Liability Allocation in Dispatch (Japan)

In Japan, liability allocation in worker dispatch (労働者派遣) depends mainly on the relationship among the dispatching agency (派遣元), the client/host company (派遣先), and the dispatched worker. The basic principle is that the dispatching agency remains the worker’s contractual employer, while the host company exercises day-to-day direction and control over the work. Consequently, responsibility may be divided according to who had the relevant legal duty, control over the work, and ability to prevent the harm. The Worker Dispatching Act also places specific obligations on the host company, including appointing a person responsible for dispatched-worker matters.

1. Liability of the Dispatching Agency

The dispatching agency generally remains responsible for matters arising from the employment relationship, including:

• conclusion and administration of the employment contract;
• payment of wages;
• employment-related records;
• appropriate selection and assignment of workers;
• certain employment-management obligations;
• supervision that falls within the agency's contractual responsibilities;
• compensation where the agency itself breaches its contractual or statutory obligations.

The agency may also face employer liability under Civil Code Article 715 where a dispatched worker causes damage in connection with the agency's business. The courts have recognized that the fact that the worker performs the work at the client company does not automatically remove the dispatching agency's responsibility.

2. Liability of the Host/Client Company

The host company is not merely a passive recipient of labour. Because it normally gives the dispatched worker concrete instructions concerning the performance of work, it can have direct responsibilities concerning:

• workplace safety;
• working conditions that are under its control;
• prevention of harassment;
• compliance with applicable working-time rules;
• supervision of dangerous work;
• workplace accidents;
• conduct of its own managers and employees.

Japanese labour authorities specifically recognize that safety-and-health legislation generally applies to the host undertaking in relation to dispatched workers.

Thus, a host company cannot necessarily avoid liability simply by arguing that “the worker was employed by the dispatching agency.”

3. Allocation According to the Nature of the Wrong

Liability can broadly be divided as follows:

The allocation is therefore fact-specific rather than automatically 50:50.

4. Important Case Laws

1. Pasona Case — Tokyo District Court, 24 June 1996

This is an important case concerning damage caused by a dispatched worker to the host company.

A worker dispatched by Pasona allegedly misappropriated money while performing duties at the host company. The host company sought compensation from both the worker and Pasona.

The Tokyo District Court held Pasona liable for the damage under the principles of employer liability (Civil Code Article 715). The circumstances included the dispatch agency's continuing involvement in supervision of the dispatched worker.

Significance:
A dispatch agency can bear liability even though the worker physically performs the work at the host company. The court may examine the agency's actual supervisory role and contractual responsibilities, rather than merely looking at where the worker worked.

2. IYOGIN Bank / Iyogin Staff Service Case — Takamatsu High Court, 18 May 2006

A dispatched worker alleged bullying by a supervisor at the host company. Claims were brought against both the host company (Iyo Bank) and the dispatching agency.

The High Court recognized liability concerning a particular negligent act by the host company's branch manager and applied the employer-liability principle to the host company. However, it did not find every alleged act or failure to respond to constitute unlawful conduct.

The Supreme Court later rejected the appeal/application for acceptance in 2009.

Significance:
The host company's responsibility can arise from the conduct of its own managers even though the victim is a dispatched worker. At the same time, liability is not automatic for every workplace complaint; the specific conduct and response of the company matter.

3. Nikon Kumagaya Manufacturing Plant Case — Tokyo District Court, 31 March 2005

A dispatched worker working at Nikon's Kumagaya plant died by suicide following excessive work and psychological burden.

The Tokyo District Court imposed damages on both the dispatch-side employer and Nikon, finding that both had responsibilities concerning the worker's safety. The case has subsequently been discussed as an important example of safety obligations toward dispatched workers.

Significance:
A host company may have a safety consideration obligation toward a dispatched worker where it controls the actual working environment and work conditions.

The case illustrates that contractual employment status does not necessarily determine the entire allocation of safety responsibility.

4. Sanpo Konpo Case — Urawa District Court, 28 May 1993

This case is important for understanding the host company's duty to consider the safety of workers working within its operational sphere.

Japanese labour-law materials cite the case for the proposition that a company which has a special relationship with a worker through the work arrangement may have a duty to take reasonable measures for that worker's safety.

Significance:
The source of liability can be the actual relationship of control and workplace integration, rather than simply the existence of a formal employment contract.

5. Labour Dispatch Company Damages Case — Tokyo District Court, 14 May 2002

In this case, a dispatched worker's assignment was substantially changed by the host company, including a reduction in the expected staffing arrangement. The worker claimed compensation against the dispatching agency.

The court awarded the worker ¥8,232 representing the remaining unpaid amount for two days of leave/absence compensation, while rejecting the much broader damages claims because the evidence did not establish the required illegality, contractual breach, damage and causal connection.

Significance:
Not every inconvenience or operational change in a dispatch arrangement automatically creates tort liability. Courts examine:

1. whether a legal duty existed;
2. whether that duty was breached;
3. whether actual damage occurred; and
4. whether there was a sufficient causal connection.

6. Labour Dispatch Company Case — Tokyo District Court, 22 October 2003

This dispute concerned the relationship between a dispatching company and host company after dispatched workers allegedly falsified MyLine application forms. The host company suffered business consequences after the conduct was discovered.

The case involved claims between the dispatching agency and the host company concerning their respective contractual and tort responsibilities.

Significance:
Where a dispatched worker causes commercial loss through misconduct, courts may examine the dispatch contract, the scope of supervision, the nature of the worker's duties, and the respective responsibilities of the two companies rather than automatically placing the entire loss on one party.

7. Matsushita Plasma Display / Pasco Case — Supreme Court

The Supreme Court considered an arrangement in which a worker was formally employed by Pasco but worked at Matsushita Plasma Display under concrete instructions from the host company's employees.

The Court recognized that the arrangement constituted worker dispatch despite the contractual structure, while rejecting the argument that an employment contract between the worker and the host company automatically arose merely because the dispatch arrangement violated the Worker Dispatching Act.

Significance:
The case is particularly important for disguised contracting/illegal dispatch arrangements. Actual working arrangements and who gives concrete instructions are critical in determining the legal character of the relationship.

5. Disguised Contracting and Liability

One of the most important risks in dispatch arrangements is 偽装請負 (disguised contracting).

A genuine contracting arrangement normally requires the contractor to:

• directly employ the workers;
• exercise its own supervision and direction;
• independently perform the contracted work;
• assume responsibility for the manner in which the work is performed.

If the client company directly gives detailed instructions to the contractor's workers, the arrangement may be treated substantively as worker dispatch rather than contracting. Japanese administrative guidance expressly distinguishes contracting from dispatch on this basis.

The Matsushita Plasma Display/Pasco Supreme Court case demonstrates the importance of this distinction.

6. Liability for Workplace Accidents

For workplace accidents, responsibility is usually determined by asking:

Who controlled the dangerous activity?

For example:

• If the host company controls machinery and workplace safety → host-company responsibility may be substantial.
• If the dispatch agency failed to provide necessary information/training that it was responsible for → agency responsibility may arise.
• If both companies contributed to the risk → both may face liability.
• If the worker's own conduct contributed to the damage → contributory negligence may affect the amount recoverable.

The Nikon case demonstrates that both the employment-side company and host company can potentially have safety responsibilities toward a dispatched worker.

7. Liability for Harassment

Where harassment is committed by an employee of the host company, the host company can face responsibility because:

• the alleged harasser may be its employee;
• the conduct occurred within its workplace;
• the host controls the workplace environment;
• management may have had an obligation to investigate and respond.

The IYOGIN Bank/Iyogin Staff Service case demonstrates that courts can examine separately the conduct of the host company's managers and the response of both the host and dispatching agency.

Therefore, a dispatch agency should not simply tell a dispatched worker to resolve harassment directly with the host company.

8. Liability for Damage Caused by the Dispatched Worker

Suppose a dispatched employee:

• damages machinery;
• steals money;
• falsifies documents;
• discloses confidential information; or
• causes loss to a customer.

The question is not simply “Who employed the worker?”

The court may examine:

1. Who selected the worker?
2. Who trained the worker?
3. Who supervised the worker?
4. Who controlled the particular task?
5. What did the dispatch agreement provide?
6. Did the dispatch agency undertake supervision?
7. Did the host company negligently supervise the worker?
8. Was the misconduct connected with the worker's assigned duties?
9. Was the loss foreseeable?
10. Did either company contribute to the damage?

The Pasona case is particularly relevant because the dispatch agency was held responsible in circumstances where its supervisory involvement was significant.

9. Contractual Allocation Between Dispatch Agency and Host Company

The dispatch agreement should clearly identify:

• scope of duties;
• workplace;
• working hours;
• supervision;
• safety responsibilities;
• equipment responsibility;
• confidentiality;
• personal-data handling;
• reporting obligations;
• accident reporting;
• harassment complaints;
• replacement of workers;
• indemnification;
• insurance;
• third-party claims;
• responsibility for worker misconduct.

However, a contractual allocation does not necessarily eliminate statutory obligations. A company cannot simply contract out of mandatory statutory responsibilities.

10. Practical Liability Matrix

Dispatching Agency

The agency is particularly exposed where the problem concerns:

• employment contract;
• wages;
• employment records;
• worker selection;
• contractual obligations toward the worker;
• inadequate agency-side supervision;
• failure to respond to complaints;
• misconduct connected with the agency's business.

Host Company

The host is particularly exposed where the problem concerns:

• unsafe workplace;
• machinery;
• excessive workload under its control;
• direct instructions;
• harassment by its employees;
• workplace discrimination;
• inadequate workplace investigation;
• negligent supervision;
• accidents occurring because of conditions it controlled.

Shared Responsibility

Both may potentially be responsible where:

• the agency knew of excessive work but failed to act;
• the host imposed excessive working hours;
• both failed to respond to safety warnings;
• the agency failed to train and the host failed to supervise;
• an accident resulted from combined failures.

Conclusion

Liability allocation in Japanese worker dispatch is based on actual responsibilities, control and the nature of the legal duty—not merely on which company signs the employment contract.

The dispatching agency normally carries the principal employment-related responsibilities, while the host company carries significant responsibilities for the actual workplace, instructions, safety and conduct within its workplace. Courts can impose liability on one or both companies where their respective conduct contributes to the harm.

The Pasona, IYOGIN Bank, Nikon, Sanpo Konpo, Labour Dispatch Company, 2003 Dispatch Company and Matsushita Plasma Display/Pasco cases collectively demonstrate that courts examine the substance of the working relationship, actual supervision, workplace control, contractual obligations, safety duties and causation when allocating liability.