Use the Lexology Navigator tool to compare the answers in this article with those from other jurisdictions.

Termination

Notice
Are employers required to give notice of termination?

There is a minimum 30-day notice period before an employer can dismiss an employee. If the employer does not wish the employee to work any part of this notice period, it can pay his or her salary in lieu of notice. Although this procedure is cumbersome and seldom applied in practice, no notice is required where the employer summarily dismisses the employee for serious misconduct, as long as it has obtained the local Labour Standards Inspection Office’s consent.

Employers may terminate an employment contract for just cause only. Dismissed employees can claim reinstatement and salary based on the invalidity of the dismissal or compensation for unfair dismissal, unless the employer can show that there was a serious and objective reason for dismissal (eg, misconduct, incapacity, illegality, redundancy or some other substantial reason). The misconduct or breach of law must be serious in order to meet the stringent Japanese court standards. Unless the employer’s case is strong (including its evidence), a customary and safer alternative to dismissal is for the employer to request that the employee resign. Resignation offers are made on an individual basis and employees need not accept them. Financial incentives are normally offered in order to encourage employees to accept resignation offers. The arrangement can be documented in a separation agreement covering the separation package, waivers and releases and restrictive covenants.

Redundancies
What are the rules that govern redundancy procedures?

Streamlining a workforce is often a complicated and costly process. Employers can terminate employees for compelling reasons only – for example, where the employer faces significant economic necessity or reasonable operational necessity and thus a reduction in workforce is unavoidable.

The Supreme Court has established the following conditions, which employers must meet in order to lay off employees in this context:

  • The employer must be in a poor financial situation, making the need to act imperative.
  • The employer must attempt to cut costs and expenses, and reassign employees to other positions within the organisation.
  • The employer must establish appropriate and rational selection criteria.
  • The employer must provide proper explanations to the employees concerned.

Where a company is being liquidated, there is enhanced flexibility with regard to terminations, regardless of the employer’s financial circumstances. However, the aforementioned conditions should not be ignored.

When the above conditions are not met, employers can try alternative approaches (eg, voluntary termination, which is governed by court jurisprudence rather than law). Early retirement plans allow employers to offer financial packages to employees in order to encourage them to leave. In contrast, in more customary voluntary retirement plans, employees are offered a financial package to encourage them to resign within a short period (eg, a couple of weeks).

The key to success is to determine which package to offer, target employees without discrimination and get the timing right. This can be a costly process. Packages vary depending on the employee’s industry, rank, age and length of service. Certain compensation figures are published which can be used as a benchmark. As a simpler and cheaper alternative, voluntary termination should be considered where the number of redundancies is limited.

Are there particular rules for collective redundancies/mass layoffs?

Pursuant to the Employment Measures Law, if 30 employees or more are to be made redundant at a given workplace within one month, a termination plan must be prepared listing the employees and detailing the measures taken or to be taken by the employer in order to facilitate job searches. Any comments from relevant labour unions (or, in the absence of a union, an employee representative) must also be included. The employer must notify Hello Work of the proposed redundancies and submit the plan for approval before implementation.

Protections
What protections do employees have on dismissal?

Employees in Japan generally have a high degree of legal protection and the standards for individual termination and redundancy are stringent. Employers must be cautious when terminating any employment relationship and ensure that they comply with the legal and contractual requirements regarding dismissal.

An employee cannot be dismissed while he or she is unable to work due to the treatment of a work-related injury or illness and for 30 days thereafter. Special protection applies to dismissals connected with pregnancy and maternity, parental and family care leave, labour union membership or activities and whistleblowing.

Click here to view the full article.