When 27-year IBM veteran Martin Jetter came to Tokyo last year, the new president of the technology giant's Japanese arm had a radical idea: hold workers accountable for performance.
Within months of Jetter's arrival, IBM Japan fired a group of workers deemed to be underperforming in the kind of restructuring common in many Western countries but rare in Japan, where the most sought-after jobs have carried a promise of lifetime employment.
International Business Machines is now being sued for wrongful termination in what is shaping up as a legal test case in one of the most divisive and politically charged issues facing Prime Minister Shinzo Abe - whether to make it easier for companies operating in Japan to fire workers.
After years of economic stagnation, the prime minister hopes to shift Japan away from an employment system that prioritizes stability to focus on growth. On a Sunday television show, Abe said he wanted more hiring based on specialization or location - jobs that would offer benefits closer to full-time positions but be easier to cut if deemed no longer necessary - as one of his planned labor market reforms.
Advocates say these reforms would spur hiring and create opportunity for women and younger workers more likely to be stuck in lower-paid contract jobs without legal protection.
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"We need to move away from this notion of lifetime employment. That means all the Japanese individuals should be more independent," said Hiroshi Mikitani, chief executive of internet shopping firm Rakuten Inc and a member of an industrial competitiveness panel that advised Abe on economic reforms.
But critics say the proposals are ill-timed. They would risk putting large numbers of mostly middle-aged men near peak earnings out of work just as the administration is trying to lift Japan from two decades of deflation and stagnant growth. The fired IBM workers are also middle aged.
"What the Abe administration is trying to do with labor reform is extremely dangerous," said Kensaku Sugino, secretary general of JMIU, the union representing dismissed IBM workers. "What is happening at IBM Japan shows what is at stake."
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Jetter, a German national and the first foreigner to head IBM Japan in nearly six decades, pushed ahead with a restructuring that led to the firing of more than two dozen IBM employees who were judged to be underperforming, union officials say. Five workers are suing IBM for wrongful termination.
IBM declined to comment specifically on the court case or make Jetter available for an interview. But in a statement, it said that as a company investing in growth areas, such as big data and cloud computing, "we need to remix our skills within the context of a high performance work culture".
Japan ranked 134th out of 144 countries on the ease of hiring and firing, a World Economic Forum report showed in 2012, a rigidity many economists and executives believe has stifled growth.
Not 'Cut and Dry'
Executives say vague wording in Japanese labor law gives judges broad discretion in settling cases and puts a relatively heavy burden on managers to prove they have made a concerted effort to avoid cutting staff.
"It is not cut and dry in the way it is in many other countries," said Jonathan Sampson, regional director at Hays Specialist Recruitment Japan, a recruiting firm.
The only real option for companies looking to make large cuts has been a voluntary retirement scheme, the method applied to all 180,000 layoffs announced by Panasonic Corp and other Japanese technology companies since 2012.
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The downside of such schemes is that companies are forced to offer buyouts widely. In many cases, the most talented employees take the severance package and go to work at a rival firm.
The IBM case has garnered attention in part because union officials say the company is targeting union members who have received below-average appraisals and giving them short notice to chose between resigning with a payout or being fired.