Posted by: Ian Rowley on January 29, 2008
Reports that Americans are eating fewer Big Macs wasn’t the only troubling news for McDonald’s yesterday. In Japan, the fast food giant’s second biggest market, a court ruled that the company was guilty of creating phony management positions to avoid paying employees overtime. The ruling came after Hiroshi Takano, a 46-year-old manager of a McDonald’s restaurant in the city of Kumagaya, complained that he was a manager in name only.
Under Japanese labor law, unlike regular staffers, companies don’t have to pay supervisors and managers overtime. That meant that by treating employees like Takano as “managers”, McDonald’s could save costs. The case hinged on the definition of a manager’s duties.
McDonalds argued that Takano had authority in setting his work hours and running the outlet and is well compensated in salary-—in other words, a bona fide manager. But Takano’s lawyer countered that because “no discretion was given in reporting to the workplace or leaving it, and little discretion was given in formulating sales plans and budgets” he wasn’t siginficantly different from regular employees. The judge came down against McDonald’s and ruled that the they pay Takano, who sometimes worked 100 hours a month unpaid, about $70,000 in overtime and compensation.
McDonald’s is considering appeal, but if the decision stands, it’s a tough call for the company. Boosted by promotions such as burgers at for less than a dollar, Japanese sales have been rising fast of late, but profit margins are miniscule. In December, it said it expected its net earnings for 2007 to come in at just $72 million from sales of $3.7 billion. The last thing the company needs is hundreds of managers demanding thousands of dollars in unpaid wages. For all that, it’s difficult not to be sympathetic towards the hard-pressed “managers”. Local media reports that 10% of McDonald’s 1,700 store managers in Japan earn less than their subordinates because the latter can claim for working late. Food for thought for Tokyoites next time they’re chomping on a teriyaki burger.