The JFCN Treaty Preemption of U.S. Anti-Discrimination Laws in Executive Positions: Analysis in International Contexts

By Hamabe, Yoichiro | Law and Policy in International Business, Fall 1995 | Go to article overview

The JFCN Treaty Preemption of U.S. Anti-Discrimination Laws in Executive Positions: Analysis in International Contexts


Hamabe, Yoichiro, Law and Policy in International Business


Introduction

The economic relationship between the United States and Japan has changed dramatically since World War II. In 1953, the United States ratified a bilateral treaty known as the Treaty of Friendship, Commerce and Navigation with Japan (JFCN Treaty).(1) At that time, the United States had economic advantages over Japan and likely used the JFCN Treaty to insure that U.S. business would be able to enter the Japanese market with fewer obstacles. Twenty years later, the economic tide that once favored the United States turned against it. As the number of Japanese businesses operating in the United States grew in the 1980s, new problems developed between U.S. employees and Japanese employers in the United States. Many Japanese companies had a tendency to limit senior management positions to Japanese citizens and, consequently, many discrimination claims were filed.(2)

Since the 1960s, the United States has strengthened anti-discrimination laws by the enactment and amendment of Title VII and other statutes.(3) Japanese employment practices have appeared to become gradually westernized during the past two decades as well. For example, due to a long recession in the Japanese economy, some Japanese employment practices, such as lifetime or long-term employment, have eroded.(4) Keeping in mind these developments, this Article focuses on executive discrimination issues between U.S. employees and Japanese employers in the United States.

Article VIII(1) of the JFCN Treaty (Article VIII) provides that "[n]ationals and companies of either Party shall be permitted to engage, within the territories of the other Party, accountants and other technical experts, executive personnel, attorneys, agents and other specialists of their choice."(5)

Literally, "of their choice" means that U.S. companies in Japan and Japanese companies in the United States can fill certain positions without restriction.(6) Accordingly, under the JFCN Treaty, are Japanese companies allowed to select certain managerial employees of their choice regardless of U.S. anti-discrimination laws? In effect, Article VIII appears to exempt certain companies from complying with anti-discrimination laws in certain employment circumstances. This is the central issue of conflict between the JFCN Treaty and anti-discrimination laws.(7)

This Article concludes that Article VIII provides a clear and desirable standard to exempt certain companies from complying with anti-discrimination laws in certain employment circumstances because Article VIII limits the scope of the protected positions and grants the exemption only to certain employers. To that extent, courts should adopt the so-called "non-contingent standard", to override domestic anti-discrimination laws.(8) Under the non-contingent standard, the JFCN Treaty provides a complete defense to certain anti-discrimination claims.

The non-contingent standard should be applicable only under certain circumstances. First, in order for both a Japanese parent company and its U.S. subsidiary to invoke the JFCN Treaty rights, the subsidiary must be controlled by a Japanese national. If so, either the parent or the subsidiary may invoke the rights. Second, only certain visa statuses should be prima facie evidence of "protected positions" under the Immigration and nationality Act of 1952 (INA)(9) and, therefore, subject to the preemption. Ultimately, "executive personnel" may include middle and upper level managers as well as top-level executives. Third, the JFCN Treaty defense is available for more than citizenship discrimination. However, if a Japanese national is not involved in the dispute, the JFCN Treaty defense should not be allowed. Fourth, the JFCN Treaty immunity should apply to intentional discrimination cases, i.e., the treaty should apply to "disparate treatment" claims as well as "disparate impact" claims.

This Article does not advocate discriminatory employment practices in Japanese corporations.

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