Act on Prohibition ofPrivate Monopolization and Maintenance of Fair
Trade (Antimonopoly Act, the provisions on theunjust use of a superior bargaining position) and Act
against Delay in Payment of Subcontract Proceeds,
etc. to Subcontractors (Subcontract Act). According
to said guidelines, the Antimonopoly Act andSubcontract Act are also applied to transactions withfreelancers, such that if a party ordering work (theclient) has a superior bargaining position to thefreelancer and utilizes that position to unjustly cause
the freelancer disadvantage contrary to typicalbusiness practices, such a case constitutes the abuseof a superior position and is regulated under the
Antimonopoly Act. Failure by the client to provide
the freelancer with written clarification of the termsof the transaction at the time of order is also deemed
inappropriate under the Antimonopoly Act and a
violation of the Subcontract Act. Furthermore,intermediaries with superior bargaining positions tofreelancers utilizing said position to impose unilateralchanges to the agreed terms and thereby unjustly
impose disadvantages on freelancers contrary totypical business practices also constitute the abuse of
a superior position.

4. Special industrial accident insurance
coverage and health and safety
The Guidelines for Secure Working Conditions
for Freelancers also address special insurance
coverage under the industrial accident insurance

program. Developments toward special coverage
began with the establishment of a system to address
the high risk of workplace accidents faced byindependent contractors in the construction industry,
through the 1965 amendment to the Industrial
Accident Compensation Insurance Act allowing suchcontractors to cover their own industrial accident
insurance contributions, thereby ensuring that theyreceive industrial accident insurance benefits when
they suffer an accident.
With the growing numbers of freelancers inrecent years, this was expanded in April 2021 toinclude persons engaged in performing arts-related
work, persons engaged in animation production, judo
therapists, and persons pursuing businesses inaccordance with the assistance for the establishmentof new businesses and other such support measures
under the 2020 amendment of the Act on Stabilizationof Employment of Elderly Persons.
September 2021 saw the addition of two new
occupation types: food delivery businesses such as
Uber Eats, and IT freelancing. Under the provisionsof a ministerial ordinance, the former is described as“businesses utilizing motorized bicycles or bicycles
for transporting goods,” and not limited to platformwork. The Uber Eats Union, formed by delivery
workers, responded to this addition with the assertion
that as long as platform enterprises are generating
profits from the work of delivery workers, thoseenterprises should cover the costs of industrial
accident insurance premiums. Other occupation
types now eligible for special coverage are masseuse,chiropractor, acupuncturist, and moxibustion
practitioner, which were added in April 2022.
Meanwhile,thenational
government’s
responsibility to an independent contractor has beenrecognized, in a May 2021 Supreme Court judgment
regarding asbestos used in construction. It is difficult
to argue that the Industrial Safety and Health Act
automatically excludes persons not classified asworkers from protection in the event that they handle
items that may potentially damage their health, evenwhen they are working alongside persons classed asworkers. The MHLW therefore established theCommittee on Occupational Safety and Health underJapan Labor Issues, vol.6, no.38, July, 20229the Labor Policy Council to set to work on reviewing
the regulations. As a result, protection underIndustrial Safety and Health Act policy, which had
previously been limited to workers (including thosein indirect employment relationships), was expanded
to cover independent contractors and other such selfemployed persons not classified as workers.

5. Leave for business suspension andunemployment safety nets
When former Prime Minister Shinzo Abe
declared the closure of schools in March 2020 as partof measures to address the COVID-19 pandemic, the
MHLW established the Subsidy for Guardians
Affected by School Closures for Business Owners
Who Have Employees (shōgakkō kyūgyō tou taiōjoseikin) for employed workers with children to takepaid leave. This prompted criticism highlighting thefact that freelancers were also having to look after
their children while working. In response, the MHLW
urgently set up the equivalent subsidy (financial
support) for freelancers (Subsidy for Guardians
Affected by Elementary School Closures for
Individual Contract Workers, shōgakkō kyūgyō toutaiō shienkin), providing freelancers with 4,100 yen,equivalent to approximately US$35, per day (anamount that was later increased to 7,500 yen per day,then to 4,500 yen per day from March 2022).
Meanwhile, measures by the Ministry of
Economy, Trade and Industry included theestablishment of the Subsidy Program for Sustaining
Businesses in May 2020 to provide 2 million yen to
corporations and 1 million yen to individual business
operators seeing declines of 50% or more in year-onyear monthly revenue. It would typically be assumed
that freelancers would also be covered by such a
subsidy, as “sales” referred to the amount recorded asbusiness income on the tax return. However, since
freelancers have generally, under the instruction of
the tax office, recorded their earnings as salaried
income (kyūyo shotoku) and miscellaneous income(zatsu shotoku), there was a succession of cases offreelancers being declared ineligible for the subsidy.
Following criticism, persons who had recorded theirearnings as salaried income and miscellaneous

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income also finally became able to apply for thesubsidy as of late June 2020. This could be described
as a case which exposed a discrepancy with theworker status concept in tax law.
The aforementioned financial support forfreelancers provides, albeit in quite limited
circumstances, freelancers with similar allowances
for business suspension (allowances for absencefrom work) as that received by employed workers.
This raises another question—namely, do surely
freelancers also require compensation for
unemployment? Unlike employed workers, in thecase of freelancers it is difficult to draw a clear
distinction between absence from work andunemployment in legal terms, as this would typicallybe determined according to whether an employment
contract is in place. However, in reality, many
freelancers are financially dependent on their primaryclient, placing them at real risk of being forced totake absence from work or becoming unemployedshould orders from said client cease. There is surely
some means of providing assistance through a system
similar to that of employment insurance.
In fact, in November 2019, the Council of
the European Union adopted the Council
Recommendation on access to social protection forworkers and the self-employed, calling for social
protection covering unemployment and five otherfields to be extended to the self-employed, as it is toworkers. Looking at the actual circumstances in
EU countries, as many as 20 countries apply
unemployment insurance to self-employed persons
in some form (full, partial, or voluntary application).
South Korea likewise determined in December 2020
the successive steps to apply, as part of national
employment insurance, employment insurance topersons in special types of employment work notcovered under the South Korean Labor Standards
Act. This entails the person engaging in the work andthe business owner equally sharing the costs of
insurance premiums, and is being expanded, step bystep, to the occupations of parcel delivery drivers,
motor cycle messengers and persons providing
replacement driver services.
Likewise in Japan, the amendment of theEmployment Insurance Act adopted in March 2022,
addresses persons eligible for the basic allowance
who launch a business after leaving employment(that is, after they become eligible to receive the said
allowance), proposing that the period for which thesaid business is implemented, up to a maximum of 4
years, not be included when calculating the period
for which the allowance can be received. While ahighly localized form, this can be seen as
unemployment benefit for freelancers (who wereformerly workers).

6. Labor law policies on freelancers incountries other than Japan
As noted above, in recent years, the platform
economy has been attracting increasing attention
across the world, highlighting the issue of the worker
status of persons who obtain work through platforms,
also known as gig workers. Let us very briefly
summarize the developments in various countries.
France is the only country to have legislation
aimed at persons working through platforms. The
2016 El Khomri Act (Loi n. 2016–1088 du 8 août2016 relative au travail, à la modernisation dudialogue social et à la sécurisation des parcours
professionnels) recognized platform workers’ right tobe insured against industrial accidents (with platform
enterprises responsible for covering the premiums of
those platform workers who chose to do so), right toform and join a labor union, and right to continuous
professional training. Furthermore, although the2019 Mobility Orientation Act (Loi d’orientation desmobilités) incorporated a policy that sought to ensure
the establishment of charters for appropriate labor
conditions in the transportation industry by allowing
for platform workers to be recognized as selfemployed persons where such charters were in place,France’s supreme court (Cour de Cassation) passed a
judgment recognizing the employee status of such aworker. In Germany, Fair Work in the Platform
Economy, published by the Federal Ministry ofLabour and Social Affairs in November 2020,
explores shifting the burden of proof with regard to
the potential misclassification of platform workers.
Turning to the trends in court precedents, it isagain France’s supreme court blazing the trail—ajudgment recognizing a food delivery platformworker to be in an employment relationship with theplatform (the Take Eat Easy case, November 28,2018) was also followed by a judgment recognizing
the employee status of a driver for a ride-hailing
platform (the Uber case, March 4, 2020). Likewise in
Spain, a Supreme Court judgment recognized theexistence of an employment relationship between afood delivery platform rider and the platform (theGlovo case, September 23, 2020). In Germany, aFederal Labor Court (Bundesarbeitsgericht)
judgment recognized the employee status of a crowd
worker conducting the small, task-based job (microjob) of checking product displays at gasoline stations(the Roamler case, December 1, 2020). Moreover,while no longer an EU member since 2020, the UK
has similarly seen a Supreme Court judgment
recognizing ride-hailing platform drivers as workers(a status differing from that of an employee, according
to a concept unique to the UK) as opposed to selfemployed (the Uber case, February 19, 2021).
Meanshile, developments in the US state ofCalifornia have been marked by considerable
seesawing back and forth. A California Supreme
Court judgment recognizing employee status (the2018 Dynamex case, in which a class of same-day
delivery drivers asserting that they had been
misclassified as independent contractors wererecognized as employees) was subsequently
incorporated into legislation with the enactment ofCalifornia Assembly Bill 5, commonly known as the“gig worker bill,” only for this progress to be
overturned by the results of a referendum (which saw
voters support legislation exempting gig workers
from the application of the bill). The referendum
was, however, later declared unconstitutional in a
Superior Court decision.

7. The EU proposal for a Directive on
platform workers
Amid the developments touched on above, theEuropean Commission, as the EU’s governing body,
published a proposal for a Directive on improving
the working conditions of persons working throughJapan Labor Issues, vol.6, no.38, July, 202211

digital platforms on December 9, 2021. These
proposals have attracted considerable interest given
their considerably bold proposals regarding thepresumption of worker status.
Article 4 of the proposed Directive prescribesthat the contractual relationship between a digitallabor platform that controls, within the meaning of
Paragraph 2 of said article, the performance of workand a person that performs platform work throughthat platform shall be legally presumed to be an“employment relationship,” that said legal
presumption should apply in all relevant
administrative and legal proceedings, and that thecompetent authorities shall be able to rely on that
presumption as they verify compliance with orenforce relevant legislation. The legal framework issuch that Paragraph 2 of the said article lists fivefactors as requirements for this; if at least two of thefive requirements are fulfilled, it is legally presumed
that the person conducting platform work is in an
employment relationship.
(a) effectively determining, or setting upper
limits for the level of remuneration;(b) requiring the person performing platformwork to respect specific binding rules with regard
to appearance, conduct towards the recipient of
the service or performance of the work;(c) supervising the performance of work orverifying the quality of the results of the work,
including by electronic means;(d) effectively restricting the freedom including
through sanctions, to organize one’s work, inparticular the discretion to choose one’s working
hours or periods of absence from work, to accept
or to refuse tasks, or to use subcontractors or

substitutes, and(e) effectively restricting the possibility ofbuilding a client base or performing work for any
third party.
These requirements all draw on characteristics
that have been noted as the distinctiveness of platformwork. Given that for the legal presumption of an
employment relationship, just two—not all—of theserequirements need to be fulfilled, they are fairly
lenient requirements.
Of course, as the relationship is thereby “legally
presumed” rather than “deemed” to be an employment
relationship, it is possible to provide facts to rebutthat legal presumption. And yet, when a digital labor
platform asserts that the contract relationship at issue
is not an employment relationship, the burden of
proof falls on the digital labor platform. Althoughsuch procedures are being pursued, the legal
presumption of an employment relationship does notcease to be applied. While in some respects, this may
be due to the tailwind provided by the judgments ofthe domestic courts in recent years, the proposed
Directive adopts an unquestionably severe stancetoward platform businesses.
1. Detailed analysis is provided in the booklet Labor Law
Policy on Freelance Work (Furiransu no rōdōhoseisaku; The
Japan Institute for Labour Policy and Training, JILPT, March 22,2022, only available in Japanese). The booklet is a compilation ofa presentation and related materials from a special lecture held by
the JILPT Tokyo Labour College on March 3, 2021. Moreover,following a similar process, the booklet Telework: Government,
Management and Labor Initiatives in the COVID-19 Pandemic(JILPT 2021, only available in Japanese), incorporates the resultsof survey research on telework.
2. JILPT Research Report No.206, Content Analysis of Labor
Standards Inspection Documents Related to Worker Status(February 2021, only available in Japanese).

HAMAGUCHI Keiichiro
Research Director General, The Japan Institute for Labour Policy andTraining. Research interest: Labor policy.
https://www.jil.go.jp/english/profile/hamaguchi.html

12Japan Labor Issues, vol.6, no.38, July, 2022