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Country snapshot

Key considerations
Which issues would you most highlight to someone new to your country?

Japan is a civil law jurisdiction and has the world’s third largest economy. The legal system is developed and comprehensive and the rule of law (ie, legal stability and predictability) prevails.

What do you consider unique to those doing business in your country?

Japan is a civil law jurisdiction and has the world’s third largest economy. The legal system is developed and comprehensive and the rule of law (ie, legal stability and predictability) prevails.

Is there any general advice you would give in the employment area?

Japan is a civil law jurisdiction and has the world’s third largest economy. The legal system is developed and comprehensive and the rule of law (ie, legal stability and predictability) prevails.

Emerging issues/hot topics/proposals for reform
Are there any noteworthy proposals for reform in your jurisdiction?

The Japanese labour system is under pressure, as the job market lacks mobility and elasticity. The traditional model – with its peculiarities of lifelong employment, job security until retirement (for those employed as permanent workers) and seniority-based pay and promotions – has become inefficient, inequitable and controversial. In addition, the number of irregular workers and temporary staff has dramatically increased in the last 30 years and become a major issue. Employment law is gradually being reformed, but the process is slow and the legal framework remains rigid.

Significant reforms to the Workers Dispatch Law (which regulates the use of temporary staff) are being implemented and further revisions are under consideration. White-collar exemption from overtime is also being considered for employees who meet certain criteria. 

What are the emerging trends in employment law in your jurisdiction?

Since the mid-1990s, Japanese companies have met their labour needs by employing more temporary staff and contract workers (ie, non-permanent employees). This has become an important feature of the Japanese labour market.

The Abe government’s policy roadmap seeks to:

  • prevent discrimination between permanent and non-permanent employees (eg, wages and benefits);
  • prevent discrimination between full-time and part-time employees;
  • restrict the use of fixed-term contracts;
  • prevent the long-term use of non-permanent status (through successive renewals of fixed-term contracts); and
  • promote the continued employment of elderly employees (ie, 65 years of age and older).

The employment relationship

Country specific laws
What laws and regulations govern the employment relationship?

The main laws governing the employment relationship are the Labour Standards Law and the Employment Contract Law. Other relevant laws include:

  • the Civil Code;
  • the Law on Securing Equal Opportunity and Treatment between Men and Women in Employment;
  • the Employment Measures Law;
  • the Law concerning the Stability of Employment of the Elderly;
  • the Part-Time Workers Employment Improvement Law;
  • the Law concerning the Proper Operation of Worker Dispatch Undertakings and Improved Wording Conditions for Dispatched Workers;
  • the Child Care Leave and Family Care Leave Law;
  • the Labour Safety and Health Law;
  • the Labour Tribunal Dispute Resolution Law;
  • the Labour Union Law; and
  • the laws governing labour insurance and social insurance.  

Who do these cover, including categories of worker?

In principle, the employment laws apply equally to all employees. The government is trying to reduce status inequalities between the various categories of worker (eg, regular employees and non-permanent contract staff).

Regular employees are usually hired pursuant to an indefinite contract. Fixed-term contracts are usually used for irregular employees and temporary workers, although they can be used for long-term employees. Part-time workers can have fixed-term or indefinite contracts; their working hours are shorter than those of regular full-time employees. Within the part-time category, workers who can be hired by the day or hour (the so-called ‘arubaito’ class) belong to the most precarious class of worker. Fixed-term contracts may not exceed three or five years, depending on the circumstances.

Employers need not renew fixed-term contracts. However, if a contract has been renewed several times and the employee can reasonably expect renewal, the courts can require the employer to justify a refusal. The Employment Contract Law provides that, unless the employer has objective and socially acceptable reasons, it cannot refuse to renew a fixed-term employment contract which has been repeatedly renewed, as refusal may be construed as termination of an indefinite employment contract (ie, dismissal). The same applies where the employee can reasonably expect his or her contract to be renewed. A fixed-term employment contract that is renewed for more than five years (starting from April 2013) can be converted into an indefinite contract at the employee’s request.

With effect from April 1 2015, fixed-term employees/part-time employees must be treated at least the same as comparable permanent/full-time employees in relation to the terms and conditions of their employment (eg, job descriptions, level of responsibilities and human resources management systems in relation to changes to job descriptions and reassignment).

Misclassification
Are there specific rules regarding employee/contractor classification?

In principle, a representative director of a joint stock company may not be an employee of the company that he or she is heading. As such, a contract for services or an entrustment agreement is generally advisable to clarify the representative director’s rights and obligations. Directors are regulated by the Companies Act.

The Workers Dispatch Law is becoming increasingly restrictive. Effective from October 2015, if a temporary agency staff contract with a temporary staffing agency is in breach of the law (eg, the temporary agency is not licensed, an employee has been dispatched beyond the maximum statutory term or there is a disguised outsourcing arrangement), the employee will be deemed to be directly employed by the host company as a regular employee.

Depending on the circumstances, an independent contractor can apply to have a contractual relationship requalified as employment in order to claim compensation for unfair dismissal.

Contracts
Must an employment contract be in writing?

Employment contracts may be made orally or in writing. A written contract or an employment letter is advisable. Contracts can be minimal if supported by work rules.

By law, employees must be provided with key employment terms and conditions (eg, relating to salary, place of work and working hours) in writing when they are hired. These particulars can be set out in a written contract to the extent that they are not already set out in the work rules remitted to the employee.

‘Work rules’ are specific rules for the workplace. They set out working conditions, including in relation to:

  • wages;
  • working hours and breaks;
  • holidays; and
  • rules with which employees must comply, including disciplinary procedures.

Employers with 10 or more employees at a given workplace must adopt work rules and file them with the local Labour Standards Inspection Office. Employers with fewer employees can create work rules on a voluntary basis.

Are any terms implied into employment contracts?

In general, contracts cannot remove statutory employee protections. Case law protects employees – in particular, with regard to dismissals. Implied terms are found in the relevant laws and regulations. In addition, where they exist, work rules are considered to be incorporated (expressly or impliedly) in employees’ employment contracts. Contract provisions (except for better terms) are considered invalid if they do not align with the work rules. Further, contracts cannot lower the standards outlined in the work rules. Terms that are favourable to the employee within the work rules or the law will override less favourable terms in the employment contract.

Collective agreements between an employer and labour union may be incorporated (expressly or impliedly) in the employment terms.

Are mandatory arbitration/dispute resolution agreements enforceable?

Private arbitration is uncommon in employment disputes. Arbitration agreements are enforceable, provided that they are made after a dispute has arisen. 

How can employers make changes to existing employment agreements?

The answer depends on the nature of the changes and the structure of the employment terms (ie, whether they are contained in a standalone contract or a contract supplemented by work rules).

Employers and employees can agree to changes. An agreement between a labour union and employer can affect individual agreements without the employee’s consent, but this is unusual. Compensation or base salary cannot be reduced unilaterally, regardless of what the contract states. However, employers generally have a right to:

  • make changes to job descriptions and positions (when clearly described in the contract);
  • reassign and redeploy employees (except in relation to restricted permanent employees); and
  • second employees to another company within the corporate group.

These rights are often supported by the work rules. Such decisions must consider the employee’s circumstances.

If an employer has established work rules, individual employment contracts need not include the employee’s working conditions (ie, wages, working hours and breaks, holidays and disciplinary procedures). However, this does not mean that altering the rules is a simple process.  

Under the Employment Contract Law, unless agreed with the employee, an employer cannot make detrimental changes to the working conditions set out in an employee’s employment contract by changing the work rules. However, changes to an employee’s working conditions will be permitted if:

  • the employer informs the employee of the changes; and
  • the changes are reasonable and consider:
    • any disadvantage to the employee;
    • the need for the change;
    • the appropriateness of the revised rules;
    • the status of any negotiations with labour unions or the like; and
    • any other relevant circumstances.

This does not apply to individual contract provisions that the employer and employee have agreed cannot be amended by revising the rules.

Foreign workers
Is a distinction drawn between local and foreign workers?

Foreign workers must satisfy immigration requirements in order to work in Japan. Visa requirements do not apply to nationals of countries with which Japan has reciprocal exemption arrangements. Foreign nationals who wish to work in Japan must select their residence status based on their circumstances and qualifications. A foreign worker’s residence status is the basis on which he or she can stay in Japan and carry out the activities listed in the Immigration Control and Refugee Recognition Act (eg, perform duties as an investor, manager, accountant, engineer, humanities or international services specialist or skilled labour). The employer must inform Hello Work (a government-run agency with offices throughout Japan) if it hires a foreign employee.

Japan has entered into social security agreements with a number of countries, including Germany, the United Kingdom, the United States, Belgium, France, Canada, Australia, South Korea, Brazil and the Netherlands. Individuals who are insured under pension and social security schemes from one of these countries may be exempt from enrolling in Japan’s pension scheme and paying social security insurance premiums depending on the scope of the bilateral agreement.

Foreign nationals working in Japan are subject to Japanese employment laws, even if the laws of another jurisdiction govern their contract.

Recruitment

Advertising
What are the requirements relating to advertising positions?

Employers can recruit through a variety of sources (eg, media and graduate career fairs). Executive search agencies are commonly used for senior and professional staff. The Hello Work network offers free support to employers looking for employees.

Positions can be freely advertised, subject to certain restrictions. For instance, under the Law on Securing Equal Opportunity and Treatment between Men and Women in Employment, employers must offer the same employment opportunities to women and men (although, in practice, this is not necessarily reflected in ads). 

Background checks
What can employers do with regard to background checks and inquiries in relation to the following:

(a) Criminal records?

Employers cannot directly access criminal records. They can ask employees to provide extracts of any criminal records (a cumbersome procedure), but this is unusual.

(b) Medical history?

Employers can inquire about an applicant’s medical history, provided that any inquiry is consistent with the purpose of the interview. In addition, the Labour Safety and Health Law – which promotes the prevention of worker illness and injury – provides that medical examinations may be performed during initial hire and at least yearly.

(c) Drug screening?

Drug screening is possible (depending on the nature of the job), but is unusual. 

(d) Credit checks?

Credit checks are not customary, as they are not considered directly relevant.

(e) Immigration status?

The immigration status of all foreign employees must be checked, as it is a criminal offence to employ someone who is subject to immigration control without the appropriate permission to work in Japan.

(f) Social media?

Employers can check social media accounts in order to check references, past convictions or any trouble with the law. 

(g) Other?

As it is extremely difficult to dismiss employees in Japan, the freedoms surrounding the pre-hiring and pre-screening process are broad. That said, certain background checks are prohibited (eg, checking whether a prospective employee belongs to the burakumin community).

Wages and working time

Pay
Is there a national minimum wage and, if so, what is it?

The Minimum Wage Law provides for a minimum wage. Wages differ per region and industry and the minimum hourly wage in Tokyo is Y888. 

Are there restrictions on working hours?

The statutory working week is 40 hours per week or eight hours per day, excluding breaks. This statutory requirement is subject to a number of business-related exceptions, under which 44-hour working weeks are acceptable. Employers must obtain and file a labour management agreement (Article 36 of the Labour Standards Law) with the Labour Standards Inspection Office if they wish employees to work over the statutory working hours or on statutory days off. Strictly speaking, there is no legal limit on the extension of working hours (except for hazardous work), provided that an Article 36 agreement has been filed.

Certain standards contained in the Labour Standards Law are designed to moderate overtime work (although a labour management agreement will prevail over these standards). The standard overtime work limits are as follows:

  • one week – 15 hours;
  • two weeks – 27 hours;
  • four weeks – 43 hours;
  • one month – 45 hours;
  • two months – 81 hours;
  • three months – 120 hours; and
  • one year – 360 hours.

Employees working over the statutory working hours, on statutory days off or late-night hours (between 10:00pm and 5:00am) must receive overtime pay. Managers are not subject to the regulations on working hours, breaks and days off (except for late-night work), but the definition of a ‘manager’ in this context is narrowly construed by the labour authorities and courts. 

Hours and overtime
What are the requirements for meal and rest breaks?

Employees are entitled to at least a 45-minute break for six hours of work and a one-hour break for eight hours of work. In practice, one-hour breaks are often provided even if an employee works less than eight hours. In principle, rest periods must be provided to all employees at the same time (exceptions can be made through a labour management agreement).

How should overtime be calculated?

Overtime generally must be paid for all hours worked over the statutory limits. Enhanced rates apply for overtime work and for hours worked on statutory holidays:

  • overtime exceeding the statutory working hours – 25%;
  • overtime in excess of the statutory working hours, exceeding 60 hours in one month – 50% (this does not apply to small and medium-sized enterprises, as defined by reference to the industry sector);
  • work on statutory days off – 35%;
  • late-night work (between 10:00pm and 5:00am) – 25%;
  • late-night work exceeding the statutory working hours – 50%;
  • late-night work over the statutory working hours, exceeding 60 hours in one month – 75% (this does not apply to small and medium-sized enterprises, as defined by reference to the industry sector); and
  • late-night work on statutory days off – 60%. 

What exemptions are there from overtime?

Managers are generally not paid for overtime. For overtime purposes, the term ‘manager’ is narrowly interpreted. The government is considering whether to relax the rules on overtime and extend the white-collar exemption to workers who:

  • have a clear scope of duties;
  • earn over Y10 million per year; and
  • are engaged in a highly specialised activity (provided that some close healthcare/medical supervision is organised).

Certain schemes can be used to minimise the financial burden of overtime payments:

  • Irregular working hours scheme – this scheme applies to employers whose business is seasonal and fluctuates. Where working hours cannot be regularly prescribed, an averaging system may provide interesting options for employers. Under an averaging system, working hours will not be treated as exceeding the maximum working hours, as long as the average number of prescribed hours does not exceed the weekly legal standards within a given period. A labour management agreement is required to implement this scheme.
  • Deemed working hours – this scheme can be used for employees who work remotely. The assumption is that the work is effectively performed during working hours.
  • Discretionary work – this scheme applies where the employer gives broad directions and the employee has significant discretion regarding how to perform the work. The scheme covers:
    • professional workers engaged in research and development and other specific occupations; and
    • workers engaged in certain duties applicable to a wider range of white-collar workers (eg, planning, researching and analysing matters pertaining to business operations without concrete directions from the employer with regard to execution and allocation of time).

Under this scheme, an employee is deemed to have worked for a certain number of hours either agreed on in advance under a labour management agreement or subject to a committee decision (including the employer and employees), depending on the employee’s activities.

Individual employment contracts can generally provide that an employee’s remuneration include a certain amount of overtime (subject to the caps set out in the Labour Standards Law).

Flexitime schemes are also available.

Is there a minimum paid holiday entitlement?

Employees who have been employed continuously for six months and worked at least 80% of all working days are entitled to 10 days of annual leave. Holiday entitlements increase over time in proportion to the employee’s length of service. After one-and-a-half years of service, employees are entitled to 11 days of holiday. After two-and-a-half years of service, employees are entitled to 12 days of holiday and so forth. After six-and-a-half years and onwards, the entitlement is 20 days.

Employers can offer more generous conditions. Most Japanese companies grant additional paid leave for weddings, the death of close relatives and the birth of a child.

What are the rules applicable to final pay and deductions from wages?

Although employers are generally prohibited from making deductions from wages (the rare exceptions are subject to a strict cap on levies), they must deduct income tax and labour and social security insurance contributions at source.

Record keeping
What payroll and payment records must be maintained?

Pursuant to the Labour Standards Law, the following records must be maintained at each workplace for three years:

  • a wage ledger, showing amounts paid and the basis of calculation (including hours worked);
  • a workers’ roster; and
  • other related documents on hiring and compensation.

Discrimination, harassment & family leave

What is the position in relation to:
Protected categories

(a) Age?

The Employment Measures Law prohibits discrimination based on age in connection with recruitment, except in certain circumstances. The Law concerning the Stability of Employment of the Elderly addresses the employment of senior citizens until the statutory retirement age of 65.

(b) Race

The Labour Standards Law and the Constitution prohibit discrimination based on nationality or ethnic or national origin during the course of employment and in relation to termination.

(c) Disability?

Under the Law on Securing Equal Opportunity and Treatment between Men and Women in Employment, disabled individuals should represent a certain percentage of an employer’s workforce (through hire or pay).

(d) Gender?

The Law on Securing Equal Opportunity and Treatment between Men and Women in Employment and the Constitution prohibit discrimination based on gender in relation to recruitment, treatment during employment (eg, in relation to assignments, promotions, demotions, dismissal, training, housing loans and fringe benefits) and termination. Under the Labour Standards Law, men and women must receive equal pay.

(e) Sexual orientation?

No law expressly prohibits discrimination based on sexual orientation.

(f) Religion?

The Labour Standards Law and the Constitution prohibit discrimination based on social status, religion or political belief during the course of employment and in relation to termination. 

(g) Medical?

No law expressly prohibits discrimination based on medical conditions; as such, this may be relied on as the basis for dismissal in certain cases.

(h) Other?

Discrimination against an employee on the grounds of membership in a trade union is unlawful. With effect from April 1 2015, fixed-term contract employees/part-time employees must be treated no less favourably in respect of their terms and conditions of employment than comparable permanent/full-time employees.

Family and medical leave
What is the position in relation to family and medical leave?

Maternity leave
Female employees are entitled to six weeks' unpaid maternity leave before giving birth (14 weeks for multiple pregnancies). In principle, employers may not require a female employee to work for eight weeks after delivery.

Family care leave
An employee with a family member in need of full-time nursing is entitled to up to 93 days of unpaid leave in order to provide care. Employers may introduce limitations on eligibility, provided that these are set out in a labour management agreement.

Employees are also entitled to unpaid leave until their child's first birthday (or until the child is 18 months, if certain conditions are met). Employers may introduce limitations on eligibility in a labour management agreement. An employee with a pre-school aged child or family member in need of full-time nursing is entitled to up to five days of unpaid leave (10 days for two or more children or family members) per year in order to nurse a sick or injured child. An employee may work reduced hours in order to care for his or her child under three years old.

Medical leave
Employees are generally covered by workers' accident insurance in the case of injury, illness, disability or death resulting from employment. In the case of work-related accidents, insurance benefits include:

  • medical compensation benefits/labour welfare services;
  • temporary disability compensation benefits (60% of the employee's average wage is paid after three days of absence from work);
  • permanent disability compensation;
  • bereaved family compensation for dependants;
  • funeral assistance;
  • injury and illness compensation;
  • pensions; and
  • assistance with care costs.

In principle, employees who are absent from work due to non-work related sickness or injury are not entitled to pay from their employer. Under national health insurance coverage, employees are entitled to two-thirds of the applicable standard wage (calculated according to a specific formula) as illness/injury allowance after three days of absence for 18 months. However, if the employer offers the employee any wages during this period, the allowance will be reduced by the amount received.

Dismissal is seldom an immediate option and work rules often include a suspension period (eg, from three to six months) during which the employee need not perform his or her duties, but maintains a contractual relationship with the employer. If the employee recovers during this period and can return to work, he or she will be reinstated. If the employee does not recover within this period, the employer can give notice of termination. Various rules can be adopted in this respect and the duration and reasons for suspension will vary.

Harassment
What is the position in relation to harassment?

Under the Employment Contract Law and the Labour Safety and Health Law, employers must provide a safe and proper working environment. Sexual harassment and power harassment claims can have severe consequences for employers. Claims can be made based on:

  • tort;
  • breaches of the Law on Securing Equal Opportunity and Treatment between Men and Women in Employment;
  • breaches of employment contracts; and
  • criminal penalties or claims under the Workmen’s Accident Compensation Law.

Most cases are dealt with internally without legal action.

With regard to sexual harassment, the Law on Securing Equal Opportunity and Treatment between Men and Women in Employment provides that employees should be able to have careers while raising children. In addition, employers must ensure that:

  • appropriate measures are in place to deal with sexual harassment allegations in the workplace;
  • employees suffer no disadvantage at work due to making allegations; and
  • no harm comes to employees due to sexual harassment in the workplace.

The Ministry of Health, Labour and Welfare issued guidelines in 2006 which set out the steps that employers must take if harassment allegations have been made, including:

  • specifying and disseminating clear policies;
  • clarifying that perpetrators will be punished;
  • specifying a contact person;
  • acting swiftly if a complaint is made;
  • taking appropriate action towards the perpetrator and victim;
  • taking corrective action to avoid any repeat; and
  • preserve privacy in the process.

Internal rules and grievance procedures can be more robust and detailed than these guidelines.

The Ministry of Health, Labour and Welfare has defined ‘power harassment’ as “any kind of behaviour by an employee using his (her) position of seniority or relationship with a co-worker which causes such co-worker mental or physical stress or a degradation of the working environment beyond the appropriate scope of duties”.

An employer’s duty to provide a safe and proper working environment also applies to bullying. The Ministry of Health, Labour and Welfare has divided power harassment into six categories, from physical abuse or assault to invasion of privacy. Employers should:

  • have a clear message against power harassment from the top management;
  • establish and disseminate clear rules on bullying (eg, by incorporating policies into the work rules);
  • educate the workforce to prevent the occurrence and recurrence of bullying through training sessions or by raising awareness;
  • provide consultation services; and
  • conduct employee surveys.

Likewise, detailed internal rules and grievance procedures can be established to deal with these situations.

Whistleblowing
What is the position in relation to whistleblowing?

The Whistleblower Protection Act protects those who expose corporate or government misconduct from unfair treatment and retribution (eg, dismissal, demotions or salary cuts). Under the act, a ‘public interest disclosure’ involves the disclosure of relevant disclosure information in order to prevent a matter from occurring or worsening by a worker to:

  • his or her employer;
  • a government agency or official with relevant jurisdiction; or
  • any other person.

These disclosures may not be made for illegitimate purposes.

‘Relevant disclosure information’ means information regarding criminal conduct or statutory violations relating to the protection of consumer interests, the environment, fair competition and generally the “life, body and property of the general public”.

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Privacy in the workplace

Privacy and monitoring
What are employees’ rights with regard to privacy and monitoring?

The Personal Information Protection Law regulates the collection, storage and use of employee information. The Ministry of Health, Labour and Welfare has issued guidelines on handling employees’ personal data. Infringements of the guidelines can lead to fines, compensation claims from aggrieved employees or regulatory action. Sectoral guidelines have also been issued.

The monitoring of employee email, internet and telephone usage and closed-circuit television recording are permissible, provided that they are carried out in accordance with the Personal Information Protection Law. Express consent is not usually required. However, the Ministry of Economy, Trade and Industry’s guidelines on the Personal Information Protection Law state that employees should be made aware of any monitoring that is being carried out, its purpose and to whom the data will be supplied. Employees must be informed if monitoring may result in disciplinary action.

To what extent can employers regulate off-duty conduct?

Employment contracts or work rules will usually cite off-duty conduct as reasonable grounds for dismissal, as the employer’s reputation can be indirectly tarnished by an employee’s behaviour. While there is little differentiation between on-duty and off-duty conduct, employers should tread carefully when seeking to rely on off-duty conduct for disciplinary purposes.

Are there rules protecting social media passwords in the employment context and/or on employer monitoring of employee social media accounts?

No express statutory rules address the protection of social media passwords or employer monitoring of social media accounts.

Trade secrets and restrictive covenants

Intellectual Property
Who owns IP rights created by employees during the course of their employment?

Intellectual property created by employees in the course of their employment can belong to the employer or employee inventor. The employee inventor can assign rights to his or her employer, depending on the nature of the IP right. For patents, the right to register belongs to the employee. This right can be assigned to the employer in return for reasonable compensation (a bill has been submitted to the National Diet that would allow employers to own a patent directly, although compensation would still be required). Compensation amounts (often nominal compared to the huge profits that can be derived from the invention) can be a source of dispute; thus, in-house remuneration rules should be established in advance.

Restrictive covenants
What types of restrictive covenants are recognised and enforceable?

Non-compete, non-poaching and confidentiality agreements are generally recognised and enforceable. Criminal penalties apply under the Unfair Competition Prevention Law in order to punish the disclosure of trade secrets by employees and officers. Although no express statutory rules govern confidential information, employees are bound by a general duty of good faith and a duty not to disclose the employer's confidential information; however, the extent of these duties is unclear.

Non-compete
Are there any special rules on non-competes for particular classes of employee?

Non-compete agreements can generally be used to prevent an employee from competing with his or her employer during and after employment. However, as post-termination restrictions can be deemed to infringe an individual's freedom to work, they will generally be enforceable only if:

  • they have been expressly agreed;
  • they are reasonable in terms of their duration and territorial scope; and
  • the employer has a legitimate interest in protecting its interests (eg, confidential information or trade connections).

No particular class of employees is targeted or exempted by law; however, in principle, it may be difficult to justify a non-compete agreement for a menial job or job with no exposure to trade secrets, proprietary knowledge or specific know-how. Under case law, no compensation is required to enforce a non-compete agreement, although this may change in the future.

Discipline and grievance procedures

Procedures
Are there specific laws on the procedures employers must follow with regard to discipline and grievance procedures?

The work rules usually detail disciplinary actions and the range of penalties available to employers. While discipline and grievance procedures can be briefly addressed (eg, as in the Ministry of Health, Labour and Welfare’s guidelines on sexual harassment), they are generally not detailed. The work rules typically do not detail discipline and grievance procedures. 

Industrial relations

Unions and layoffs
Is your country (or a particular area) known to be heavily unionised?

Although labour unions are still relatively strong in certain industries, their importance has declined in the last 30 years. That said, some companies still require new recruits to sign union shop contracts. Relationships between unions and employers are often peaceful and cooperative. In general, unions are sensitive to employers’ economic circumstances.

What are the rules on trade union recognition?

Establishing a labour union is straightforward. Unions can be voluntarily organised by workers and should:

  • be comprised mainly of workers;
  • be operated independently from management control; and
  • not be financially subsidised by management.

Regulations dealing with union organisation and operations must be established.      

What are the rules on collective bargaining?

Enterprise-based bargaining is more frequent than industry-based bargaining. Collective agreements between employers and labour unions regulate matters such as:

  • working conditions;
  • pay;
  • bonuses;
  • fringe benefits;
  • working hours;
  • holidays;
  • health and safety;
  • dispute resolution procedures;
  • redundancies or secondments; and
  • the re-employment of elderly employees.

Collective agreements may also regulate the relationship between employers and unions – for example, they may require labour management consultation or prior consent before certain decisions are made (eg, redundancies, closures or business transfers).

Labour management agreements are designed to exempt employers from criminal penalties under the Labour Standards Law (eg, the obligation to make and file an Article 36 agreement to have the right to request overtime from employees) or deal with the special treatment of employees (eg, restrictions on care leave eligibility). 

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.

Courts/tribunals

Jurisdiction and procedure
Which tribunals or courts have jurisdiction to hear complaints?

Most labour disputes are settled out of court. The district courts have jurisdiction in cases involving amounts exceeding Y1.4 million. However, in order to resolve labour disputes and procedures – including mediation and arbitration – special labour courts under the labour tribunal system have been established to provide quicker, more cost-efficient specialised resolution methods.

What is the procedure and typical timescale?

Where an employee is dismissed without good cause, he or she may ask the relevant district court to issue a summary judgment confirming that the dismissal was unfair, unlawful and void, and request that the employer pay his or her salary until the case is settled through a judgment on the merits or an amicable settlement is reached. District courts often accept these requests, unless the employer can promptly demonstrate good cause. These proceedings are still considered summary proceedings, although the court hears both parties and hearings can be held several times over a three to six-month period. The parties often attempt to settle before a judgment is rendered and the courts frequently put pressure on the parties to do so.

An official suit on the merits before a district court may take one year or more. Even if the employer wins the case, it can be a costly process. If the employee wins, he or she may:

  • be awarded past salary;
  • be reinstated; and
  • receive a small award for mental distress.

Alternatively, a motion can be filed before the labour tribunal. The tribunal offers a simple framework, allowing disputes to be resolved quickly. It will generally put pressure on the parties to settle. Further, the tribunal will often propose that the employment relationship be severed, even if the employee has been wrongfully terminated, while requiring the employer to pay compensation (12 months of remuneration is perceived as the unwritten cap on remuneration). Within a four-month period, only three hearings can take place.

While the tribunal tries to mediate disputes, if the matter cannot be settled amicably, it will issue a judgment. The parties have 14 days to file an objection before the judgment is considered binding. If any objection is raised, the matter will be brought as an official suit before the relevant district court. 

Appeals
What is the route for appeals?

The high courts hear district court appeals and the Supreme Court hears high court appeals.