TOKYO, Mar. 27, 2017 /PRNewswire/ --
The following is a news story as reported by Global Village Media Co. Ltd.:
Medidata Solutions K.K., a subsidiary of Medidata Solutions, Inc., which operates a technology business for clinical trials, wrongfully dismissed its 56-year-old American information systems director in March of 2015, the Tokyo District Court ruled on March 15, 2017.
David Wood, who had been employed at Medidata Solutions Japan K.K. as a regular employee (seishain) since 2006, was unilaterally dismissed after four months had passed since he had been instructed by his boss to fly from Tokyo to New York for a five-minute meeting in November 2014 to be told in a jetlagged state that his job had been eliminated due to a reorganization. The next morning he was notified that his e-mail and access to all company systems was being terminated.
Thereafter, Mr. Wood consistently refused company demands that he voluntarily resign citing his age, long tenure and large family of a wife and five children at home as well as the phenomenal growth that the company had been experiencing. In what would become a remarkably atypical case, after receiving multiple notices of official termination in March and May, he was sued by the company, which sought a judgment that its dismissal was valid and for Mr. Wood, who was the defendant in the case, to pay its court costs.
The decision to dismiss was also made weeks after Mr. Wood had filed two ethics reports on his boss via a third-party online reporting system managed by EthicsPoint. One report alleged nepotism due to the wife of another subordinate of his boss being hired to work in the same office, and the other was about poor management by his boss, including a security hole in the company data systems that the boss was failing to address. Mr. Wood also asserted that an HR manager had called him the following day and identified him as the sender of the reports from their contents, and thus there was the possibility that the dismissal was retaliatory.
Negotiations prior to the lawsuit had centered on the issue of whether a regular employee in Japan wanting to keep his job was a "right" as Mr. Wood claimed or an "unreasonable demand" as the company's chief legal counsel, Michael Otner, had asserted.
Then the focus of the ruling was on the legality of a restructuring dismissal (seiri-kaiko), which in Japan is based on the Doctrine of Abusive Dismissal (kaikoken-ranyo-hori). This should require all of four key factors to be satisfied. (1) Valid need for personnel reductions (2) Good faith efforts to avoid dismissal (3) Reasonable and objective selection standards and (4) Appropriate procedures.
The main assertion of the company, which cited its legal obligations to its shareholders under Delaware corporation law, was that reorganizing its hosting services to a network operations center (NOC) in the U.S. was necessary in order for the company to avoid the possibility of falling into financial distress, and therefore the dismissal of its information systems director in Tokyo was unavoidable.
The company had not claimed actual financial distress, but rather its COO, Michael Capone, said in a statement to the court that the rate of sales growth in Japan was not as high as in other countries, and the only witness for the company, David Fearnley, who was also Mr. Wood's boss, cited positive earnings for the parent company in 2014 that had not been as good as the year before. Although not mentioned in the testimony, it should be noted that in the year before or 2013 the company stock price had increased by more than 600 percent. When asked questions about the financials of the Japan subsidiary during the testimony, Mr. Fearnley responded, "I don't know what they are."
The company denied any ethical wrongdoing by responding that Mr. Wood's assertions were just coincidences and misunderstandings on his part. It further asserted that he was an incompetent manager who had demonstrated remarkably bad job performance during his eight years with the company and that he was widely disliked by his subordinates and other coworkers who did not want him to return to his job.
After describing Mr. Fearnley's testimony as not credible on multiple points, the court gave a stinging rebuke to the company's attempt to impose a U.S.-style at-will dismissal in the Japanese legal environment by finding that it had not satisfied any of the four prerequisites for a restructuring dismissal.
In regard to factor (1) the court said emphatically that "not being able to maintain the company with only a little profit if Mr. Wood were not dismissed is absolutely unacceptable."
With factor (2), after stating "sufficient and sincere efforts are required by the employer before a decision to dismiss is made since a dismissal deprives a worker of a means of a livelihood or forces the person against his will to change jobs to another company under working conditions more adverse than before," the court said, "efforts to avoid dismissal were extremely inadequate."
On factor (3), the court found that that there was no proof of bad work performance and the simple reason of the employee's position being eliminated was not a sufficient selection criteria.
Then, with factor (4) the court found that the dismissal procedures during the New York trip were inappropriate, that in subsequent discussions no specific explanations were given about other possible jobs in the company, and that nothing was provided in writing.
The court further said that there was no evidence to prove retaliation for the two ethics reports as a reason for the dismissal while at the same time citing the guarantee of anonymity by the third-party reporting system.
The ruling concluded that there was no necessity for personnel reductions to justify a restructuring dismissal; the company did not fulfill its obligations to avoid dismissal; the rationality of the person selected was doubtful; and the procedures were not appropriate. As a result, the dismissal was invalid as an abuse of an employer's right of dismissal and Mr. Wood remains an employee of the company. It also ordered the company to pay back salary and bonuses (in excess of 30 million yen) during the past two years with interest.
When Global Village Media interviewed Mr. Wood at the court house, he said, "I'm so thankful that I live in a country where employees are treated as human beings and not as objects that can be easily disposed of for the purpose of obtaining higher profits," and his attorney, Masako Suzuki, echoed these sentiments, "The judgment clearly showed the fact that trashing employees for the purpose of corporate growth is not acceptable in Japan, and we believe this is a big victory for workers." Throughout the case, Mr. Wood, who is currently 58 years old, repeatedly expressed his desire to continue in his job until the company's retirement age of 65.
Source: Global Village Media Co., Ltd. Yaesuguchi Kaikan, 1-7-20 Yaesu, Chuo-ku, Tokyo 103-0028, Tel. 03-5255-3090, Fax. 03-5255-3160, e-mail: toiawase@gvm.co.jp
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