I Introduction

The laws in Japan governing collective labour relationships are the Labour Union Act (LUA) and the Labour Relations Adjustment Act. Regarding individual labour relationships, there are laws protecting minimum working conditions, such as the Labour Standards Act (LSA), the Minimum Wages Act, the Industrial Safety and Health Act (ISHA), and the Industrial Accident Compensation Insurance Act. These laws are traditional Japanese labour laws established after World War II and based on the Constitution of Japan.

The Labour Contract Act (LCA) was enacted in 2007 and sets out basic regulations on employment agreements. The revision of the LCA (effective from April 2013) includes important amendments for fixed-term employment. The Equal Employment Opportunity Act (EEOA)2 entered into effect in 1986 and has been revised several times. Since 2007, the EEOA has broadened protections for employees so that both male and female employees will not suffer any disadvantages based on their sex. Employees' rights are also expanded by other laws, such as the Child Care and Family Care Leave Act3 and the Part-time Employment Act (PEA).4 In addition, the Worker Dispatch Act (WDA) enacted in 1985 and amended in 1999 extended the scope of occupations that were covered under the worker dispatching system. As a result, the worker dispatching system was considered a social problem, so the WDA was amended in 2012 and in September 2015.

Each labour law has a different supervision and conflict-resolution system, so the overall system is complicated. The LUA stipulates the Labour Relations Commission system. A local labour relations commission (established in each prefecture) and its supervising agency, the Central Labour Relations Commission, conduct mediation, conciliation and arbitration to settle collective labour disputes.

In contrast, ordinary courts settle individual labour disputes. Additionally, since the inception of the labour tribunal system in 2006, labour tribunals have also been competent to settle such disputes. Local labour departments (governmental agencies) also conduct mediations to settle such disputes.

The Labour Standards Inspection Office (LSIO) is the supervisory agency with regard to the LSA, the Minimum Wages Act, the ISHA and the Industrial Accident Compensation Insurance Act.

Local labour bureaus are the supervisory agencies with regard to the EEOA, the PEA and the WDA.

II YEAR IN REVIEW

On 29 May 2018, the Work Style Reform Act was enacted. This Act mainly sets forth the following two areas: correction of working long hours; and improvement of working conditions for irregular workers.

Regarding correction of working long hours, the Work Style Reform Act introduced new regulations regarding the maximum limitation of overtime working hours under a labour management agreement with criminal liabilities. The new regulations will become effective from 1 April 2019. Under the new regulations, the maximum limitations on overtime working hours must be less than 100 hours (including hours for legal holiday work) per month, an average of 80 hours (including hours for legal holiday work) per month over two to six months, and 720 hours per year.

Regarding improvement of working conditions for irregular workers, Article 20 of the LCA will be abolished, and the Act on Improvement, etc. of Employment Management for Part-Time Workers will be amended to cover employment management for fixed-term employees. (The name of the Act will be changed to the Act on Improvement, etc. of Employment Management for Part-Time Workers and Fixed-Term Workers.) As a result, working conditions for part-time employees and fixed-term employees should be balanced with those for open-term employees under the same employer. In addition, under certain circumstances, working conditions for part-time employees and fixed-term employees should be equal to those for open-term employees under the same employer. With regard to dispatched workers, the WDA has been amended to improve their working conditions. Under new regulations, certain methods based on a labour-management agreement must be agreed between a staffing company and the representative of its dispatched workers. These regulations will become effective from 1 April 2019.

As explained in Section III, the Supreme Court issued two important decisions on 1 June 2018 with regard to Article 20 of the LCA. Many decisions were also issued in district courts and appeal courts with regard to Article 20. These decisions will become case law when interpreting relevant articles under the Act on Improvement, etc. of Employment Management for Part-Time Workers and Fixed-Term Workers.

III SIGNIFICANT CASES

There were three noteworthy cases of the Supreme Court in 2018, two of which relate to fixed-term employment. The main legal issue under these two cases was, in a situation where employment conditions for a fixed-term employee are different to those for an open-term employee and where both employees are hired by the same employer, whether the conditions for the fixed-term employees are regarded as 'unreasonable labour conditions' under Article 20 of the LCA.

i Nagasawa Unyu case (1 June 2018)

The plaintiffs were truck drivers who terminated their employment contract because they reached the retirement age (60). Just after the termination, they were hired as fixed-term employees by the same employer. The plaintiffs argued that their salary as fixed-term employees was approximately 20 per cent lower than their salary before they reached retirement age and they were not receiving the same allowances as regular employees, and that this should be regarded as unreasonable labour conditions.

The Supreme Court first held that the nature of the regular employees' work and that of contract employees' work was the same, and that the skills required for their work was the same.

Employment conditions, such as the amount of wages, are substantially affected by negotiations between employers and employees. Therefore, the history of these negotiations should be considered as 'other circumstances' under Article 20 of the Employment Contract Act. The following are underlying facts for considering the wages system for re-employed employees: (1) the wage system for regular employees was based on the assumption that the company would employ those regular employees for a long time whereas employees who retired from the company and were then rehired were not likely to be employed for a long period; and (2) re-employed employees who were below the retirement age received the same wages as regular employees until they reached retirement age, when they would receive the old age pension provided they satisfied certain conditions. Therefore, the fact that the plaintiffs were re-employed employees should be considered as 'other circumstances' under Article 20 of the Employment Contract Act.

To judge whether the differences in working conditions (such as wages or allowances) between fixed-term employees and regular employees are unreasonable, the reasons for the differences should be considered, in addition to comparing the total amount of wages and allowances of both types of employees.

Based on the above, the Supreme Court judges decided the following in respect to the differences in working conditions in this case.

Differences (i.e., allowances only paid to regular employees) Violation of Article 20 of Employment Contract Act Reasons
Difference in respect to salary and productivity incentive* No violation (1) The total amount of the basic salary and percentage fee for the fixed-term employees was only between 2% and 12% lower than the total amounts of the basic salary, incentive salary (which is calculated based on the type of truck the employee drives and the hours he or she works) and productivity incentive (a fixed allowance that depends on the type of truck); (2) the fixed-term employees were re-employed employees and could receive the old age pension by satisfying certain conditions; and (3) the fixed-term employees will receive equalisation payments until they start receiving the proportional part of the old age pension corresponding to the amount of salary.
Regular attendance allowance Violation There was no difference in the content of the work of the fixed-term employees and the regular employees. Therefore, it was not necessary to incentivise only the regular employees by paying this allowance.
Housing allowance No violation There was a wide spectrum of ages among the regular employees that did not exist among the fixed-term employees, and it is reasonable to pay costs or expenses for housing and living for families of regular employees.
Family allowance No violation
Bonus (five times the basic salary) No violation In light of the fact that (1) the fixed-term employees were re-employed employees who were receiving the retirement fee, as well as the old age pension, and the equalisation payment (a monthly allowance paid to re-employed employees by the company); and (2) the salary for fixed-term employees is supposed to be approximately 79% of their salary before retirement.
* Regular employees receive the basic salary (fixed amount), incentive salary and productivity incentive, whereas fixed-term employees only receive the basic salary and a percentage fee, but do not receive the incentive fee and productivity incentive.

ii Hamakyorex case (1 June 2018)

The main issue in the Hamakyorex case was similar to the Nagasawa Unyu case: whether the difference between regular employees' salaries and those of fixed-term employees should be regarded as unreasonable working conditions. The Supreme Court held that the content of the regular employees' work and that of contract employees' work is the same, while the range of utilisation of human resources between them is different. Based on this, the Supreme Court judges decided the following in respect to the differences in working conditions in this case.

Differences (i.e., allowances only paid to regular employees) Violation of Article 20 of Employment Contract Act Reasons
Housing allowance No violation Regular employees may need to relocate for a permanent position.
Regular attendance allowance Violation There is no difference in the content of the work (i.e., driving) and the need to encourage regular attendance.
Clean driving licence allowance Violation There is no difference in the content of the work (i.e. driving), and the need to drive safely and prevent accidents.
Special work allowance Violation The company pays this allowance to all regular employees regardless of their tasks. In addition, the nature of the work of regular employees and fixed-term employees is the same – there is no 'special work' subject to this allowance.
Meal allowance Violation The need for meals is the same for regular employees and fixed-term employees. Further, work shifts are the same for regular employees and fixed-term employees.
Commute allowance Violation The cost of the commute is the same, regardless of whether the employee's contract is regular or fixed-term.

iii Ibiden case (15 February 2018)

The Supreme Court decided that the lack of response of a parent company to the request for consultation from an employee of an affiliated company does not constitute violation of the duty based on the principle of good faith and mutual trust. In this case, the parent company established a compliance system for its affiliated companies and had a help desk through which it could deal with consultation requests from its employees.

X, a contract employee working at an affiliated company of Ibiden, was repeatedly asked to go on a date by A, an employee of another affiliated company of Ibiden working at the same workplace, who also burst into X's home. X resigned because of A's behaviour. At the time of A's actions, Ibiden was in the process of establishing its compliance system, which includes a code of conduct for employees to ensure compliance with the laws of Japan and other countries, articles of incorporation, internal rules and company ethics. Over eight months after A's actions, an employee of one of Ibiden's affiliated companies made a request for consultation with Ibiden on X's behalf. Ibiden, via its affiliated company, ultimately only interviewed A because it was notified that there was no evidence to support X's claim. X then sought compensation from Ibiden for damage arising out of A's violation of duty under the principle of good faith and mutual trust, by virtue of non-performance of obligations and tort liability.

The district court dismissed X's claims because there was no evidence showing that A carried out the alleged actions. The appeal court overturned this decision.

The Supreme Court found that because Ibiden had established its compliance system, if an employee who has suffered as a result of a violation that took place at one of the affiliated companies or if an employee requests a consultation, Ibiden has a duty under the principle of good faith and mutual trust to appropriately deal with complaints or requests from employees, and to take necessary measures in accordance with the compliance system. However, the Court also found that Ibiden's lack of response to X's request for consultation (including a lack of investigation into the request) did not constitute violation of the aforementioned duty for various reasons, including the following:

  1. there are no facts to suggest that, as part of the compliance system, all the requests submitted to the help desk must be resolved;
  2. X's request for consultation with Ibiden related to actions that occurred outside the workplace and out of working hours, and was not directly related to A's performance at work; and
  3. at the time of the request for consultation, X no longer worked at the same place as A and over eight months had passed since the alleged actions of A were conducted.

IV BASICS OF ENTERING AN EMPLOYMENT RELATIONSHIP

i Employment relationship

An employment contract is established when an employer and a job applicant agree that (1) the job applicant shall work for the employer; and (2) the employer shall pay a salary to the job applicant as consideration. If the employer has its work rules stipulating reasonable working conditions and has informed its employees of the work rules, the contents of an employment contract shall be based on the working conditions provided by the work rules without any consent of the job applicant. A job applicant and an employer may enter into or change, by agreement, an employment contract that includes working conditions different from those under the work rules. However, any parts of an employment contract that stipulate working conditions that do not meet the standards established by the work rules shall be invalid. In this case, the invalid portions shall be governed by the standards established by the work rules.

There is no statutory requirement concerning the form of an employment contract, so an employer and a job applicant may orally enter into an employment contract. However, to allow the job applicant to understand his or her rights and duties under the contract, the employer must notify him or her in writing of certain employment conditions5 before or upon entering into the employment contract.6 The employer can fulfil this requirement by giving the applicant a written employment contract or by providing a copy of its work rules.

Fixed-term employment is lawful, but the term cannot be longer than three years, except in limited circumstances.

ii Probationary periods

Although there is no regulation concerning probationary periods, an employer may set a limited probationary period based on case law in Japan. Many employers use probationary periods to train and to evaluate their employees to determine whether they should be retained as fully fledged employees.

An employer generally sets forth probationary periods in its work rules. Generally, probation periods range from one to six months and a typical probationary period is three months. Extremely long probationary periods will be void because of violation of public policy.

It is generally understood that the usual probationary period is designed to reserve the employer's right of cancellation. The employer may dismiss an employee on probation less strictly than a regular employee; however, even during the probationary period, 'reasonable and socially acceptable' grounds are required to dismiss the employee. This means that an employer is required to show a lack of fitness of its employee based on facts (e.g., low job-performance ratings and unsatisfactory attitudes) in order to properly exercise its reserved cancellation rights.

iii Establishing a presence

Whether a foreign company is required to register will be decided based on its intended business in Japan. If it intends only to conduct preparatory or supplemental tasks (e.g., market surveys and collecting information), it may establish its representative office in Japan without any registration. However, if it intends to continuously operate its business in Japan, it must register with the relevant legal affairs bureau. In this case, while the foreign company does not have to establish its branch office in Japan, it must at least register its representative or its branch office (if any) in Japan.

Unless a foreign company intends to continuously operate its business in Japan, it may engage an independent contractor in Japan that does not require registration. An independent contractor will constitute a permanent establishment (PE) of the foreign company under certain conditions, for example provided that the contractor is authorised to conclude contracts on behalf of the foreign company in Japan. While there are exemptions for independent contractors under Japanese taxation laws, if a foreign company has its PE in Japan, its Japanese-sourced income will be subject to corporate tax.

There are four types of insurance that a company is obliged to have: workers' accident compensation insurance; employment insurance; health insurance and nursing care insurance; and employees' pension insurance.

Salary income is subject to withholding tax under the Income Tax Act. Under the withholding tax system, a payer of salary income in Japan must calculate the amount of income tax payable, withhold the amount of income tax from the income payment, and pay it to the government.

v RESTRICTIVE COVENANTS

Given the personal, continuous character of an employment contract, a relationship of trust between the parties is required. In more concrete terms, each party is required to act in good faith in consideration of the other's interest. Therefore, during the term of employment, an employee shall undertake obligations to keep trade secrets, to refrain from competitive activities and not to damage the employer's reputation or confidence even if there is no provision about the obligations under any employment contract or work rules.

By contrast, an employee has the right to change his or her job, which means that if the employer wants its employees to undertake post-termination non-compete obligations, it must enter into such an agreement with the employees or have corresponding work rules, both setting forth the obligations. Non-compete obligations are direct restrictions on a former employee's freedom to choose his or her occupation, so courts will decide their enforceability based on a variety of factors, such as whether the duration and scope of the obligations are clearly stated in an agreement or work rules, and whether additional and sufficient financial compensation is provided to the former employee.

VI WAGES

i Working time

Statutory working hours

The LSA stipulates overly rigid regulations on working hours. In principle, an employer must not require or approve of employees working more than eight hours a day or 40 hours a week (excluding rest periods) without a labour-management agreement.7 These are generally known as statutory working hours. If an employer violates this regulation, it will bear criminal liability.8

Where an employer wants to require employees to work more than the statutory working hours, it must enter into a labour-management agreement either with a labour union (if any) or, if a union does not exist, an employee that represents the majority of employees at a workplace, and then notify the relevant government agency of the agreement.9

As stated in Section II, the Work Style Reform Act will become effective on 1 April 2019. Under the new regulations, even if a labour-management agreement is executed, the overtime hours will, in principle, be capped at 45 hours per month and 360 hours per year. It will be possible for employers to have employees work more where special circumstances exist based on the labour-management agreement. However, even under these special circumstances, the maximum limitations on overtime working hours must be less than 100 hours (including hours for legal holiday work) per month, an average of 80 hours (including hours for legal holiday work) per month over two to six months, and 720 hours per year.

Exemptions to statutory working hours

The LSA stipulates certain modified working-hour systems, such as flexitime and annual, monthly or weekly modified working-hour systems. Under these systems, an employer may require its employees to work beyond the statutory working hours to the extent permitted by law.

Exemption for managers

Further, certain employees, such as those in management, are exempted from the regulations on statutory working hours.10 This means that an employer may require the exempted employees to work in excess of the statutory working hours without entering a labour-management agreement.

ii Overtime

The LSA does not require an employer to pay its employees a salary based on working hours. However, it is understood that, in practice, wages and working hours are associated when it comes to overtime pay. Under certain conditions, an employer may let its employees work overtime, with the LSA requiring the following minimum salary premiums for all employees except those who are exempted from the regulations on statutory working hours.

Work in excess of statutory working hours 25%
Work in excess of statutory working hours exceeding 60 hours in a month 50%
Work on statutory days off 35%
Work late at night (between 10pm and 5am) 25%
Work late at night in excess of statutory working hours 50%
Work late at night in excess of statutory working hours exceeding 60 hours in a month 75%
Work late at night on statutory days off 60%

Employees who are exempted from the regulations on statutory working hours (e.g., employees in management) are entitled to a minimum premium of 25 per cent for work late at night (between 10pm and 5am). However, such employees are not entitled to receive the other premiums.

VII FOREIGN WORKERS

There is no limit on the number of foreign workers that an employer can employ. Japanese employment laws are applicable to foreign workers who are employed and work in Japan regardless of whether their employer is a foreign company or a domestic company.

Additionally, an employer must not use the nationality of any employees as a basis for engaging in discriminatory treatment concerning certain working conditions, such as wages and working hours.11

When an employer enters into an employment contract with a foreign person, other than a special permanent resident, it must notify the relevant job-placement office of the person's information, such as name, resident status and date of birth. The employer is also required to give notice to a relevant job-placement office in the case of the person's retirement.

Any foreign national who enters Japan to work must obtain a working visa at a Japanese diplomatic mission abroad. Also, any foreign national must generally receive landing permission when he or she arrives at a port of entry, a time when his or her residence status and period of stay in Japan will be determined. The foreign national can conduct activities within its resident status. The foreign national can only reside in Japan for his or her period of stay. A foreign national who wishes to continue conducting the same activities in Japan with his or her current resident status beyond the period of stay must apply for an extension no later than the last day of the period.

As mentioned in Section IV.iii, there are four types of insurance that are obligatory for employers in Japan. This insurance also covers foreign workers.

All individuals, regardless of nationality, are classified as either residents or non-residents under Japanese tax laws. In general, residents have an obligation to pay income tax on their worldwide income (including salary). By contrast, non-residents are obliged to pay income tax on any income from domestic sources (including salary from employment in Japan).

VIII GLOBAL POLICIES

The adoption of work rules is mandatory for any employer who hires 10 or more employees on a continuing basis. This employer must submit its work rules to the relevant local LSIO.12 When establishing its work rules, an employer must hear an opinion of either a labour union (if applicable) or, if there is no union in the workplace, an employee that represents the majority of the employees at a workplace. When submitting its work rules to the relevant local LSIO, the employer must attach a document stating the opinion.13

The work rules must include the following information:14

  1. working hours (including holiday, leave, shift changes, breaks, and the start and end of the working day);
  2. wages (including the methods for determination, calculation and payment of wages; and the dates for closing accounts for wages and for payment of wages); and
  3. termination (including grounds for dismissal).

Work rules must also cover the following if the employer has a policy relating to these matters:

  1. termination allowances (including the scope of covered employees; methods for determination, calculation and payment of termination allowances; and the dates for payment of such allowances);
  2. special and minimum wages;
  3. the cost to be borne by employees for food, supplies or other expenses;
  4. safety and health;
  5. vocational training;
  6. accident compensation and support for injury or illness outside the course of employment;
  7. commendations and sanctions; and
  8. other matters applicable to all employees at the workplace.

The work rules must not infringe any laws and regulations or any collective agreement applicable to the workplace in question.15

To amend work rules, the employer must request an opinion on its amendment from either a union or an employee (if there is no union in the workplace) that represents the majority of the employees at the workplace. The employer and the employees may, by agreement, amend the work rules. However, if (1) the employer informs its employees of the changed work rules, and (2) the changed work rules set forth reasonable working conditions in light of relevant circumstances (such as disadvantages to be incurred by the employees; the need for the change; the contents of the changed work rules; and the status of negotiations with a labour union or a representative employee), the employer may amend its work rules without the employees' consent.

IX TRANSLATION

When employing foreign workers, an employer is not required to provide the worker with relevant documents (e.g., work rules and employment agreement) in a language that he or she understands. However, to avoid conflicts, it is appropriate to explain key working conditions in a language comprehensible to foreign workers so that they can understand the terms and conditions of their employment contracts. Furthermore, an employer should display warning letters, and health and safety rules at a workplace, both written in languages employees understand. If an industrial accident happens under a situation where there is no such display at a workplace, the situation will be regarded as evidence that an employer has not complied with its duties of safety and of safety education.

X EMPLOYEE REPRESENTATION

There is no definition of employee representation under Japanese law. However, in certain situations, the LSA requires that an employer hear an opinion of or enter into a labour-management agreement with either a labour union organised by a majority of the employees at a workplace (where such a union exists) or a person representing the majority of the employees at a workplace (where a union does not exist). While in practice, the union or representative is referred to as an employee representative, this is very different to the works councils established and regulated in many European countries. When the employees at a workplace select a person to represent them, the person must be selected through a democratic process. Further, the employees cannot select a person in management as their representative. The employee representative is an ad hoc representative, so, in general, there is no term for the representative.

On the other hand, where an employer enters into a collective agreement concerning working conditions, a labour union will be party to that agreement. The Constitution of Japan guarantees workers' right to organise, and to bargain and act collectively, so a labour union must remain independent from an employer. In contrast to the United States and Europe, corporate unions are more popular than industry unions in Japan. Once a collective agreement is executed, any employment agreement that does not meet working conditions under the collective agreement will be void and replaced with the collective agreement. In a case of collective bargaining, an employer must negotiate in good faith with a labour union.

XI DATA PROTECTION

i Requirements for registration

Data protection in Japan is governed by the Act on the Protection of Personal Information (APPI). The APPI was amended on 3 September 2015. The amendment included clarification on the definition of personal information, the establishment of the Personal Information Protection Commission and the introduction of provisions relating to sensitive information. There is no required registration in relation to data protection under Japanese laws.

When handling personal information, a company shall, as far as possible, specify the purpose for its use of personal information (the purpose).16 In principle, no company can handle personal information beyond the scope necessary to achieve the purpose without obtaining the prior consent of the data subject.17

When acquiring personal information, a company must promptly notify the person of, or publicly announce, the purpose, unless the company has already publicly announced it.18 In addition, when a company directly acquires personal information from a person in writing, the company must expressly show its purpose to the person in advance.19

A company must not, in principle, provide any personal data to any third parties without obtaining the prior consent of the person.20

A company must keep personal data accurate and up to date within the scope necessary for the achievement of the purpose. Once the purpose is achieved, a company needs to delete personal data without delay.21 Also, a company must take necessary and proper measures for the prevention of leakage, loss or damage, and for other security control of the personal data.22 A company must exercise necessary and appropriate supervision over its employees to ensure the security control of the personal data.23

ii Cross-border data transfers

A company must, in principle, obtain the prior consent of the person when it provides personal data to any third party.24 The same shall apply for cross-border transfer of personal data.25

A company does not have to obtain the prior consent of the person in cases that are not regarded as the transfer of personal information to a third party.26 The same shall apply for the cross-border transfer of personal data if a company provides personal data to (1) any third party in a foreign country that has regulations for personal information protection at the same level as Japanese regulations, or (2) any third party in a foreign country who puts into place a system compliant with the standards prescribed by rules of the Personal Information Protection Commission as is necessary to continuously take measures corresponding with measures that business operators handling personal information ought to carry out pursuant to certain provisions under APPI with regard to the handling of personal data.27

iii Sensitive data

The amendment of the APPI defines sensitive information as personal information that contains descriptions that have been specified by Cabinet Order to require special consideration in handling so as to avoid any unfair discrimination, prejudice or other disadvantage to an individual based on his or her race, creed, social status, medical history, criminal records or the fact that a person has incurred damages through an offence, etc.28 A company must not acquire sensitive personal information without obtaining the person's consent to do so, except in certain circumstances.29

Certain guidelines also set forth additional rules concerning sensitive personal information, such as information relating to race, ethnic group, social status, family origin, income and medical records. Further, if a company abusively uses such sensitive information, this may be regarded as a violation of privacy or an invasion of personal rights, in which case the company may be held liable for damages arising from the violation or invasion.

iv Background checks

As an employer has the freedom to employ applicants of its choosing, it may collect personal information about applicants (such as information related to their credit records), to a reasonable extent, as part of a background check. However, when collecting sensitive information, such as criminal records, an employer must obtain the applicant's consent to do so.

The collection of sensitive information needs to be carried out by commonly accepted proper methods and care must be taken to respect applicants' privacy.

XII DISCONTINUING EMPLOYMENT

i Dismissal

As a general rule, employment will only be terminated for cause by an employer in Japan. There is no concept of termination 'at will'.

Cause for dismissal includes poor performance, repeated misconduct, serious misconduct, redundancy and medical incapacity. However, an employer's right to dismiss its employee is severely restricted. Article 16 of the LCA stipulates that a dismissal will, if it lacks objectively reasonable grounds and is not considered to be appropriate in general societal terms, be treated as an abuse of right and be invalid.

Other laws (such as the LSA) set forth certain restrictions on dismissals, such as during maternity leave or medical treatment of work-related injury.

Where an employer wishes to dismiss its employee, the employer must provide at least 30 days' advance notice. An employer who does not give the 30-day notice is required to pay the average wage for no less than 30 days, except under certain conditions.30 An employer is not generally required to give notice to a works council or trade union when the employer dismisses its employee.

Based on its work rules, an employer may dismiss its employee because of a disciplinary action (punitive dismissal). In a case of punitive dismissal, courts will judge the validity of the dismissal pursuant to Articles 15 and 16 of the LCA.31

ii Redundancies

As mentioned in subsection i, the validity of the redundancy is also judged by whether it lacks objectively reasonable grounds and whether it is considered to be appropriate in general societal terms. Under case law, for redundancies to be deemed reasonable and appropriate, the following criteria must be met:

  1. Necessity: the business circumstances of the employer are in a situation that renders redundancies unavoidable and necessary.
  2. Efforts to avoid redundancy: in short, redundancies should be the measure of last resort.
  3. Reasonable selection: the standards for selection of employees who are subject to redundancies were reasonable and redundancies were fairly carried out.
  4. Reasonable process: the employer conducted sufficient consultations with its employees and labour unions.

XIII TRANSFER OF BUSINESS

i Merger

In a merger, employment contracts between a target company and its employees shall be automatically transferred to an acquiring company. Therefore, employees of the target company shall be employees of the acquiring company as of the effective date of the merger. Employees' working conditions remain the same at the acquiring company, so they are not materially disadvantaged. This is why there is no specific Japanese labour law to protect employees affected by a merger.

ii Asset transfer

In a case of asset transfer, each asset (including employment contracts) shall be transferred from a seller to a purchaser according to an asset purchase agreement. However, Japanese law requires employers to obtain consent from each employee to validly transfer their employment contracts to the purchaser. The employees may decide whether they continue working at their current employer, so there is no specific Japanese labour law to protect employees affected by asset transfer.

iii Company split

In a case of a company split, a part or all of the company's assets and liabilities (including employment contracts) constituting a particular business of a seller shall be transferred from a seller to an acquirer based on a company split plan or agreement. While the Companies Act sets forth general procedures for the company, the Labour Contract Succession Law regulates the transfer of employment contracts in a company split because of the impact of the split on employees.

XIV OUTLOOK

The most important issue regarding employment in Japan is the reduction in the labour force as a result of the declining birth rate, ageing society and a declining population. To solve this issue, the Diet is discussing the amendment of the Immigration Control Law to accept more foreign workers from other countries. It is expected that the status of residence for foreign workers will be expanded to unskilled labour, such as construction work.

However, it is recognised that there are human rights issues regarding foreign workers who come to Japan with foreign trainee or technical intern visa status. Among other things, working conditions are very poor and workers are not allowed to change their job under these visas. In addition, many foreign students obtain a student visa to come to Japan for work and not for study. As the country is experiencing a labour shortage, chain stores (e.g., convenience stores and restaurant chains) cannot continue their operations without foreign workers, most of whom are students. Despite the requirement for labour, it is generally argued that these issues must be dealt with before accepting more foreign workers into the country.


Footnotes

1 Shione Kinoshita, Shiho Azuma and Yuki Minato are partners, and Hideaki Saito, Hiroaki Koyama, Keisuke Tomida, Emi Hayashi, Tomoaki Ikeda and Momoko Koga are associates, at Dai-ichi Fuyo Law Office.

2 The Act on Securing, etc. of Equal Opportunity and Treatment between Men and Women in Employment.

3 The Act on the Welfare of Workers Who Take Care of Children or Other Family Members Including Child Care and Family Care Leave.

4 The Act on Improvement, etc. of Employment Management for Part-time Workers.

5 Such as wages, working hours, term of contract, workplace and the nature of the work.

6 Article 15, Paragraph 1 of the LSA.

7 Article 32 of the LSA.

8 Article 119, Paragraph 1 of the LSA.

9 Article 36 of the LSA.

10 Article 41 of the LSA.

11 Article 3 of the LSA.

12 Article 89 of the LSA.

13 Article 90 of the LSA.

14 Items 1–3, Article 89 of the LSA.

15 Article 92 of the LSA.

16 Article 15, Paragraph 1 of the APPI.

17 Article 16, Paragraph 1 of the APPI.

18 Article 18, Paragraph 1 of the APPI.

19 Article 18, Paragraph 2 of the APPI.

20 Article 23, Paragraph 1 of the APPI.

21 Article 19 of the APPI.

22 Article 20 of the APPI.

23 Article 21 of the APPI.

24 Article 23, Paragraph 1 of the APPI.

25 Article 24 of the APPI.

26 The cases are stipulated in Article 23, Paragraph 5 of the APPI.

27 Article 24 of the APPI.

28 Article 2, Paragraph 3 of the APPI.

29 Article 17, Paragraph 2 of the APPI.

30 Article 20 of the LSA.

31 Article 15 of the LCA stipulates that 'in a case where an employer takes disciplinary action against its employee, if the disciplinary action lacks objectively reasonable grounds and is not found to be appropriate in general societal terms in light of the characteristics and mode of the act committed by the worker pertaining to the disciplinary action and any other circumstances, the disciplinary order will be treated as an abuse of right and be invalid.'