Fixed-term employment is closely linked to the issue of employment protection as it can be an instrument for employers to enhance numerical flexibility. Many authors thus do not distinguish between EPL and the possibility to temporarily restrict employment. This makes sense because when it comes to terminating contracts employers usually do not face comparable legal repercussions as when they try to terminate a permanent contract. Relaxing restrictions on fixed-term jobs, therefore, is often interpreted as an alternative to often highly polarised EPL reforms. Usually the termination of contracts does not entail any obligation on the side of the employer to offer contract renewals, however, in most countries there are limitations to how many times a work contract can be renewed. As with most other forms of non-regular employment fixed-term contracts are often justified on the basis that they are either facilitating the transition into permanent jobs, e.g. graduates without work experience, or allow new forms of employment where highly skilled experts work for firms on temporary assignments. At the same time they are often criticised as they do not offer the same level of security as open-ended jobs.
Superficially the legal situation in Germany until the 1980s (see table C-6) confirms the characterisation of German policy-makers preferring “good jobs” and relatively high unemployment over high employment with many precarious jobs (Eichhorst and Marx 2011). Until 1985 fixed-term employment was permissible only under certain conditions specified in the law and was limited to a maximum of 6 months. Also, fixed-term contracts could not be renewed in order to avoid employers re-hiring fixed-term employees and to not discourage them from offering permanent work contracts.
The first major reform in 1985 demonstrates that even though the government at the time was firmly committed to deregulation, it did not simply deregulate but included several protective measures as well. For example, the expansions included in the law were to be granted only for 10 years and thus required a new legislative act if was to be extended. Moreover, it limited complete deregulation of fixed-term employment to firms with less than 20 employees and it expanded the period for fixed-term contracts only for new employees. Noteworthy is also the inclusion of a provision which allowed employers to grant part-time workers and fixed-term workers different working conditions under the condition this was backed by the
respective collective agreement. Although this part of the law was soon overturned by labour courts (Waas 2007), it confirms that collective bargaining has often been used in the German context to infuse flexibility while avoiding bold deregulation (another example is the reform of temp agency work in 2002). The list of reasons (Sachgründe) for fixed-term employment was not expanded which meant that the employment form remained highly regulated and limited mainly to specialists. The next rounds of deregulations in 1994 and 1998 merely extended the provisions implemented in 1985 until the year 2000 (1994) and deregulated fixed-term employment further but only for specific groups (new employees and workers 60 years and older). After the change in government, this policy of cautious and incremental expansions was basically continued: Reforms in 2000, 2002 and 2003 facilitated fixed-term employment mostly for specific groups such as employees in start-ups or elderly workers (lowering the age threshold from 60 to 58) but fell short of a major expansion. This means that German governments, independent of partisan composition, followed a similar cautious politics of slowly expanding flexibility while maintaining a high level of protective measures at the same time. It implies that the regulatory challenge of regulatory flexibility-enhancement has been the main motive for this specific form of incremental change.
This pattern is also visible in the Japanese example (see table C-7) even though, in contrast to Germany fixed-term employment has been virtually unregulated until a reform in 1993. For example there have been no provisions in the Japanese law which regulate the succession of fixed-term labour contracts. Limitations have been set only on the length of contracts but there is no legal limitation on the number of successive contracts with the same employer. So in Japan employers face virtually no limit on offering fixed-term employment. The MoL was unconcerned with the situation until the early 1990s because long-term employment practices until then appeared rather stable. Moreover, even before Japanese governments began to re- regulate fixed-term labour through law several landmark court decisions had already established effective limitations on the use of fixed-term contracts as early as 1974 (for the role of case law for fixed-term employment see Takeuchi-Okuno 2010: 78- 80). For instance the Supreme Court ruled in 1986 that fixed-term contracts could not be used for quasi-permanent employment and thus de fact permanent workers with temporary contrast had a right to permanent contracts (although the court did not set specific and universal criteria to identify such cases). This means that unlike
the OECD’s EPL indicator suggests, fixed-term employment was in fact already regulated to some extent.
However, in the early 1990s the MoL felt that further regulation was required due to the worsening economic situation and the threat of mass lay-offs. A reform in 1993 therefore established the first specific provisions for part-time workers (which includes those on fixed-term contracts) although it entailed only very weak regulatory changes and mostly aimed at encouraging firms to adopt fair labour practices, e.g. by establishing a part-time centre informing employers about appropriate practices. A LSL reform in 1998 reduced limitations on the maximum duration of fixed-term contracts (now 3 years) and facilitated fixed-term employment for elderly workers. However, given the already quite flexible regulatory arrangement it is questionable that the reform led to a considerable expansion in qualitative terms. The case may be different with the 2003 reform of the LSA which was considerably more radical in abolishing formal limits to fixed-term contracts and thus seemed to mirror the deregulation policy of Koizumi at the time. However, it prompted Koizumi’s successor, Abe, to backtrack as early as 2007 because public concerns about exploitation of non-regular workers had increased in the meantime. A reform of the part-time act (which concerns basically all workers with non-standard working conditions) was meant to mitigate these concerns although its actual provisions were again rather weak, “encouraging” rather than committing employers to offer equal or comparable working conditions. The fact that a specific act for non-regular workers was used rather than universal provisions applying to all types of work contracts can be seen as a further institutionalisation of regulatory dualisation.
Although in 2007 a Labour Contract Act (LCA, roudou keiyaku hou 労働契約法) was introduced which transferred the LSL provisions on labour contracts into a separate act, the overall arrangement remained more or less unchanged. Again the act entailed some re-regulation of fixed-term employment but it encouraged rather than obliged employers to offer equal working conditions. The act basically recommended institutionalised communication between employees and employers on desired changes and requires that changes are only valid if they are “reasonable” in the light of the general situation of the firm. Instead of mandatory procedures, however, the act mainly extends existing regulations and added only minor details on the relationship between the employment contract and work rules. The main aim, as
presented by the minister in the Diet, was to increase stability of labour relations and thus to decrease the substantial number of individual labour disputes which had put the government under pressure to respond. Even though the relationship between work rules and individual contracts has been described as problematic by legal experts for many years (Sugeno 2002: 84), the limited scope of the reforms seems to confirm the overall trend in Japanese labour law to avoid universal and binding provisions.
The Japanese example suggests that governments in comparable labour market arrangements prefer to distinguish between different forms of employment rather than to implement universal provisions that apply to all workers to the same extent. Even the 2007 contract act, although designed for universal application, has not changed this pattern. In a way this is also visible in Germany although here collective bargaining rather than law is the main mechanism for institutionalising regulatory differences between employment forms. This suggests dualisation is not only furthered through the expansion or deregulation of non-regular employment forms but also, at least to some extent, the particular forms of regulation German and Japanese policy-makers have applied.