McDonald's not loving Japan court ruling

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.

Reader Comments

american in paradise

January 29, 2008 1:09 PM

was big mac one of the multinationals here in costa rica who nationally fired all its employees and then re-hired them at starter wages under a black list agreement with all the other multies when the free trade agreement was voted in? the deal here was to subvert the referendum on free trade by telling the employees that they would lose their jobs if there were no treaty with the u.s.a. they were told that all the companies would leave. some now are.
i don't eat fast food anyway.

american in paradise

January 29, 2008 1:16 PM

was big mac one of the multinationals in costa rica who nationally fired all its employees and then re-hired them at starter wages under a black list agreement with all the other multies when the free trade agreement was voted in? the deal here was to subvert the referendum on free trade by telling the employees that they would lose their jobs if there were no treaty with the u.s.a. they were told that all the companies would leave. some now are.
i don't eat fast food.

Don Boxx

January 29, 2008 3:13 PM

Interesting

Sanmitra Gokhale

January 29, 2008 5:49 PM

Great Article Ian!

Some of these corporate giants need to learn a lesson on business ethics, and it's high time they learn it the hard way.

Squeezebox

January 29, 2008 6:19 PM

Same stuff they do in the good ol' US of A, just a different legal system. Fast food outlets need to quit creating phony "managers" and pay people honestly.

Paulo Stevenson

January 29, 2008 8:08 PM

The only thing McDonalds has to do is respect other countries law and try to clear this bad image.

Andy Xie

January 29, 2008 11:26 PM

Now we know where the sweatshop practices came from. That is a concept that Asians imported from American MNC.

Tim Zhuang

January 31, 2008 3:33 AM

Fast food chains are only after sheer profit, it is in their nature to squeeze the cost, at all cost..

Nik Frengle

February 4, 2008 7:25 PM

McDonalds Japan is a seperate company, with a minority of it's shares owned by McDonalds Corporation, so suggesting, as some of the comments above have, that this is a big American MNC imposing poor conditions on Japan is inaccurate. The Japanese are adept enough at doing that to themselves, and don't really need help. It is the land of 'karoshi' (death by overwork) as an official cause of death, and one that happens fairly often. It is the land of 'hakken shain', or 'temp' staff that get no benefits of regular employees, are paid often lower wages, and are temporary in name only, working in companies for years on 3-month renewed contracts so that the company can get away with treating them more poorly than the law allows. This is just one more case.

OT

July 22, 2008 1:17 PM

A similar suit was filed in the United States (Federal Court in Delaware) on Friday. The law firm handling the case is Martin & Wilson. www.martinandwilson.com

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Bloomberg Businessweek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies.

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