[Breaking News] Practical Measures for Companies in Light of the First Recommendation under the Freelancer Act

Overview of the Recommendation Case

The JFTC issued administrative recommendations (including the public disclosure of the names of the entities involved) to two major publishing companies ^[1], which have business dealings with approximately 2,000 and 4,000 freelancers respectively.
This marks the first recommendation case under the Freelancer Act since its enforcement, and strongly underscores the importance of legal compliance in transactions with freelancers.

What Is a “Recommendation”?

A “recommendation” is a type of administrative disposition whereby an administrative authority urges a business operator to voluntarily rectify a violation or potential violation of law. While it does not carry legal enforcement (i.e., there are no immediate penalties), failure to comply may lead to formal orders or sanction procedures, making it effectively a final warning.
Furthermore, under the Freelancer Act, the names of companies and details of their violations are disclosed to the public in conjunction with a recommendation, meaning the measure can have a significant reputational impact, undermining trust from stakeholders and business partners.
This case is the first where such a recommendation and public disclosure were applied, signaling not only the need for the relevant companies to correct unlawful conduct, but also to reform their business practices and strengthen governance. It also serves as a timely warning for other companies to enhance compliance with the Freelancer Act.

Legal Basis for the Freelancer Act and Recommendations

This case constitutes the first recommendation issued under the Freelancer Act, which was enacted in 2024 as the “Act on Ensuring Proper Transactions for Specified Commissioned Business Operators.” The Act aims to guarantee fair transaction conditions and a sound working environment for freelancers. In connection with this case, the following obligations imposed on commissioning parties (i.e., clients) are at issue:

1. Obligation to Clearly State Transaction Terms (Article 3, Paragraph 1)
   In outsourcing arrangements, key terms such as the amount of compensation, payment due date, scope of work, and deadlines must be clearly stated in writing or equivalent form.
2. Deadline for Payment of Compensation (Article 4, Paragraph 5)
   Compensation must, in principle, be paid within 60 days from the delivery of deliverables or the completion of the work.

Summary of the Violations

1. Ambiguous Presentation of Transaction Terms
   According to the investigation, the companies placed orders with freelancers without clearly specifying key conditions such as the scope of work, amount of compensation, or payment deadlines at the time of outsourcing. In many cases, the orders were given verbally, and even where communication occurred via email or social media, payment deadlines were often omitted.
2. Delays in Payment of Compensation
   Furthermore, compensation was paid only after the relevant magazine was published, and it was found that in some cases, over 80 days had elapsed between the delivery of work and actual payment. This practice was deemed to violate the legal requirement mandating payment within 60 days from the date of delivery.

Summary of the Recommendation

In light of the above violations, the JFTC issued the following recommendations to the two companies:

1. Confirm at the board of directors’ meeting that the relevant conduct constitutes a legal violation, and ensure that, in future contracts, transaction terms are clearly specified and payments are made within the legally permissible timeframe.
2. Conduct an internal review of similar transactions and take corrective action if issues are identified.
3. Establish a compliance framework through internal training programs.
4. Ensure internal dissemination and awareness of the measures described in items 1 through 3.
5. Notify business partners of the measures described in items 1 through 4.
6. Report to the JFTC on the implementation status of measures 1 through 5.

Items 1 through 3 are considered essential steps in establishing a compliance system.

Although the Freelancer Act merely provides that a recommendation may be issued when a violation occurs—such as failure to specify transaction terms or pay compensation on time—this recommendation has now established a concrete precedent for the content of such corrective measures. These include actions led by the board of directors, internal communication, and notification to business partners.

Practical Issues and Responses Faced by Companies

This recommendation case is significant in that it marks the first public naming of violators since the enforcement of the Freelancer Act and represents a major opportunity to encourage reform of conventional business practices. It is not only relevant for the two large publishing houses involved but also for all companies that engage in transactions with freelancers. Simply continuing existing practices does not suffice for proper compliance with the Freelancer Act, and a reassessment of practices from a corporate compliance perspective is now required. Key practical measures are as follows:

Structuring the Order Process to Specify Terms Clearly

In this case, the problem stemmed from the fact that details such as the scope of work, compensation, and payment deadlines were conveyed only verbally or via text on social media, rather than as formal contract clauses. Under the Freelancer Act, commissioning parties are required to provide documentation that comprehensively states these terms at the time of contract execution. Therefore, companies must develop and implement standardized templates for use in outsourcing agreements.

Revising Industry Practices on Payment Timing

Industry customs that tie payment dates to magazine publication dates are inconsistent with the legal obligation to pay within 60 days from delivery. Companies must clearly specify payment deadlines in contracts and purchase orders and revise their internal payment procedures to ensure adherence to the 60-day rule.

Clarifying Operational Rules and Embedding Compliance in Practice

Even when internal training programs were conducted following the Act’s enforcement, field practices often continued based on traditional customs. Training alone is not sufficient; practical mechanisms must be created to support actual compliance at the operational level. This includes developing detailed flowcharts, Q&A handbooks, and pre-order checklists to ensure actionable compliance.

Building Systems to Prevent Inconsistencies Across Departments

When multiple departments are involved in freelancer transactions, inconsistent practices may result in inadequate compliance. Companies should ensure that management departments take the lead in establishing unified internal policies and manuals, and implement centralized monitoring mechanisms for order contents and payment deadlines. A company-wide response is necessary.

Standardizing Contract Terms and Strengthening Record-Keeping

Where contract formats and order details differ by department or individual, management risks increase. To balance compliance and operational efficiency, companies should adopt standardized templates for outsourcing contracts and establish centralized systems for managing key transaction records such as contract execution dates, delivery dates, and payment dates.

Realities of Enforcement and the Corporate Attitude Required

This recommendation illustrates the Freelancer Act’s intent to drive reform in long-standing industry practices. The fact that ambiguous contract terms and prolonged delays in payment have now been formally deemed illegal is highly significant. Companies are now expected to recognize the structural issues inherent in their dealings with freelancers and take effective action from the following perspectives.

Revising Contract Practices in Light of Power Imbalances

Freelancers, who often operate as individuals or single-person entities, tend to occupy a weaker position in commercial relationships. As a result, they may find it difficult to demand the strict execution of contracts or the clear specification of terms prior to starting work. This structural imbalance has led to circumstances where legal obligations were not fully met. Companies must therefore revisit their contracting practices—for example, by ensuring that contract terms are clearly stated and that agreements are concluded at the earliest stages of the engagement.

Promoting Institutional Understanding and Ground-Level Penetration

A pre-enforcement survey conducted before the Freelancer Act came into effect revealed that 54.5% of commissioning parties and 76.3% of freelancers reported being “not familiar” with the law’s content ^[2]. This highlights a widespread lack of awareness at the operational level. Even in companies that conducted internal training sessions, the recommendations noted that such efforts had not translated into actual behavioral change among front-line personnel. Moving forward, it is necessary to go beyond merely holding trainings and instead implement follow-up measures to verify understanding, ensuring deep penetration of the system in day-to-day operations.

Ensuring Effective Implementation and Internal Systems

In conjunction with the recommendation, the JFTC also issued requests to industry associations to promote awareness of the legal framework. It is likely that industries with high volumes of freelance transactions will face continued scrutiny and regulatory attention. Companies must not stop at superficial compliance but must truly understand the purpose of the legislation, reevaluate their current practices, and promptly develop robust internal systems.

This recommendation highlights the risk that conventional industry customs can diverge from legal requirements. Violations are not limited to blatant rejections of freelancers’ demands; even seemingly unproblematic communications may conceal latent legal violations. Accordingly, companies must take care to adopt a compliance-conscious, thoughtful approach before issues arise. In all freelance-related transactions—and indeed, even in broader dealings involving counterparties with differing levels of power or bargaining strength—it is crucial that companies understand the underlying purpose of the Freelancer Act and ensure fair, transparent operations. This approach aligns with the broader framework of corporate compliance.

By anticipating future regulatory trends and undertaking internal reforms alongside efforts to shift employee awareness, companies can enhance both their sustainability and stakeholder trust.

Consult Experts When Reviewing Internal Frameworks

At ZeLo, we maintain a team of attorneys and Certified Social Insurance and Labor Consultants (shakai hoken roumushi) with extensive expertise in employment and labor law. We provide comprehensive support to help companies establish proper operational practices in their transactions with freelancers.

Through our joint legal and labor advisory services, we offer prompt and practical assistance for implementing the Freelancer Act, including contract revisions, the development of systems for clearly specifying transaction terms, revision of payment procedures, and the creation of internal guidelines. Our support is designed to ensure compliance with the law while also enabling smooth and effective implementation in day-to-day business.

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Sources：

[1]JFTC, Recommendation to Shogakukan Inc. (June 17, 2025) and JFTC, Recommendation to Kobunsha Co., Ltd. (June 17, 2025)

[2]JFTC and Ministry of Health, Labour and Welfare, Summary of the Survey on the Actual Status of Transactions with Freelancers (Pre-Enforcement Survey) (October 18, 2024)