The Employment Law Review: Japan

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 the Second World War and based on the Constitution of Japan.

The Labour Contract Act (LCA), enacted in 2007, 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 gender. 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 by the worker dispatching system. As a result, the worker dispatching system was considered a social problem, so the WDA was further amended in 2012 and in September 2015.

Each labour law has a different supervision and conflict resolution system, so the system as a whole is complicated. The LUA stipulates a system of labour relations commissions, whereby 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 these types of disputes. Local labour departments (government agencies) also conduct mediations to settle these disputes.

The Labour Standards Inspection Office 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.

Year in review

One of the most major legal amendments in 2020 was the amendment of the Civil Law. As the Civil Law regulates the basic legal framework regarding civil matters in Japan and the amendment changed the regulation for the statute of limitation, the LSA was amended to extend the period of statute of limitation for wage claims (enforced on 1 April 2020) in relation to the amendment of the Civil Law.

In addition, the Industrial Accident Compensation Insurance Act was amended (enforced on 1 September 2020) in respect of individuals who work for multiple employers.

Major decisions held by the Supreme Court during 2020 concerned whether certain differences in working conditions between open-term, full-time (regular) and fixed-term employees is unreasonable, and then void in several cases (see Section III).

Significant cases

There were five noteworthy cases of the Supreme Court in 2020, all of which relate to fixed-term employment. The main legal issues in these cases concerned working conditions for a fixed-term employee and how they differ from those for an open-term employee and where both types of employees are hired by the same employer, whether the conditions for the fixed-term employees are regarded as 'unreasonable working conditions' under former Article 20 of the LCA.

i Educational Foundation of Osaka Medical and Pharmaceutical

The plaintiff was an employee with administrative duties on a fixed-term contract. His employment agreement was renewed three times. The plaintiff argued that he did not receive bonuses or wages for absences because of personal injuries and sicknesses, to which regular employees were entitled, and that these working conditions should be regarded as unreasonable. On 13 October 2020, the Supreme Court held that there was no violation of Article 20 of the LCA in respect of either bonuses or payment during absences for sickness.

Since bonuses for regular employees included the purpose of deferred payment and uniform remuneration for services, and that the amount paid to fixed-term employees was only about 55 per cent of the total amount of basic salary and bonuses for regular employees, the difference in bonuses was deemed not to be unreasonable.

The purpose of absence due to personal injuries and sicknesses is to ensure the livelihood of regular employees who work or are expected to work for a long period, and to maintain and secure their employment. Therefore, the fact that wages for absence due to a personal injury or sickness were not granted to fixed-term employees is not unreasonable.

ii Metro Commerce

The main issue in this case (held on 13 October 2020) was also whether there being a difference between the salaries of regular employees and fixed-term employees should be regarded as unreasonable working conditions.

The Supreme Court held that the fact that retirement allowance is granted to regular employees but not to fixed-term employees is not unreasonable. This is because the payment of the retirement allowance is of a complex nature, consisting of deferred payment of consideration for labour and rewards for continuous service, among other things, and the purpose of the retirement allowance is to secure and retain personnel who can perform the duties of a regular employee.

iii Japan Post Co Ltd (Tokyo case, Osaka case, Saga case)

Fixed-term employees who were engaged in mail delivery and package pickup services claimed that differences in allowances, among other benefits, between them and regular employees should be regarded as unreasonable working conditions. On 15 October 2020, the Supreme Court held as follows

Disputed differences between fixed-term and regular employeesWhether difference violates Article 20 of the LCAReasons
Tokyo case
Year-end and new year work allowanceViolatesRegardless of the nature of the work and the difficulty in performing the work, the payment is based on actual work during a given period (i.e., year-end and new year); the amount of payment is uniform according to the period and time of work; and the purpose of the payment of the allowance is appropriate for fixed-term employees. Therefore, the granting of year-end and new year work allowances as part of working conditions to regular employees but not to fixed-term employees is unreasonable and void.
Sickness leaveViolatesThe purpose of granting paid sickness leave is to give employees a benefit to work continuously. This purpose applies equally to regular employees and fixed-term employees who work continuously. Therefore, the granting of sickness leave as part of working conditions to regular employees but not to fixed-term employees is unreasonable and void.
Osaka case
Year-end and new year work allowanceViolatesSee Tokyo case.
Holiday allowance for new year periodViolatesThe purpose of providing holiday allowance is to provide consideration work carried out during the new year period. If regular employees work at new year, the holiday allowance will be paid. If fixed-term employees work at new year, there is no reason not to pay holiday allowance to them. Therefore, the granting of holiday allowance as part of working conditions to regular employees but not to fixed-term employees is unreasonable and void.
Family allowanceViolatesThe purpose of providing family allowance is to provide benefit for employees who have dependants and are expected to work continuously. This purpose applies equally to regular employees and fixed-term employees. Therefore, the granting of family allowance as part of working conditions to regular employees but not to fixed-term employees is unreasonable and void.
Saga case
Summer/winter leaveViolatesThe purpose of summer/winter leave is to give employees opportunities to get away from work and recover both physically and mentally. This purpose applies to both regular employees and fixed-term employees. Therefore, the fact that summer/winter leave is granted as part of working conditions to regular employees but not to fixed-term employees is unreasonable and void.

Basics of entering into 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 in place working rules that stipulate reasonable working conditions and has informed its employees of those rules, the contents of an employment contract shall be based on the working conditions provided by the working rules without the requirement of consent from the job applicant. A job applicant and an employer may enter into or change, by agreement, an employment contract that includes working conditions that differ from those under the working rules. However, any parts of an employment contract that stipulate working conditions that do not meet the standards established by the working rules shall be invalid. In this case, the invalid portions shall be governed by the standards established by the working rules.

There is no statutory requirement concerning the form of an employment contract, so an employer and a job applicant may enter into an employment contract orally. 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 working conditions5 before or on 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 working rules.

Fixed-term employment is lawful, but the term of the agreement 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 working rules. They range from one to six months and are typically three months. Extremely long probationary periods will be void because of a violation of public policy.

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

iii Establishing a presence

Whether a foreign company is required to register will be depend on its intended business in Japan. If it intends only to conduct preparatory or supplemental tasks (e.g., market surveys or collecting information), it may establish its representative office in Japan without any registration. However, if it intends to operate its business continuously in Japan, it must register with the relevant legal affairs bureau. In these circumstances, although the foreign company does not have to establish a 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 operate its business continuously 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, such as the contractor being authorised to conclude contracts on behalf of the foreign company in Japan. Although 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 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.

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 working 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 working rules, both of which should set 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 working rules, and whether additional and sufficient financial compensation is provided to the former employee.

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

If 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 who represents the majority of employees in the workplace, and then notify the relevant government agency of the agreement.9

The Work Style Reform Act took effect on 1 April 2019. According to this Act, even if a labour management agreement is executed, overtime will, in principle, be capped at 45 hours per month and 360 hours per year. It will be possible for employers to require employees to work more hours when special circumstances exist based on the labour management agreement. However, even under these special circumstances, the maximum limits for overtime 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.

The maximum limits on overtime working hours can be summarised as follows:

In principal45 hours per month and 360 hours per year
In an extraordinary special circumstance720 hours or less per year (overtime only)
Less than 100 hours per month (both overtime and holiday work)
Average of 80 hours or less per month (both overtime and holiday work) over two to six months
Month with more than 45 hours of overtime work should be limited to six times per year

Exemptions to statutory working hours

The LSA stipulates certain modified systems of working hours, such as flexitime and annual, monthly or weekly modified 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

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 into a labour management agreement.

ii Overtime

The LSA does not require an employer to pay its employees a salary based on the number of 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 performed during night hours (i.e., between 10pm and 5am)

25%

Work performed during night hours in excess of statutory working hours

50%

Work performed during night hours in excess of statutory working hours exceeding 60 hours in a month

75%

Work performed during night hours on statutory days off

60%

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

iii Prohibition of unreasonable treatment (employment terms, working hours, etc.)

Before 1 April 2020, Article 20 of the LCA provided that working conditions for fixed-term employees should be balanced with those for open-term employees under the same employer to improve working conditions for irregular workers.

However, on 1 April 2020, Article 20 of the LCA was abolished and the Act on Improvement, etc. of Employment Management for Part-Time Workers was amended to cover managing the employment for fixed-term employees. (The name of the Act was 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 working for the same employer. In addition, under certain special circumstances, working conditions for part-time employees and fixed-term employees should be equal to those for open-term employees working for the same employer. With regard to Article 20 of the LCA, the Supreme Court issued two important decisions on 1 June 2018 and other five important decisions in 2020 (see Section III). Further, many other decisions have been issued in district courts and appeal courts, which 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.

The WDA has also been amended to improve the working conditions for dispatched workers.11 Under current regulations, working conditions for dispatched workers should be in line with those for employees at a company that accepts dispatched workers, unless a labour management agreement exists between a staffing company and the representative of its dispatched workers. These regulations became effective from 1 April 2020.

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 employee as a basis for engaging in discriminatory treatment concerning certain working conditions, such as wages and working hours.12

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 key information about the person, such as name, residency status and date of birth. The employer is also required to give notice to a relevant job placement office 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, and a time when his or her residency status and period of stay in Japan will be determined. The foreign national can conduct activities within its residency status. The foreign national can only reside in Japan for the agreed period of stay. A foreign national who wishes to continue conducting the same activities in Japan within his or her current residency status beyond the period of stay must apply for an extension no later than the last day of the period.

There are four types of insurance that are obligatory for employers in Japan, as mentioned in Section IV.iii, all of which also apply to 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 for employment in Japan).

Global policies

The adoption of working rules is mandatory for any employer who hires 10 or more employees on a continuing basis. The employer must submit its working rules to the relevant local Labour Standards Inspection Office (LSIO).13 When establishing its working rules, an employer must seek the 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 in the workplace. When submitting its working rules to the relevant local LSIO, the employer must attach a document stating the opinion of the labour union or employee representative.14

The working rules must include the following information:15

  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).

Working rules must also cover the following if the employer has a policy relating to any or all of 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 an injury or illness that does not arise during the course of employment;
  7. commendations and sanctions; and
  8. other matters applicable to all employees at the workplace.

The working rules must not infringe any laws and regulations or any collective agreement applicable to the workplace in question.16

To amend working rules, the employer must request an opinion on its amendment from either a union or, if there is no union in the workplace, an employee who represents the majority of the employees in the workplace. The employer and the employees may, by agreement, amend the working rules. However, if (1) the employer informs its employees of changes to working rules, and (2) the changed working 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 working rules and the status of negotiations with a labour union or a representative employee), the employer may amend its working rules without the employees' consent.

Parental leave

i Maternity leave

If a woman requests to take pre-childbirth leave when she is due to give birth within six weeks (or within 14 weeks in the case of a multiple birth), the employer is not permitted to require the employee to work during this time. Further, an employer cannot require a woman to work for eight weeks after childbirth (post-childbirth leave). However, this does not prevent an employer from permitting a woman to return to work sooner, when she has requested to do so, when certain requirements are met. In this case, the mother may return to work six weeks after childbirth.

ii Parental leave

An employee can request parental or childcare leave to care for a child less than one year old (or, in certain situations, less than one and half or two years old).

The employer may not refuse a request for childcare leave by any employee except those who (1) are employed for a specified term who meet certain conditions, (2) are employed on a per diem basis, and (3) belong to certain categories as specified in a labour management agreement made with a union or an employee representing a majority of the employees.

Translation

When employing foreign workers, an employer is not required to provide the worker with relevant documents (e.g., working rules and an 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 in the workplace, both written in languages employees understand. If an industrial accident happens in a situation where there is no such display at a workplace, the circumstances will be regarded as evidence that an employer has not complied with its duties of safety and of safety education.

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 a union exists) or a person representing the majority of the employees at a workplace (where a union does not exist). Although, in practice, the union or representative is referred to as an employee representative, this is very different from 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 of service for the representative.

However, when 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.

Data protection

i Requirements for registration

Data protection in Japan is governed by the Act on the Protection of Personal Information (APPI), which 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 data. 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).17 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.18

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.19 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.20

A company must not, in principle, provide any personal data to any third parties without obtaining the prior consent of the person.21

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 must delete personal data without delay.22 Also, a company must take necessary and proper measures for the prevention of leaks, loss or damage, and for other security control of the personal data.23 A company must exercise necessary and appropriate supervision over its employees to ensure the security control of the personal data.24

ii Cross-border data transfers

A company must, in principle, obtain the prior consent of the person (the data subject) when it provides the data subject's personal data to any third party.25 The same shall apply for cross-border transfers of personal data.26

A company does not have to obtain the prior consent of the data subject in cases that are not regarded as the transfer of personal information to a third party.27 The same shall apply to 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 the APPI with regard to the handling of personal data.28

iii Sensitive data

The amendment of the APPI defines sensitive data 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 record or the fact that a person has incurred damages through an offence, etc.29 A company must not acquire sensitive personal information without obtaining the data subject's consent to do so, except in certain circumstances.30

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

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

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'.

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

It is considered that dismissal because of poor performance is one of the most difficult cases at trial. Employment law in Japan is very protective of employees and a heavy burden is placed on employers to prove reasonable cause in all cases of dismissal. Therefore, an employer must prepare and collect detailed facts and evidence showing the employee is actually underperforming. The evidence should be objective, such as written warning letters, a written performance improvement plan, and emails with detailed facts expressing that the employee is underperforming.

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

If an employer wishes to dismiss an 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 fewer than 30 days, except under certain conditions.31 An employer is not generally required to give notice to a works council or trade union when an employee is dismissed.

Based on its working rules, an employer may dismiss an employee because of a disciplinary action (punitive dismissal). In the case of a punitive dismissal, the courts will judge the validity of the dismissal pursuant to Articles 15 and 16 of the LCA.32

ii Redundancies

As with any dismissal, as discussed in Section XIII.i, the validity of a redundancy is judged by whether there are objectively reasonable grounds and whether it is considered appropriate in general societal terms. However, in general, redundancy will not become a reasonable cause for termination under case law in Japan, except in special circumstances, such as when an employer has no option other than redundancy to avoid going bankrupt.

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 redundancy were reasonable and the redundancies were carried out fairly; and
  4. reasonable process: the employer conducted sufficient consultations with its employees and labour unions.

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 the event of a transfer of assets, 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 ensure the validity of the transfer of the employment contracts to the purchaser. The employees may decide whether they continue working for their current employer, so there is no specific Japanese labour law to protect employees affected by asset transfer.

iii Company split

In the event 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 to follow, the Labour Contract Succession Law regulates the transfer of employment contracts in a company split because of the consequences of a split on employees.

Outlook

Because of the covid-19 pandemic, many companies temporarily let their employees work from home in 2020. In fact, many companies are now considering introducing a permanent system for working from home. Under Japanese Employment Law, an employer may order and decide where its employees work. When considering introducing a permanent system for working from home, it is essential that an employer analyses the roles and job duties of each category of its employees. For instance, an employer should consider whether it is essential that certain employees need to be in the office to perform their roles and job duties. After making such an analysis, an employer should decide the scope of employees who will be allowed to work from home. Tax and social insurance issues should also be considered when contemplating and deciding on a system for working form home.

Regarding major legal amendments in 2021, the Act on the Stabilisation of Employment of Elderly Persons was amended to require that employers are obliged to make efforts to ensure employment for employees until the age of 70. The Act will come into effect on 1 April 2021.

Footnotes

1 Shione Kinoshita, Shiho Azuma, Hideaki Saito, Yuki Minato and Hiroaki Koyama are partners, and Yukiko Machida, Emi Hayashi, Momoko Koga, Takeaki Ohno and Misaho Takagi are associates at Dai-ichi Fuyo Law Office.

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

3 In full, the Act on the Welfare of Workers Who Take Care of Children or Other Family Members, including Child Care and Family Care Leave.

4 In full, the Act on Improvement, etc. of Employment Management for Part-Time Workers and Fixed-Term Workers.

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

6 Labour Standards Act [LSA], Article 15, Paragraph 1.

7 id., at Article 32.

8 id., at Article 119, Paragraph 1.

9 id., at Article 36.

10 id., at Article 41.

11 'Dispatched workers' are temporary or agency workers. When a staff agency company sends its employees to another company, those employees are also referred to as dispatched workers. Under Japanese employment law, there is no concept of dual employer; such employees are called dispatched workers.

12 id., at Article 3.

13 id., at Article 89.

14 id., at Article 90.

15 id., at Article 89, Items 1 to 3.

16 id., at Article 92.

17 Act on the Protection of Personal Information [APPI], Article 15, Paragraph 1.

18 APPI, Article 16, Paragraph 1.

19 id., at Article 18, Paragraph 1.

20 id., at Article 18, Paragraph 2.

21 id., at Article 23, Paragraph 1.

22 id., at Article 19.

23 id., at Article 20.

24 id., at Article 21.

25 id., at Article 23, Paragraph 1.

26 id., at Article 24.

27 The cases are stipulated in APPI, at Article 23, Paragraph 5.

28 APPI, Article 24.

29 id., at Article 2, Paragraph 3.

30 id., at Article 17, Paragraph 2.

31 LSA, Article 20.

32 Article 15 of the Labour Contract Act 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'.

Get unlimited access to all The Law Reviews content