Nova struggling to pay refunds, wages

Major English-conversation school operator Nova Corp. is struggling to pay refunds for prepaid lessons to students who canceled their contracts with the company midterm and has had difficulty paying employees’ salaries, according to sources.

The Osaka Chuo Labor Standards Inspection Office in Osaka has instructed the Osaka-based company four times to pay wages to its workers that it has owed since July.

Nova has completely changed its “expansionary course” business strategy. It had closed about 50 schools in Tokyo and surrounding areas and Osaka as of Sept. 30 and drastically cut its TV commercials and other advertising.

Nova has to refund large amounts of money in many cases because students have to prepay lesson fees, often for hundreds of classes, when they sign contracts with the company.

According to Nova, the number of contracts canceled increased sharply after the Supreme Court ruled in April that the company’s unfair cancellation policy was illegal. Nova had 418,000 students as of March 31, but there were 7,880 cancellations between April and June, which cost the company 1.62 billion yen in total.

Cancellations continued after the Economy, Trade and Industry Ministry ordered the company to partially suspend its operations in June, judging that its sales pitch to students violated the Specified Commercial Transactions Law. The ministry said that Nova falsely explained to students that lessons can be reserved any time they want, and made exaggerated claims in advertisements during a special campaign offering free sign up.

Since June, consumer centers in Tokyo have received several dozen complaints and requests for consultations. In one case, a caller said, “I haven’t received a refund from Nova even though I canceled lessons more than three months ago.” Consumer centers around the nation are receiving similar complaints, according to the sources.

If students sign a contract with Nova to pay tuition with a credit card in installments and Nova did not refund fees for cancelled classes, they can refuse to pay the charges to their credit card company. However, if students paid cash in advance for lessons and then canceled their contract, there is little they can do but wait for Nova to refund the money.

There is no legal deadline for refunding lesson fees upon cancellation, but the Tokyo metropolitan government has instructed Nova to pay such refunds as soon as possible. Representatives of the National Union of General Workers Tokyo South in Minato Ward, Tokyo, and General Union in Osaka, of which some of Nova’s foreign teachers are members, requested METI on Tuesday to instruct Nova to refund the fees promptly.

Economy, Trade and Industry Minister Akira Amari said at a press conference Tuesday that Nova needs to make sincere efforts to solve the problems. “We’d like to respond to the problem in areas where the ministry can intervene,” he said.

Nova has not paid salaries to 2,000 Japanese employees since July. About 5,000 foreign employees have not yet received their salaries for September.

A senior foreign teacher working in a Nova’s school in the Kinki region said, “An instructor I know has been asked to leave his apartment rented by Nova because the company has failed to pay the rent.”

A Japanese employee working at one of schools in Tokyo said when he asked Nova’s headquarters the reason for the delay in salary payments, the person he spoke to simply said, ‘I don’t know.’ “Because there isn’t enough information about why the schools were closed and why the refund has been delayed, it’s difficult for me to explain about the matter to students,” he said.